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 October 31, 2002
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 12/16/02
----- -----------------------
Common Stock, $.01 Par Value 44,748,566
CABLE DESIGN TECHNOLOGIES CORPORATION
-------------------------------------
TABLE OF CONTENTS
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Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Review Report of Independent Accountants for the
Three Months Ended October 31, 2002 and 2001 .............. 3
Condensed Consolidated Statements of Operations - Unaudited
for the Three Months Ended October 31, 2002 and 2001 ...... 4
Condensed Consolidated Balance Sheets - Unaudited as
of October 31, 2002 and July 31, 2002 ..................... 5
Condensed Consolidated Statements of Cash Flows -
Unaudited for the Three Months Ended
October 31, 2002 and 2001 ................................. 6
Notes to Condensed Consolidated Financial Statements -
Unaudited ................................................. 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 15
Item 3 Quantitative and Qualitative Disclosures About
Market Risk ............................................... 19
Item 4 Controls and Procedures ................................... 19
PART II OTHER INFORMATION
Item 1 Legal Proceedings ......................................... 19
Item 2 Changes in Securities ..................................... 19
Item 3 Defaults upon Senior Securities ........................... 19
Item 4 Submission of Matters to a Vote of Security Holders ....... 19
Item 5 Other Information ......................................... 19
Item 6 Exhibits and Reports on Form 8-K .......................... 19
Signatures ........................................................... 22
Certifications ........................................................... 23
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT ACCOUNTANTS' REPORT
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 and subsidiaries as of October 31, 2002,
and the related condensed consolidated statements of operations and cash flows
for the three-month periods ended October 31, 2002 and 2001. These financial
statements are the responsibility of the Corporation'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 of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, 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 such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Cable Design Technologies Corporation and subsidiaries as of July 31, 2002, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
October 11, 2002 (October 25, 2002 as to the third paragraph of Note 19), we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of July 31, 2002 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
December 6, 2002
3
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except share and per share data)
Three Months Ended
October 31,
---------------------------
2002 2001
---------- ----------
Net sales $121,041 $128,602
Cost of sales 93,348 92,987
---------- ----------
Gross profit 27,693 35,615
Selling, general and administrative expenses 23,451 25,781
Amortization of goodwill - 515
Research and development expenses 1,049 1,205
Business restructuring expenses 7,072 979
---------- ----------
(Loss) income from operations (3,879) 7,135
Interest expense, net 1,640 1,596
Other expense (income), net 269 (313)
---------- ----------
(Loss) income from continuing operations before income taxes
and minority interest (5,788) 5,852
Income tax (benefit) provision (2,301) 2,226
Minority interest in earnings of subsidiaries, net 88 43
---------- ----------
Net (loss) income from continuing operations (3,575) 3,583
---------- ----------
Discontinued operations:
Loss from discontinued operations, net of tax benefit of $293 and
$346 for the three months ended October 31, 2002 and 2001, respectively (636) (753)
Loss on sale of business, net of tax benefit of $12,676 for the three
months ended October 31, 2002. (32,008) -
---------- ----------
Net loss from discontinued operations (32,644) (753)
---------- ----------
Net (loss) income $(36,219) $2,830
========== ==========
Basic and Diluted (loss) earnings per common share:
From continuing operations $(0.08) $0.08
From discontinued operations (0.73) (0.02)
========== ==========
$(0.81) $0.06
========== ==========
Weighted average common shares outstanding 44,528,305 44,042,776
========== ==========
Weighted average common shares outstanding and
common stock equivalents 44,542,548 44,644,194
========== ==========
The accompanying notes are an integral part of these statements.
4
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS-UNAUDITED
(In thousands, except share and per share data)
October 31, July 31,
2002 2002
----------- ---------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 9,883 $ 16,754
Trade accounts receivable, net of allowance for uncollectible accounts of
$6,920 and $6,319, respectively 77,759 83,619
Inventories 115,100 114,181
Other current assets 29,034 28,108
Assets held for sale 3,701 --
Current assets of discontinued operations -- 29,739
--------- ---------
Total current assets 235,477 272,401
Property, plant and equipment, net 205,391 212,976
Goodwill, net 62,886 62,988
Intangible assets, net 5,960 6,232
Other assets 3,192 4,439
Non-current assets of discontinued operations -- 26,751
--------- ---------
Total assets $ 512,906 $ 585,787
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term obligations $ 558 $ 550
Current maturities of long-term debt 2,380 2,442
Other current liabilities 71,523 64,212
Current liabilities of discontinued operations -- 5,491
--------- ---------
Total current liabilities 74,461 72,695
Long-term debt, excluding current maturities 81,172 108,908
Deferred income taxes 15,352 28,173
Other non-current liabilities 15,581 14,544
--------- ---------
Total liabilities 186,566 224,320
--------- ---------
Minority interest in subsidiaries 4,689 4,567
--------- ---------
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,
48,305,864 and 48,090,790 shares issued, respectively 483 481
Paid-in capital 201,773 200,714
Deferred compensation (978) --
Retained earnings 173,833 210,052
Treasury stock, at cost, 3,609,738 shares (45,188) (45,188)
Accumulated other comprehensive loss (8,272) (9,159)
--------- ---------
Total stockholders' equity 321,651 356,900
--------- ---------
Total liabilities and stockholders' equity $ 512,906 $ 585,787
========= =========
The accompanying notes are an integral part of these statements.
