-----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, LhMTTI1ffA1woLPKyoybSJrs7dT4+3mKlXe5mD9xLIO9eahGzQEFoDKjFjKZMEPJ mAtBORDRHgjvssMJx0VN1w== 0000950130-98-003101.txt : 19980615 0000950130-98-003101.hdr.sgml : 19980615 ACCESSION NUMBER: 0000950130-98-003101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980612 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-Q SEC ACT: SEC FILE NUMBER: 001-12561 FILM NUMBER: 98647541 BUSINESS ADDRESS: STREET 1: 661 ANDERSON DR STREET 2: FOSTER PLZ 7 CITY: PITTSBURGH STATE: PA ZIP: 15220 BUSINESS PHONE: 4129372300 MAIL ADDRESS: STREET 1: FOSTER PLAZA 7 STREET 2: 661 ANDERSEN DRIVE CITY: PITTSBURGH STATE: PA ZIP: 15220 10-Q 1 FORM 10-Q ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1998 Commission File No. 0-22724 CABLE DESIGN TECHNOLOGIES CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-3601505 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Foster Plaza 7 661 Andersen Drive Pittsburgh, PA 15220 (Address of principal executive offices) (412) 937-2300 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at 5-28-98 ----- ---------------------- Common Stock, $.01 Par Value 30,120,133 ============================================================================== CABLE DESIGN TECHNOLOGIES CORPORATION ------------------------------------- TABLE OF CONTENTS ----------------- Page ---- PART I FINANCIAL INFORMATION ITEM 1 Financial Statements...................................... 3 Review Report of Independent Public Accountants for the Three Months and Nine Months Ended April 30, 1998..... 4 Cable Design Technologies Corporation and Subsidiaries Condensed Consolidated Statements of Income - Unaudited for the Three Months and Nine Months Ended April 30, 1998 and 1997...................... 5 Cable Design Technologies Corporation and Subsidiaries Condensed Consolidated Balance Sheets as of April 30, 1998 (Unaudited), and July 31, 1997....... 6 Cable Design Technologies Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows - Unaudited for the Nine Months Ended April 30, 1998 and 1997............................. 7 Cable Design Technologies Corporation and Subsidiaries - Notes to Condensed Consolidated Financial Statements (Unaudited).......................... 8 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10 PART II OTHER INFORMATION ITEM 1 Legal Proceedings......................................... 14 ITEM 2 Changes in Securities..................................... 14 ITEM 3 Defaults upon Senior Securities........................... 14 ITEM 4 Submission of Matters to a Vote of Security Holders....... 14 ITEM 5 Other Information......................................... 14 ITEM 6 Exhibits and Reports on Form 8-K.......................... 14 SIGNATURES .......................................................... 15 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS In the opinion of Cable Design Technologies Corporation's (the "Company") management, the unaudited consolidated financial statements included in this filing on Form 10-Q reflect all adjustments which are considered necessary for a fair presentation of financial information for the period presented. REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP has made a review, based upon procedures adopted by the American Institute of Certified Public Accountants, of the unaudited consolidated financial statements for the three month and nine month periods ended April 30, 1998 and 1997, contained in this report. As stated on page 4, Arthur Andersen LLP did not audit and accordingly does not express an opinion on the unaudited consolidated financial statements; however as a result of such review, they are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. -3- Report of Independent Public Accountants To the Board of Directors and Stockholders of Cable Design Technologies Corporation: We have reviewed the accompanying condensed consolidated balance sheet of Cable Design Technologies Corporation (a Delaware corporation) and Subsidiaries as of April 30, 1998, and the related condensed consolidated statements of income for the three and nine-month periods ended April 30, 1998 and 1997, and the condensed consolidated statements of cash flows for the nine month periods ended April 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Cable Design Technologies Corporation and Subsidiaries as of July 31, 1997, and, in our report dated September 9, 1997, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of July 31, 1997, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. Pittsburgh, Pennsylvania, Arthur Andersen LLP May 21, 1998 -4- CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED ------------------------------------------------------- (Dollars in thousands, except per share data) ---------------------------------------------
