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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
---------- ----
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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
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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.
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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
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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.
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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
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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.
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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.
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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
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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.
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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
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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.
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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
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