5
CABLE DESIGN TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(In thousands)
Three Months Ended
October 31,
--------------------------
2002 2001
----------- -----------
Net cash provided by operating activities $13,661 $22,643
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,025) (6,139)
Acquisition of businesses, including transaction
costs, net of cash acquired -- (10,196)
Proceeds from sale of discontinued operations 9,555 --
----------- -----------
Net cash provided (used) by investing activities 8,530 (16,335)
----------- -----------
Cash flows from financing activities:
Net change in demand note borrowings -- 854
Funds provided by long-term debt 1,592 8,976
Funds used to reduce long-term debt (30,617) (19,339)
Common stock issued or issuable -- 312
Net proceeds from exercise of stock options -- 158
----------- -----------
Net cash used by financing activities (29,025) (9,039)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (37) (28)
----------- -----------
Net decrease in cash and cash equivalents (6,871) (2,759)
Cash and cash equivalents, beginning of period 16,754 14,624
----------- -----------
Cash and cash equivalents, end of period $ 9,883 $11,865
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,005 $ 1,684
=========== ===========
Income taxes $ 1,088 $ 1,833
=========== ===========
The accompanying notes are an integral part of these statements.
6
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 accounting principles generally accepted in the United States of America
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, 2002.
Certain reclassifications have been made to the prior year statements to conform
with the current year presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Shipping and Handling
Amounts billed to customers for shipping and handling costs are included in net
sales in the accompanying consolidated statements of operations. Shipping and
handling costs incurred by the Company for the delivery of goods to customers
were historically classified as a component of either cost of sales or selling,
general and administrative expenses, depending on the specific operating unit.
Effective August 1, 2002, all shipping and handling costs are included in cost
of sales, and prior year statements have been reclassified to conform to the
current year presentation.
Impact of Newly Adopted Accounting Standards
Effective August 1, 2002, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 142, Goodwill and Other Intangible
Assets. Under SFAS 142, goodwill and intangible assets with indefinite lives are
no longer amortized but are reviewed annually, or more frequently if impairment
indicators arise, for impairment. Separable intangible assets that are not
deemed to have indefinite lives will continue to be amortized over their useful
lives. The Company is currently testing its goodwill for impairment under the
transition provisions of SFAS 142, and has not determined the effect on the
financial statements of any potential impairment as a result of the adoption.
The Company also reassessed the useful lives of its identifiable intangible
assets and determined that the lives were appropriate other than for the
Company's tradenames and trademarks acquired prior to June 30, 2001, which were
concluded to have indefinite useful lives. As a result, the Company ceased
amortization of the cost of such assets as of August 1, 2002, and tested each of
its tradenames and trademarks for impairment by comparing the fair value of each
asset to its carrying value as of August 1, 2002. Fair value was estimated by
using the relief from royalty method (a discounted cash flow methodology). Based
on these tests, the Company concluded that none of its tradenames or trademarks
were impaired. The Company will test the carrying value of its indefinite-lived
intangible assets for impairment at least annually. Total amortization expense
of goodwill, tradenames and trademarks was $0.5 million for the three months
ended October31, 2001. Application of the nonamortization provision of SFAS 142
for the three months ended October 31, 2001 would have resulted in an increase
in net income of $0.4 million, or $0.01 per diluted share for the period. See
Note 4 "Goodwill and Other Identifiable Intangible Assets" for additional
information.
7
The Financial Accounting Standards Board ("FASB") issued SFAS 143, Accounting
for Asset Retirement Obligations, in June 2001. SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets. In August 2001, the FASB issued SFAS 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, and provides further guidance regarding the accounting
and disclosure of long-lived assets. The Company adopted SFAS 143 and SFAS 144
effective August 1, 2002. The adoption of SFAS 143 did not have a material
impact on the Company's consolidated financial statements. As a result of the
adoption of SFAS 144, the sale of NORCOM was accounted for as a discontinued
operation (see Note 10 "Discontinued Operations") and certain assets to be
disposed of have been classified as assets held for sale in the accompanying
condensed consolidated balance sheets.