Three Months Ended Nine Months Ended April 30, April 30, --------------------------------------------------- 1998 1997 1998 1997 --------------------------------------------------- Net sales $167,647 $129,965 $485,429 $359,893 Cost of sales 119,763 91,308 345,302 251,269 --------------------------------------------------- Gross profit 47,884 38,657 140,127 108,624 Selling, general and administrative expenses 27,973 23,194 83,034 65,375 --------------------------------------------------- Income from operations 19,911 15,463 57,093 43,249 Interest expense, net 2,311 1,410 6,142 3,553 Other (income) expense 285 (576) (810) (436) --------------------------------------------------- Income before income taxes 17,315 14,629 51,761 40,132 Income tax provision 6,657 5,438 19,727 14,863 --------------------------------------------------- Net income $ 10,658 $ 9,191 $ 32,034 $ 25,269 =================================================== Per share data: Basic earnings per common share $ 0.37 $ 0.33 $ 1.12 $ 0.92 Diluted earnings per common share $ 0.34 $ 0.30 $ 1.02 $ 0.82 ===================================================
The accompanying notes are an integral part of these statements. -5- CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (Dollars in thousands, except per share data) ---------------------------------------------
As of As of April 30, July 31, 1998 1997 ------------------------ (Unaudited) ASSETS - ------ Current assets: Cash and cash equivalents $ 7,422 $ 9,017 Accounts receivable, net of allowance for uncollectible amounts of $4,867 and $4,665, respectively 117,294 109,262 Inventories 131,925 120,974 Other current assets 10,633 8,292 ----------------------- Total current assets 267,274 247,545 Property, plant and equipment, net 157,288 127,568 Goodwill, net 58,316 45,248 Other assets 9,070 9,138 ----------------------- Total assets $491,948 $429,499 ======================= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Liabilities: Current liabilities $ 88,449 $ 85,520 Long-term debt, excluding current maturities 147,267 126,661 Other non-current liabilities 13,584 12,193 ----------------------- Total liabilities 249,300 224,374 ----------------------- 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, 29,094,637 and 18,755,865 shares, respectively 291 188 Paid in capital 164,755 158,670 Deferred compensation (11) (87) Retained earnings 80,158 48,219 Currency translation adjustment (2,545) (1,865) ----------------------- Total stockholders' equity 242,648 205,125 ----------------------- Total liabilities and stockholders' equity $491,948 $429,499 =======================
The accompanying notes are an integral part of these statements. -6- CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED ----------------------------------------------------------- (Dollars in thousands) ----------------------
Nine months ended April 30, --------------------- 1998 1997 --------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 27,800 $ 8,471 --------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (38,481) (12,265) Acquisition of businesses, including transaction costs, net of cash acquired (18,905) (72,205) --------------------- Net cash used by investing activities (57,386) (84,470) --------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Funds provided by long-term debt 1,199 12,053 Funds used to reduce long-term debt (3,340) (38,016) Net change in revolving note borrowings 25,230 95,661 Net proceeds from issuance of common stock 8 1,004 Net proceeds from exercise of stock options and related tax benefits 4,806 1,696 --------------------- Net cash provided by financing activities 27,903 72,398 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 88 (124) --------------------- Net decrease in cash (1,595) (3,725) Cash and cash equivalents, beginning of period 9,017 16,097 --------------------- Cash and cash equivalents, end of period $ 7,422 $ 12,372 =====================
The accompanying notes are an integral part of these statements. -7- CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES ------------------------------------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED ---------------------------------------------------------------- 1. BASIS OF PRESENTATION: --------------------- The condensed consolidated financial statements presented herein are unaudited. Certain information and footnote disclosures normally prepared in accordance with generally accepted accounting principles have been either condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Although the registrant believes that all adjustments necessary for a fair presentation have been made, interim period results are not necessarily indicative of the results of operations for a full year. As such, these financial statements should be read in conjunction with the financial statements and notes thereto included in the registrant's most recent Form 10-K which was filed for the fiscal year ended July 31, 1997. 2. INVENTORIES ----------- Inventories of the Company consist of the following:
April 30, July 31, 1998 1997 ---------------------- (Dollars in thousands) Raw materials $ 42,265 $ 34,424 Work-in-process 25,316 25,608 Finished goods 64,344 60,942 ---------------------- $131,925 $120,974 ======================