3. INVENTORIES
-----------
Inventories, net of reserves, of the Company consist of the following:
October 31, July 31,
2002 2002
----------- ------------
(In thousands)
Raw materials $ 32,341 $ 33,535
Work-in-process 25,108 23,838
Finished goods 57,651 56,808
----------- ------------
$115,100 $114,181
=========== ============
4. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS
-------------------------------------------------
The change in the carrying amount of goodwill attributable to each business
segment for the three months ended October 31, 2002 was as follows:
Network Specialty
Communication Electronic
Segment Segment Total
------------- ----------- -----------
(In thousands)
Balance, July 31, 2002 $6,958 $56,030 $62,988
Goodwill allocated to
discontinued operations (500) -- (500)
Currency translation 36 362 398
------------- ------------ -----------
Balance, October 31, 2002 $6,494 $56,392 $62,886
============= ============ ===========
8
The Company's other identifiable intangible assets are classified as follows:
October 31, 2002 July 31, 2002
--------------------------------- ------------------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
-------- ------------ ------ -------- ------------ ------
(In thousands)
Amortized intangible assets:
Patents $4,940 $(2,856) $2,084 $4,902 $(2,656) $2,246
Other 1,954 $ (781) 1,173 1,953 (670) 1,283
------ ------- ------ ------ ------- ------
$6,894 $(3,637) $3,257 $6,855 $(3,326) $3,529
====== ======= ====== ====== ======= ======
Indefinite-lived intangible
assets:
Tradenames and trademarks $2,703 $2,703
------ ------
Total intangible assets, net $5,960 $6,232
====== ======
The change in the carrying amount of amortized intangible assets was due to
currency translation. The estimated useful lives of the Company's identifiable
intangible assets with finite lives range from two to ten years. Aggregate
amortization expense related to these intangible assets was $0.3 million for
each of the three month periods ended October 31, 2002 and 2001. At October 31,
2002, estimated future amortization expense of intangible assets is as follows:
$0.8 million for the remaining nine months of fiscal 2003 and $1.0 million,
$0.9 million, $0.5 million, $0.1 million, and $0.0 million in fiscal 2004, 2005,
2006, 2007 and 2008, respectively.
5. FINANCING ARRANGEMENTS
----------------------
The Company's revolving credit facility is comprised of a $150.0 million U.S.
Facility, including European and U.K. sub-facilities, and a $65.0 million
revolving facility for its Canadian operations (the "Canadian Facility"), which
facility is supported by a letter of credit under the U.S. Facility and reduces
the availability under the U.S. Facility. On October 10, 2002, the Company and
the agent under the U.S. and Canadian Facilities reached an agreement whereby
the Company reduced total available borrowings under the U.S. and Canadian
Facilities to $150.0 million from the previous $200.0 million, reduced the
European and U.K. sub-facility limits to $37.5 million and $11.3 million,
respectively, and provided security for the loans in the form of a pledge of
substantially all of the Company's U.S. and Canadian non-real estate assets.
During the three months ended October 31, 2002, the Company recognized $0.3
million of additional deferred loan cost amortization as a result of the
reduction in the size of the facility. Such expense is included in Other
expense, net in the consolidated statement of operations. The U.S. and Canadian
Facilities expire on January 2, 2005 and December 2, 2004, respectively.
Borrowings under the U.S. Facility bear interest at either LIBOR plus 1.05% to
2.00%, or a base rate, as defined, plus 0.20% to 0.50%. The applicable interest
rate margin is based on the Company's leverage ratio as calculated under the
facility. A facility fee margin of 0.20% to 0.50%, which is also based on the
Company's leverage ratio, is payable on the maximum facility amount. Fees for
letters of credit under the U.S. Facility are charged at the applicable interest
rate margin. Borrowings under the Canadian Facility bear interest at the
Canadian Banker's Acceptance rate, plus an applicable margin of 0.30%. A
facility fee of 0.15% is payable under the Canadian Facility. As of October 31,
2002, the Company had availability of approximately $49.9 million and $20.4
million under the U.S. Facility and Canadian Facility, respectively.
9
The U.S. and Canadian Facilities have customary financial and non-financial
covenants. The financial covenants consist of "fixed charge" and "leverage"
ratios and a minimum net worth test. Compliance with these covenants is
dependent on a number of factors, including, in the case of the fixed charge
ratio, trailing four fiscal quarter capital expenditures and tax, interest and
scheduled principal payments and, in the case of the leverage ratio, the
Company's consolidated debt. Important to both of these ratios is the Company's
net income before interest, taxes, depreciation and amortization ("EBITDA"), as
calculated under the U.S. Facility, for the trailing four fiscal quarters. In
the case of the leverage ratio, pro forma adjustments are made to EBITDA for
acquisitions and, in the case of both ratios, add-backs to EBITDA are permitted
at the discretion of the lenders in the case of certain types of charges, which
included the loss on the sale of NORCOM in the first quarter of fiscal 2003 and
certain business restructuring expenses. The Company is currently in compliance
with the financial and non-financial covenants. Continued compliance with the
financial covenants is dependent on the levels of the various components that
are included in the calculations.
6. (LOSS) EARNINGS PER COMMON 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 potential
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
October 31,
---------------------------
2002 2001
---------------------------
(In thousands, except share
and per share data)
Numerator:
Net (loss) income from continuing operations $ (3,575) $ 3,583
Net loss from discontinued operations (32,644) (753)
---------- ----------
Net (loss) income $ (36,219) $ 2,830
========== ==========
Denominator:
Basic earnings per common share-weighted average
common shares outstanding 44,528,305 44,042,776
Common stock equivalents 14,243 601,418
---------- ----------
Denominator for diluted earnings per common share-
weighted average common shares outstanding and
common stock equivalent shares: 44,542,548 44,644,194
========== ==========
Basic and Diluted (Loss) Earnings per Common Share:
Continuing operations $(0.08) $0.08
Discontinued operations (0.73) (0.02)
---------- ----------
$(0.81) $0.06
========== ==========
Options to purchase 4,573,595 and 2,039,051 shares of common stock were
outstanding during the three months ended October 31, 2002 and 2001,
respectively, but were excluded from the computation of common stock equivalents
as the options' exercise prices were greater than the average market price of
the common stock for the respective periods.
10
7. INDUSTRY SEGMENT INFORMATION
----------------------------
The Company's operations are organized into two business segments: the Network
Communication segment and the Specialty Electronic segment. Network
Communication encompasses connectivity products used within computer networks
and communication infrastructures for the electronic transmission of data,
voice, and multimedia. Products included in this segment are high performance
network cable, fiber optic cable and passive components, including connectors,
wiring racks and panels, and interconnecting hardware for end-to-end network
structured wiring systems, and communication cable products for local loop,
central office, wireless and other applications. The Specialty Electronic
segment encompasses electronic cable products for automation and process control
applications as well as specialized wire and cable products for niche markets,
including commercial aviation and automotive electronics.
The Company evaluates segment performance based on operating profit excluding
business restructuring expenses, after allocation of Corporate expenses.
Business restructuring expenses of $7.1 million and $1.0 million, respectively,
were incurred in the three month periods ended October 31, 2002 and 2001, and
approximately $5.6 million and $0.8 million of the total business restructuring
expenses for the respective periods were associated with operations in the
Network Communication segment. See Note 9 "Business Restructuring Expenses" for
further discussion.
The Company has no inter-segment revenues. Summarized financial information for
the Company's business segments is as follows:
Network Specialty
Communication Electronic
Segment Segment Total
------------- ---------- --------
Three Months Ended October 31, (In thousands)
Net Sales:
2002 $ 71,485 $ 49,556 $121,041
2001 $ 74,520 $ 54,082 $128,602
Segment Operating (Loss) Profit
2002 $ (654) $ 3,847 $ 3,193
2001 $ 2,374 $ 5,740 $ 8,114
Total Assets:
October 31, 2002 $291,917 $220,989 $512,906
July 31, 2002 $360,786 $225,001 $585,787
11
Segment operating (loss) profit differs from consolidated (loss) income from
continuing operations before income taxes and minority interest reported in the
consolidated statements of operations as follows:
Three months ended
October 31,
--------------------
2002 2001
--------- -------
(In thousands)
Segment operating profit $ 3,193 $8,114
Less:
Business restructuring expenses 7,072 979
Interest expense, net 1,640 1,596
Other expense (income), net 269 (313)
--------- -------
(Loss) income from continuing operations before income
taxes and minority interest $(5,788) $5,852
========= =======
8. OTHER COMPREHENSIVE (LOSS) INCOME
- --------------------------------------
Comprehensive (loss) income consists of net (loss) income, foreign currency
translation adjustments and minimum pension liability adjustments. The
components of comprehensive (loss) income for the three months ended October 31,
2002 and 2001 are as follows:
Three months ended
October 31,
--------------------
2002 2001
--------- -------
(In thousands)
Net (loss) income $(36,219) $2,830
Currency translation adjustments 1,591 (1,791)
Minimum pension liability adjustments, net of tax (704) --
--------- -------
Comprehensive (loss) income $(35,332) $ 1,039
========= =======
9. BUSINESS RESTRUCTURING EXPENSES
- ------------------------------------
During the three months ended October 31, 2002, the Company incurred business
restructuring expenses of $7.1 million related to the consolidation of four
facilities into other Company operations and a Company-wide workforce reduction
of 313 employees, including employees of the facilities to be consolidated. The
restructuring expenses include severance and other employee termination costs of
approximately $3.7 million, asset impairment charges related to property and
equipment to be abandoned or held for sale of approximately $2.0 million, future
rent payments under noncancelable operating leases of $0.8 million, and other
costs associated with the facility consolidations of $0.6 million. As of October
31, 2002, all of the affected employees have been given notice of termination,
although certain employees will continue employment until the facility
consolidation plans have been completed, which management currently expects to
occur by February 2003. The operating leases expire at various dates through
July 31, 2005. During the three months ended October 31, 2001, the Company
incurred restructuring charges of $1.0 million, representing severance and other
termination related costs of workforce reductions at certain operations and
costs incurred, including asset impairments, as a result of the closing of the
Company's wireless assembly facility.