-8- 3. EARNINGS PER SHARE ------------------ Basic earnings per common share are computed based on the weighted average common shares outstanding. Diluted earnings per common share are computed based on the weighted average common shares outstanding plus additional shares assumed to be outstanding to reflect the dilutive effect of common stock equivalents. The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Nine Months Ended April 30, April 30, --------------------------------------------------------------------- 1998 1997 1998 1997 --------------------------------------------------------------------- (Dollars in thousands, except per share data) Net income $ 10,658 $ 9,191 $ 32,034 $ 25,269 -------------------------------------------------------------------- Basic earnings per common share: Weighted average common shares 29,050,372 27,653,250 28,682,804 27,431,060 Basic earnings per common share $ 0.37 $ 0.33 $ 1.12 $ 0.92 ==================================================================== Diluted earnings per common share: Weighted average common shares 29,050,372 27,653,250 28,682,804 27,431,060 Shares issuable from assumed conversion of dilutive stock options 2,391,085 3,131,000 2,785,115 3,366,673 ==================================================================== Weighted average diluted common shares 31,441,457 30,784,250 31,467,919 30,797,733 Diluted earnings per common share $ 0.34 $ 0.30 $ 1.02 $ 0.82 ====================================================================
Options to purchase 802,500 and 787,500 shares of common stock were outstanding during the three and nine month periods ended April 30, 1997, respectively, but were not included in the computation of diluted EPS as the options exercise price was greater than the average market price of the common stock for the respective periods. 4. BUSINESS ACQUISITIONS --------------------- On September 10, 1997, the Company acquired all the outstanding stock of Barcel Acquisition Corporation, and its subsidiaries, based in Irvine, California. On March 17, 1998, the Company acquired all the outstanding stock of Orebro Kabel AB, headquartered in Orebro, Sweden. These acquisitions were accounted for using the purchase method under APB Opinion No. 16. Their prior results are not material, therefore, pro forma financial information is not presented. 5. STOCK SPLIT ----------- On January 9, 1998, the Company effected a three for two stock split in the form of a common stock dividend. Prior period share information other than amounts displayed on the balance sheets have been adjusted to reflect the effect of the split. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cable Design Technologies is a leading manufacturer of technologically advanced electronic data transmission cables for network, communications, specialty electronics, and automation and process control applications, including complete voice and data wiring solutions, fiber optic connective solutions and other components required to build high performance data and telecommunications infrastructures. The Company refined its existing business groups effective with the second fiscal quarter ended January 31, 1998. Results of operations for all periods presented are discussed along the following four principal lines of business: Network Products group; Communications group; Automation & Process Control group; and Specialty Electronic Cable group. This discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's condensed consolidated financial statements (unaudited) and the notes thereto. RESULTS OF OPERATIONS OVERVIEW Sales for the three months ended April 30, 1998 ("third quarter 1998") increased 29.0% to $167.6 million compared to the three months ended April 30, 1997 ("third quarter 1997"), and sales for the nine months ended April 30, 1998 ("first nine months 1998") increased 34.9% to $485.4 million compared to the nine months ended April 30, 1997 ("first nine months 1997"). Incremental sales attributable to the recently acquired businesses accounted for approximately 60% and 66% of the increase in revenues for the third quarter 1998 and first nine months 1998, respectively. The recently acquired businesses include Dearborn/CDT (including Thermax/CDT), Orebro/CDT, Barcel/CDT and Stronglink/CDT. Results for the third quarter 1998 and the first nine months 1998 reflect increased sales in each of the Company's four principal business groups, resulting from the additional sales contributed by the Company's recent acquisitions and internal sales growth, primarily in the Network Products and the Communications groups. Sales outside of North America for the third quarter 1998 were $27.8 million compared to $26.3 million for the same period last year, and for the first nine months 1998 were $79.1 million compared to $76.1 million for the first nine months 1997, including the additional sales outside of North America of the recently acquired businesses. Net income for the third quarter 1998 increased 16.0% to $10.7 million ($0.34 per diluted share) and for the first nine months 1998 net income increased 26.8% to $32.0 million ($1.02 per diluted share) compared to the same periods last year. THREE MONTHS ENDED APRIL 30, 1998 COMPARED TO THREE MONTHS ENDED APRIL 30, 1997 Net Sales Net sales for the third quarter 1998 increased $37.7 million, or - --------- 29.0%, to $167.6 million compared to $130.0 million for the third quarter 1997. Net sales for the third quarter 1998 include additional sales of $22.5 million attributable to the recently acquired businesses. Network Products group sales increased $10.2 million, or 16.6%, over the third quarter 1997. The increase in Network Products group sales resulted from a 22.6% increase in sales of