12
The following table displays the activity related to the restructuring plans for
the three months ended October 31, 2002:
Severance and Asset Lease payments
other employee costs write-downs and other costs Total
-------------------- ----------- --------------- -------
(In thousands)
Restructuring reserve, July 31, 2002 $ 1,877 $ -- $ -- $ 1,877
Charges 3,734 2,013 1,325 7,072
Cash expenditures (1,137) -- -- (1,137)
Asset write-downs/other adjustments (224) (2,013) -- (2,237)
------- ------- ------ -------
Restructuring reserve, October 31, 2002 $ 4,250 $ -- $1,325 $ 5,575
======= ======= ====== =======
10. DISCONTINUED OPERATIONS
-----------------------
On October 31, 2002, the Company sold substantially all of the operating assets
(consisting principally of accounts receivable, inventory and fixed assets) of
its NORCOM operating unit, a manufacturer of outside plant and central office
cables located in Kingston, Ontario. The assets were purchased for cash of
$11.3 million, subject to adjustment for asset values as of the closing date,
plus assumption of certain current liabilities. The Company retained ownership
of the NORCOM real estate and is leasing the property to the purchaser
essentially rent free for the first year of the lease agreement. Accordingly,
$1.7 million, representing the estimated fair market value of annual lease
payments, of the proceeds from the sale have been recorded as deferred rental
income and will be amortized to revenue on a straight-line basis over the rental
period. The sale agreement provides for contingent additional purchase price of
up to $8.1 million over a three year period, primarily dependent on the
purchaser's achievement of future business levels and sales of certain inventory
items. Under the sale agreement, the Company retained various liabilities,
including certain pension and postretirement obligations related to the
transferred employees. See Note 11 "Pension and Other Employee Benefits".
Sales and pretax operating loss of the discontinued NORCOM operations for the
three month periods ended October 31, 2002 and 2001 were as follows:
Three Months Ended
October 31,
-----------------------
2002 2001
------- -------
(In thousands)
Net sales $13,287 $13,354
Pretax operating loss $ (929) $(1,099)
The results of operations for NORCOM have been reported separately as
discontinued operations in the consolidated statements of operations for all
periods presented.
13
11. PENSION AND OTHER EMPLOYEE BENEFITS
-----------------------------------
As of October 31, 2002, the Company recognized a curtailment loss of
$2.3 million resulting from the sale of NORCOM (see Note 10 "Discontinued
Operations"). The curtailment loss was recorded in Loss on sale of business in
the accompanying condensed consolidated statement of operations.
Settlement of certain of the Company's pension liabilities with respect to
employees of the discontinued operation is expected to occur within one to two
years. Under SFAS No. 88, Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits, the cost to
settle these liabilities will be recognized at the settlement date when the
liabilities are funded in cash or through the purchase of annuities. The Company
currently estimates the cost of settlement to be $2 to $3 million based on
current actuarial assumptions.
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cable Design Technologies Corporation ("the Company") is a leading manufacturer
of technologically advanced connectivity products for the Network Communication
and Specialty Electronic marketplaces. Network Communication encompasses
connectivity products used within computer networks and communication
infrastructures for the electronic transmission of data, voice and multimedia.
Products included in this segment are high bandwidth network and interconnect
cables, fiber optic cable and passive components, including connectors, wiring
racks and panels, and interconnecting hardware for end-to-end network structured
wiring systems, and communication cable products for local loop, central office,
wireless and other applications. The Specialty Electronic segment encompasses
electronic cable products for automation and process control applications as
well as specialized wire and cable products for niche markets, including
commercial aviation and automotive electronics.
This discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the Company's unaudited condensed
consolidated financial statements and the notes thereto.
Results of Operations
Three Months Ended October 31, 2002 Compared to
Three Months Ended October 31, 2001
Sales for the three months ended October 31, 2002 ("first quarter 2003") were
$121.0 million compared to $128.6 million for the three months ended October 31,
2001 ("first quarter 2002"), a decrease of 6%. First quarter 2003 sales included
$10.0 million attributable to acquired businesses, primarily in the Network
Communication segment. Network Communication segment sales decreased
$3.0 million, or 4%, to $71.5 million for the first quarter 2003 compared to
$74.5 million for the first quarter 2002, and Specialty Electronic segment sales
declined $4.6 million, or 8%, to $49.5 million for the first quarter 2003
compared to $54.1 million for the first quarter 2002. The decrease in sales for
the Network Communication segment was primarily due to a 13% decrease in sales
of network products, including a 60% decline in sales of the lower performance
Category 5 network cable. Sales of Category 5 network cable currently represent
less than 10% of the Company's sales of Category 5 and higher network cable.