network cable products. Sales of network cable products to the North American marketplace increased 28%, reflecting higher sales volume, an improvement in average selling price for plenum category 5 cables, and a favorable product mix as compared to the third quarter 1997. The sales of network structured wiring components was unchanged from the third quarter 1997. Although sales of network structured wiring components to the North American marketplace increased, such increase was partially offset by lower sales to the western European marketplace. Communications group sales increased 20.6% over the third quarter 1997, due to increased demand for cable by telephone companies to expand their distribution network capacity to support increased Internet, fax, telecommuting, and other telephony usages. Third quarter 1998 sales of Automation & Process Control group products and of Specialty Electronic Cable group products increased 32.8% and 100.3%, respectively, primarily due to the additional sales contributed by the recent acquisitions. Sales outside of North America for the third quarter 1998 increased to $27.8 million compared to $26.3 million for -10- the third quarter 1997, including the additional sales outside of North America of the recently acquired businesses. Sales outside of North America for the third quarter 1998 reflect reduced sales in the United Kingdom and Western Europe by the Company's United Kingdom based manufacturing and distribution operations due to continued competitive market conditions and a stronger British pound. Including sales attributable to the recently acquired businesses, increased international sales in other geographic regions, primarily Latin America and Australia, offset the lower sales in the United Kingdom and Western Europe. Gross Profit Gross profit for the third quarter 1998 increased $9.2 million, - ------------ or 23.9%, to $47.9 million compared to $38.7 million for the third quarter 1997. Gross profit for the third quarter 1998 includes $6.0 million of additional gross profit attributable to the recently acquired businesses which primarily benefited the gross profit for the Automation & Process Control and Specialty Electronic Cable groups. Other factors contributing to the increase in gross profit were increased sales for the Network Products and the Communications groups which were partially offset by a lower gross profit for the Automation & Process Control group. The lower gross profit for the Automation & Process Control group, excluding the effect of acquisitions, was the result of higher material costs and competitive price pressure, primarily at one domestic division. A factor contributing to the higher material cost for this division was higher priced copper, purchased several months ago, which impacted the third quarter 1998 gross profit. The gross margin for the third quarter 1998 was 28.6% compared to 29.7% for the third quarter 1997. The primary factors contributing to the lower gross margin were the decrease in the margin for the Automation & Process Control group, the mix effect of higher sales for the relatively lower margin Communications group, and the inclusion of the additional sales from the recently acquired businesses, which collectively have a lower gross margin than the Company's previous gross margin percentage. Additionally, the move of NORDX/CDT's IBDN structured wiring operations to a new facility in Montreal, completed in the third quarter 1998, temporarily constrained capacity, and the gross margin for the Network Products group would have been greater except for the need for NORDX/CDT to outsource cable from both external and intercompany sources. Selling, General and Administrative Expense Selling, general and - ------------------------------------------- administrative expense ("SG&A") for the third quarter 1998 was $28.0 million compared to $23.2 million for the third quarter 1997. The increase in SG&A is primarily attributable to the additional SG&A of the recently acquired businesses and, at certain of the other business units, increased commission and other direct sales expenses due to the increased sales, and increases in personnel and other selling expenses in order to support continued sales growth. As a percent of sales, SG&A decreased to 16.7% for the third quarter 1998 compared to 17.8% for the third quarter 1997. The decrease in SG&A as a percent of sales for the third quarter 1998 was primarily the result of the lower average SG&A percentage of the recently acquired businesses and, for the balance of the Company, a lower percentage growth in SG&A expense compared to the growth in sales. Income from Operations Income from operations for the third quarter 1998 - ---------------------- increased 28.8% to $19.9 million compared to $15.5 million for the third quarter 1997. The operating margin, derived by dividing operating income by net sales, was unchanged at 11.9% for both the third quarter 1998 and the third quarter 1997. Net Income Net income increased 16.0% to $10.7 million ($0.34 per diluted - ---------- share) compared to net income of $9.2 million ($0.30 per diluted share) for the third quarter 1997. Net income for the third quarter 1998 reflects an increase in interest expense of approximately $0.5 million, net of