Sales of other network products were also negatively impacted by lower sales
volume and decreases in selling prices as a result of the downturns in the U.S.
and European economies. Sales of products for the telecommunication market
increased 37% compared to the first quarter 2002, due to the additional sales of
acquired businesses. Excluding sales attributable to acquired businesses, sales
for this marketplace decreased 22% due to lower capital spending by
communication companies. The decrease in sales for the Specialty Electronic
segment was primarily due to lower sales of commercial aviation products
resulting from reduced demand from aircraft manufacturers. Sales outside of
North America increased to $43.1 million for the first quarter 2003 compared to
sales of $35.2 million for the first quarter 2002 due to sales attributable to
businesses acquired during fiscal 2002, primarily in Europe.
Gross profit for the first quarter 2003 was $27.7 million compared to
$35.6 million for the first quarter 2002, and the gross margin was 22.9%
compared to 27.7% last year. The decrease in the gross margin was primarily a
result of a lower Network Communication segment margin due to decreases in
selling prices of the Company's network connectivity products and volume
inefficiencies. First quarter 2003 gross profit was also negatively impacted by
an inventory write-down of $0.6 million related to the closing of a
manufacturing facility. Additionally, included in first quarter 2003 cost of
sales is approximately $0.5 million of continuing pension expense related to the
discontinued NORCOM operations, which is expected to be reduced on a going
forward basis.
Shipping and handling costs incurred for the delivery of goods to customers were
historically classified by the Company as either cost of sales or selling,
general and administrative expenses ("SG&A"), depending on the specific
operating unit. Effective with the first quarter 2003, such shipping and
handling costs for all operating units is included in cost of sales, and
comparative prior period amounts have been reclassified consistent with the
current year presentation.
15
SG&A for the first quarter 2003 decreased 9%, to $23.5 million compared to
$25.8 million for the same period last year. Excluding the additional SG&A of
acquired businesses SG&A decreased $3.4 million, primarily due to reduced
employee costs resulting in part from the Company's previous efforts to reduce
expenses in response to the slowing economy, as well as lower sales volume
related expenses. SG&A as a percentage of sales decreased to 19.4% for the first
quarter 2003 compared to 20.0% for the first quarter 2002.
During the first quarter 2003, the Company incurred business restructuring
expenses of $7.1 million related to the consolidation of four facilities into
other Company operations and a Company-wide workforce reduction of 313
employees, including employees of the facilities to be consolidated. The
restructuring expenses include severance and other employee termination costs of
approximately $3.7 million, asset impairment charges related to property and
equipment to be abandoned or held for sale of approximately $2.0 million, future
rent payments under noncancelable operating leases of $0.8 million, and other
costs associated with the facility consolidations of $0.6 million. Additionally,
the Company expects to incur future costs of approximately $0.7 to $1.0 million
to relocate equipment from the four facilities to other CDT operations. Business
restructuring charges of $1.0 million were incurred in the first quarter 2002
representing severance and other termination related costs of workforce
reductions at certain operations and costs incurred, including asset
impairments, as a result of the closing of the Company's wireless assembly
facility.
The first quarter 2003 effective tax rate for continuing operations was 39.8%
compared to 38.0% for the first quarter 2002. The Company recognized
approximately $0.5 million of tax benefit in the first quarter 2003 due to the
favorable resolution of certain tax issues.
During the first quarter 2003, the Company recognized $0.3 million of additional
deferred loan cost amortization as a result of the reduction in the size of its
primary credit facility. Such expense is included in other expense, net in the
consolidated statement of operations.
Reported net loss from continuing operations for the first quarter 2003 was
$(3.6) million, or $(0.08) per diluted share, compared to net income from
continuing operations of $3.6 million, or $0.08 per diluted share, for the first
quarter 2002. Excluding net of tax business restructuring expenses for both
periods, net income from continuing operations was $1.1 million, or $0.03 per
diluted share, for the first quarter 2003, a decrease of $3.1 million compared
to $4.2 million, or $0.09 per diluted share, for the same period last year. The
lower net income was primarily due to the effect of the lower gross margin
percentage which more than offset the lower SG&A expenses.
Discontinued Operations
On October 31, 2002, the Company sold substantially all of the operating assets
of its NORCOM operating unit, a manufacturer of outside plant and central office
cable for the U.S. and Canadian marketplaces. Loss from discontinued operations
was $(32.6) million, net of tax benefit of $13.0 million, and $(0.8) million,
net of tax benefit of $0.3 million, for the first quarter 2003 and 2002,
respectively. The first quarter 2003 loss includes a $(32.0) million net of tax
loss on the sale. See also Note 10 "Discontinued Operations" of the Notes to
Consolidated Condensed Financial Statements. The Company's net loss for first
quarter 2003 including discontinued operations was $(36.2) million, or $(0.81)
per diluted share, compared to net income of $2.8 million, or $0.06 per diluted
share, for the same period last year.