tax, compared to the third quarter 1997, primarily due to increased borrowings to fund acquisitions and capital projects. Additionally, net income reflects approximately $0.2 million , net of tax, of foreign currency transaction losses versus gains of $0.3 million, net of tax, a year ago. NINE MONTHS ENDED APRIL 30, 1998 COMPARED TO NINE MONTHS ENDED APRIL 30, 1997 Net Sales Net sales for the first nine months ended April 30, 1998 increased - --------- 34.9% to $485.4 million compared to $359.9 million for the nine months ended April 30, 1997. Sales for the first nine months 1998 include the addition of $83.1 million of sales attributable to the recently acquired businesses. Although sales for the Network Products group increased 16.6% for the third quarter 1998, lower pricing for plenum category 5 network cables and lower sales of connector products for the first six months 1998 resulted in an overall sales increase for the Network Products group of 9.8% for the first nine months 1998. Sales for the Communications group increased 38.9% over -11- the first nine months 1997 due to increased demand for cable by telephone companies to expand their distribution network capacity to support increased Internet, fax, telecommuting, and other telephony usages . The increases in sales for the Automation & Process Control and for the Specialty Electronic Cable groups for the first nine months 1998 of $36.8 million and $46.5 million, respectively, were primarily due to the additional sales attributable to the recently acquired businesses. Gross Profit Gross profit for the first nine months 1998 increased $31.5 - ------------ million, or 29.0%, to $140.1 million compared to $108.6 million for the first nine months 1997. The gross profit attributable to the recently acquired businesses accounted for $23.1 million of the overall increase in gross profit for the first nine months 1998. Other factors contributing to the increase in gross profit were increases in gross profit for the Communications and the Network Products groups as a result of the increase in sales for these groups. The gross margin was 28.9% for the first nine months 1998 compared to 30.2% for the first nine months 1997. Factors contributing to the reduction in gross margin were the inclusion of the additional sales from the recently acquired businesses which, in the aggregate, have a lower gross margin relative to the Company's historical operations, the mix effect of higher sales for the relatively lower margin Communications group, and the lower gross margin percentages for the Automation & Process Control and Network Products groups. Selling, General and Administrative Expense SG&A for the first nine months - ------------------------------------------- 1998 increased $17.7 million to $83.0 million compared to $65.4 million for the first nine months 1997. The increase in SG&A for the first nine months 1998 is primarily attributable to the additional SG&A of the recently acquired businesses. As a percent of sales, SG&A was 17.1% for the first nine months 1998 compared to 18.2% for the first nine months 1997. The decrease in SG&A as a percent of sales for the first nine months 1998 was primarily the result of the lower average SG&A percentage of the recently acquired businesses. Income from Operations Income from operations for the first nine months 1998 - ---------------------- was $57.1 million compared to $43.2 million for the first nine months 1997. The operating margin, derived by dividing operating income by net sales, was 11.8% for the first nine months 1998 compared to 12.0% for the first nine months 1997. Net Income Net income for the first nine months 1998 increased 26.8% to $32.0 - ---------- million, or $1.02 per diluted share, compared to net income of $25.3 million, or $0.82 per diluted share, for the first nine months 1997. FINANCIAL CONDITION Liquidity and Capital Resources The Company's credit agreement, dated April 10, - ------------------------------- 1997, is comprised of a $105.0 million revolver and a CDN $115.0 million Canadian revolver. The Company also maintains a foreign credit facility in the United Kingdom which provides for up to approximately $12.5 million of borrowings. At April 30, 1998, the Company had outstanding borrowings of approximately $136.0 million and $8.1 million under the credit agreement and foreign credit facility, respectively. 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 facilities will provide it with sufficient liquidity to meet the current liquidity needs of the Company. Working Capital During the first nine months 1998, operating working capital - --------------- increased $15.5 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 inventories of $7.8 million and in accounts receivable of $6.9 million. The change in operating working capital excludes changes in cash and current maturities of long-term debt. Cash Flow The Company generated $27.8 million of net cash from operating - --------- activities during the first nine months 1998. Net cash used by investing activities of $57.4 million included $18.9 million for the acquisition of businesses and $38.5 million for capital projects including expenditures for a new facility for the IBDN structured wiring operations at NORDX/CDT and for the