Financial Condition
Liquidity and Capital Resources
The Company generated $13.7 million of net cash from operating activities during
the first quarter 2003, primarily from an operating working capital decrease of
$11.1 million. The change in operating working capital was primarily the result
of a decrease in accounts receivable of $7.1 million and an increase in accounts
payable and other current liabilities of $4.8 million. The change in operating
working capital excludes changes in cash and cash equivalents and current
maturities of long-term debt.
16
Cash provided by investing activities of $8.5 million included $9.6 million of
proceeds from the sale of discontinued operations, partially offset by capital
expenditures of $1.0 million. Net cash used by financing activities of $29.0
million represented the net reduction of outstanding debt. While the Company has
substantially reduced outstanding debt over the two prior quarterly periods, the
Company does not expect further reductions to debt in its second fiscal quarter
due to the seasonality of the business.
The Company's revolving credit facility is comprised of a $150.0 million U.S.
Facility, including European and U.K. sub-facilities, and a $65.0 million
revolving facility for its Canadian operations (the "Canadian Facility"), which
facility is supported by a letter of credit under the U.S. Facility and reduces
the availability under the U.S. Facility. On October 10, 2002, the Company and
the agent under the U.S. and Canadian Facilities reached an agreement whereby
the Company reduced total available borrowings under the U.S. and Canadian
Facilities to $150.0 million from the previous $200.0 million, reduced the
European and U.K. sub-facility limits to $37.5 million and $11.3 million,
respectively, and provided security for the loans in the form of a pledge of
substantially all of the Company's U.S. and Canadian non-real estate assets. The
U.S. and Canadian Facilities expire on January 2, 2005 and December 2, 2004,
respectively. Borrowings under the U.S. Facility bear interest at either LIBOR
plus 1.05% to 2.00%, or a base rate, as defined, plus 0.20% to 0.50%. The
applicable interest rate margin is based on the Company's leverage ratio as
calculated under the facility. A facility fee margin of 0.20% to 0.50%, which is
also based on the Company's leverage ratio, is payable on the maximum facility
amount. Fees for letters of credit under the U.S. Facility are charged at the
applicable interest rate margin. Borrowings under the Canadian Facility bear
interest at the Canadian Banker's Acceptance rate, plus an applicable margin of
0.30%. A facility fee of 0.15% is payable under the Canadian Facility. As of
October 31, 2002, the Company had availability of approximately $49.9 million
and $20.4 million under the U.S. Facility and Canadian Facility, respectively.
The U.S. and Canadian Facilities have customary financial and non-financial
covenants. The financial covenants consist of "fixed charge" and "leverage"
ratios and a minimum net worth test. Compliance with these covenants is
dependent on a number of factors, including, in the case of the fixed charge
ratio, trailing four fiscal quarter capital expenditures and tax, interest and
scheduled principal payments and, in the case of the leverage ratio, the
Company's consolidated debt. Important to both of these ratios is the Company's
net income before interest, taxes, depreciation and amortization ("EBITDA"), as
calculated under the U.S. Facility, for the trailing four fiscal quarters. In
the case of the leverage ratio, pro forma adjustments are made to EBITDA for
acquisitions and, in the case of both ratios, add-backs to EBITDA are permitted
at the discretion of the lenders in the case of certain types of charges,
including the loss on the sale of NORCOM in the first quarter of fiscal 2003 and
certain business restructuring expenses. The Company is currently in compliance
with the financial and non-financial covenants. Continued compliance with the
financial covenants is dependent on the levels of the various components that
are included in the calculations.
Based on current expectations for improvement in its business, management
believes that the Company's cash flow from operations and the available portion
of its credit facilities will provide it with sufficient liquidity to meet its
current liquidity needs.
Fluctuation in Copper Price
The cost of copper in inventories, including finished goods, reflects purchases
over various periods of time ranging from one to several months for each of the
Company's operations. For certain communication cable products, profitability is
generally not significantly affected by volatility of copper prices as selling
prices are generally adjusted for changes in the market price of copper,
however, differences in the timing of selling price adjustments do occur and may
impact near term results. For other products, although selling prices are not
generally adjusted to directly reflect changes in copper prices, the relief of
copper costs from inventory for those operations having longer inventory cycles
may affect profitability from one period to the next following 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.
17
New Accounting Standards
In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 146 ("SFAS 146"). SFAS 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring). The provisions
of SFAS 146 are effective for exit or disposal activities that are initiated
after December 31, 2002, with early adoption encouraged. The Company is
currently evaluating the effects of SFAS 146 on its financial position, results
of operations and cash flows.