construction and expansion of manufacturing and warehouse facilities at Raydex/CDT, Thermax/CDT and West Penn/CDT. Net cash provided by financing activities of $27.9 million included $4.8 million from the exercise of stock options and $23.1 million from debt sources (net). -12- Recent Developments The Company has authorized the offering for sale of the - ------------------- DynaTrax(TM) electronic cross-connect switch business. Upon completion of a sale, the Company estimates a positive benefit to operating profit in excess of $1.0 million per quarter, excluding any gain or loss which may be realized upon sale. FLUCTUATION IN COPPER PRICE The cost of copper in inventories (including finished goods) reflects purchases over various periods of time ranging from one to several months for each of the Company's individual operating units. For the Communications group, profitability is generally not significantly affected by volatility of copper prices as changes in copper prices are generally passed along to customers, however, differences in the timing of selling price adjustments do occur and may impact near term results. For other product groups, although selling prices are not generally adjusted to directly reflect changes in copper prices, the relief of copper costs from inventory for those operating units having longer inventory cycles may affect profitability from one period to the next following periods of significant movement in the cost of copper. The Company does not engage in activities to hedge the underlying value of its copper inventory. TEFLON(R) SUPPLY The supply of Teflon(R), a raw material in certain of the Company's products, continues to be constrained due to an industry wide shortage. The Company's primary supplier of Teflon(R) has announced that additional capacity provided by a new production facility should alleviate the shortage during the first six months of the Company's fiscal year ending July 31, 1999. However, if the shortage continues it may affect the Company's ability to meet demand for certain products. NEW ACCOUNTING STANDARDS 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. 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. 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. In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, "Employees' Disclosures about Pensions and Other Post Retirement Benefits" ("SFAS No. 132"). SFAS No. 132 revises and standardizes disclosure requirements for pension and other post retirement benefit plans. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. Management does not anticipate that adoption of SFAS No. 132 will have a significant impact on its financial disclosures. YEAR 2000 ISSUES The Company has assessed the impact of the Year 2000 issue on its information systems, and has incurred and expects to continue to incur expenditures over the next 15 months to address this issue. Maintenance or modification costs are expensed as incurred, while the costs of new software are capitalized and amortized over the software's useful life. Many of the Company's operating units have acquired, or plan to acquire, new computer hardware and software systems in order to improve functionality and provide additional capabilities. Based on management's assessment, expenditures associated with modifying existing information systems for Year 2000 compliance will not have a material effect upon the Company's results of operations or liquidity and capital resources. Many of the Company's suppliers and customers, many of which are located in Europe and other foreign countries, rely significantly on computer systems. The Company does not monitor such third parties' Year 2000 compliance procedures. There can be no assurance that inadequate Year 2000 compliance by third parties will not -13- cause business disruptions which may have an adverse effect on the Company's operations. FORWARD-LOOKING STATEMENTS Certain statements in this quarterly report are forward-looking statements, including, without limitation, statements regarding future financial results and performance, and the Company's or management's beliefs, expectations or opinions. These statements are subject to various risks and uncertainties, many of which are outside the control of the Company, including the level of market demand for the Company's products, competitive pressures, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, price fluctuations of raw materials and the potential unavailability thereof, foreign currency fluctuations, technological obsolescence, environmental matters and other specific factors discussed in the Company's Annual Report on Form 10-K for the year ended July 31, 1997, and other Securities and Exchange Commission filings. The information contained herein represents management's best judgment as of the date hereof based on information currently available; however, the Company does not intend to update this information to reflect developments or information obtained after the date hereof and disclaims any legal obligation to the contrary. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On March 12, 1998, Siecor Corporation and NORDX/CDT, Inc. settled their litigation relating to various trademark and patent issues on mutually satisfactory terms. The action in the U.S. District Court for the District of Delaware was dismissed on March 17, 1998. As part of the settlement, the parties released each other for any liabilities based on any acts of infringement of the patent and trademark in suit. Siecor also granted NORDX/CDT, Inc. a non-exclusive patent license and a supply agreement. The settlement will not have a material adverse effect on the Company. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- 15.1 Letter of Arthur Andersen LLP regarding unaudited interim financial statement information 27.1 Financial data 27.2 Restated financial data schedule for the years ending July 31, 1997, 1996 and 1995. 27.3 Restated financial data schedule for the three month period ended October 31, 1996. 27.4 Restated financial data schedule for the six month period ended January 31, 1997. 27.5 Restated financial data schedule for the nine month period ended April 30, 1997. 27.6 Restated financial data schedule for the three month period ended October 31, 1997. (b) Form 8-K's: None -14- SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CABLE DESIGN TECHNOLOGIES CORPORATION /s/ Paul M. Olson ------------------------------------- June 12, 1998 Paul M. Olson President and Chief Executive Officer /s/ Kenneth O. Hale ------------------------------------- June 12, 1998 Kenneth O. Hale Vice President, Chief Financial Officer and Secretary -15- EX-15.1 2 LETTER OF ARTHUR ANDERSEN LLP EXHIBIT 15.1 May 21, 1998 To the Stockholders and Board of Directors of Cable Design Technologies Corporation: We are aware that Cable Design Technologies Corporation has incorporated by reference in its Registration Statements on Form S-3 (Registration No. 333- 00554); Form S-8 (Registration No. 33-73272); Form S-8 (Registration No. 33- 78418); Form S-8 (Registration No. 333-2450); Form S-8 (Registration No. 333- 6743); and Form S-8 (Registration No. 333-17443) its Form 10-Q for the quarter ended April 30, 1998, which includes our report dated May 21, 1998, covering the unaudited interim financial statement information contained therein. Pursuant to Regulation C of the Securities Act of 1933 (the Act), that report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP EX-27.1 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of April 30, 1998 and the nine month period then ended and is qualified in its entirety by reference to such financial statements. 1000 9-MOS JUL-31-1998 AUG-01-1997 APR-30-1998 7,422 0 122,161 4,867 131,925 267,274 198,704 41,416 491,948 88,449 0 0 0 291 242,357 491,948 485,429 485,429 345,302 428,336 (810) 0 6,142 51,761 19,727 32,034 0 0 0 32,034 1.12 1.02
EX-27.2 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Financial Statements as of July 31, 1997 and is qualified in its entirety by reference to such financial statements. 1000 YEAR YEAR YEAR JUL-31-1997 JUL-31-1996 JUL-31-1995 AUG-01-1996 AUG-01-1995 AUG-01-1994 JUL-31-1997 JUL-31-1996 JUL-31-1995 9,017 16,097 2,210 0 0 0 113,927 95,096 34,274 4,665 2,660 1,553 120,974 90,618 35,377 247,545 208,456 74,341 158,146 112,419 45,791 30,578 22,900 15,644 429,499 320,105 118,976 85,520 74,366 30,870 0 0 0 0 0 0 0 0 0 188 181 98 204,937 165,276 31,767 429,499 320,105 118,976 516,996 357,352 188,941 516,996 357,352 188,941 362,060 245,533 125,777 454,394 325,825 159,328 (58) 271 (5) 0 0 0 5,338 5,362 5,111 57,322 25,894 24,507 21,287 10,013 9,794 36,035 15,881 14,713 0 0 0 0 596 0 0 0 0 36,035 15,285 14,713 1.31 0.64 0.67 1.17 0.55 0.57
EX-27.3 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of October 31, 1996 and the three month period then ended and is qualified in its entirety by reference to such financial statements. 1000 3-MOS JUL-31-1997 AUG-01-1996 OCT-31-1996 16,040 0 98,527 2,623 92,497 216,176 117,806 24,792 331,199 68,830 0 0 0 182 175,776 331,199 115,971 115,971 81,266 101,991 (45) 0 1,117 12,908 4,770 8,138 0 0 0 8,138 0.30 0.26
EX-27.4 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of January 31, 1997 and the six month period then ended and is qualified in its entirety by reference to such financial statements. 1000 6-MOS JUL-31-1997 AUG-01-1996 JAN-31-1997 14,268 0 91,708 2,794 104,334 218,546 121,078 26,721 334,514 65,161 0 0 0 184 182,468 334,514 229,928 229,928 159,961 202,142 140 0 2,143 25,503 9,425 16,078 0 0 0 16,078 0.59 0.52
EX-27.5 7 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of April 30, 1997 and the nine month period then ended and is qualified in its entirety by reference to such financial statements. 1000 9-MOS JUL-31-1997 AUG-01-1996 APR-30-1997 12,372 0 108,071 3,623 127,954 253,992 133,341 28,822 421,737 80,504 0 0 0 186 191,272 421,737 359,893 359,893 251,269 316,644 (436) 0 3,553 40,132 14,863 25,269 0 0 0 25,269 0.92 0.82
EX-27.6 8 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Unaudited Condensed Consolidated Balance Sheet and Statement of Income as of October 31, 1997 and the three month period then ended and is qualified in its entirety by reference to such financial statements. 1000 3-MOS JUL-31-1998 AUG-01-1997 OCT-31-1997 6,843 0 120,251 5,089 126,373 258,120 175,154 36,403 455,439 90,752 0 0 0 189 217,646 455,439 162,144 162,144 115,068 142,373 (529) 0 1,914 18,386 6,936 11,450 0 0 0 11,450 0.41 0.37
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