Forward-Looking Statements -- Under the Private Securities Litigation Act of
1995
Certain statements in this quarterly report are forward-looking statements,
including, without limitation, statements regarding future financial results and
performance and available liquidity, future debt paydown or incurrence, amount,
or date of recognition of, future pension obligations, effect of SFAS 142
testing of goodwill for impairment, 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, the ability to remain in compliance with financial and
other covenants contained in the Company's credit facilities (which, in part,
depends on the Company's indebtedness, fixed charges and adjusted EBITDA, each
as calculated under the credit facilities), litigation exposure, 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, 2002, 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.
18
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There was no material change in the Company's exposure to market risk from
July 31, 2002.
Item 4. CONTROLS AND PROCEDURES
a. Evaluation of disclosure controls and procedures. Based on their evaluation
as of a date within 90 days of the filing date of this Form 10-Q, the Company's
principal executive officer and principal financial officer have concluded that
the Company's disclosure controls and procedures (as defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act"))
are effective to ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
b. Changes in internal control. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation described above. There
were no significant deficiencies or material weaknesses, and therefore there
were no corrective actions taken.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
The Company's chief executive officer and chief financial officer have
provided as part of this filing the certification with respect to this
Form 10-Q that is required by Section 906 of the Sarbanes-Oxley
Act of 2002.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation of CDT as filed
with the Secretary of State of Delaware on November 10, 1993,
incorporated by reference to Exhibit 3.1 to CDT's Registration
Statement on Form S-1 (File No. 33-69992), Certificate of Amendment
of the Restated Certificate of Incorporation of CDT and Certificate
of Designation, Preferences and Rights of Junior Participating
Preferred Stock, Series A of CDT, as filed with the Secretary of
State of Delaware on December 11, 1996 and incorporated by reference
to CDT's Registration Statement on Form 8-A/A, as filed on
December 23, 1996.
19
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 Collective Labour Agreement dated June 10, 2001, between NORDX/CDT
and Canadian Union of Communications Workers Unit 4. Incorporated by
reference to Exhibit 10.7 to CDT's Annual Report on Form 10-K, as
filed on October 29, 2002.
10.6 Form of Change in Control Agreement between CDT and each of
George C. Graeber, Kenneth O. Hale, Charles B. Fromm, Peter Sheehan
and Ian Mack. Incorporated by reference to Exhibit 10.14 to CDT's
Annual Report on Form 10-K, as filed on October 27, 1999.
10.7 Cable Design Technologies Corporation 1999 Long-Term Performance
Incentive Plan adopted April 19, 1999 and amended June 11, 1999.
Incorporated by reference to Exhibit 10.16 to CDT's Annual Report on
Form 10-K, as filed on October 27, 1999.
10.8 Cable Design Technologies Corporation Employee Stock Purchase Plan.
Incorporated by reference to Exhibit 4.3 to CDT's Registration
Statement on Form S-8 (File No. 333-76351).
10.9 Form of June 11, 1999 Stock Option Grant under the 1999 Long-Term
Performance Incentive Plan. Incorporated by reference to Exhibit
10.18 to CDT's Annual Report on Form 10-K, as filed on October 27,
1999.
10.10 Form of April 23, 1999 Stock Option Grant. Incorporated by reference
to Exhibit 10.19 to CDT's Annual Report on Form 10-K, as filed on
October 27, 1999.
10.11 Amendment No. 1, dated March 7, 2000, to Cable Design Technologies
Corporation Non-Employee Director Stock Plan. Incorporated by
reference to Exhibit 10.14 to CDT's Annual Report on Form 10-K, as
filed on October 27, 2000.
10.12 Amendment No. 2, dated July 13, 2000, to Cable Design Technologies
Corporation 1999 Long-Term Performance Incentive Plan. Incorporated
by reference to Exhibit 10.15 to CDT's Annual Report on Form 10-K,
as filed on October 27, 2000.
10.13 Employment agreement dated August 1, 2000, among CDT, Noslo Ltd. and
Ian Mack. Incorporated by reference to Exhibit 10.16 to CDT's Annual
Report on Form 10-K, as filed on October 27, 2000.
20
10.14 Cable Design Technologies Corporation 2001 Long-Term Performance
Incentive Plan adopted December 6, 2000. Incorporated by reference
to Exhibit 99.1 to CDT's Report on Form 10-Q as filed March 15,
2001.
10.15 Form of Stock Option Grant under CDT Non-Employee Director Stock
Plan. Incorporated by reference to Exhibit 99.2 to CDT's Report on
Form 10-Q as filed March 15, 2001.
10.16 Form of Employment Agreement dated December 10, 2001, between Cable
Design Technologies Corporation and Ferdinand C. Kuznik.
Incorporated by reference to Exhibit 10.2 to CDT's Report on Form
10-Q as filed March 13, 2002.
10.17 Form of Change in Control Agreement dated December 10, 2001, between
Cable Design Technologies Corporation and Ferdinand C. Kuznik.
Incorporated by reference to Exhibit 10.1 to CDT's Report on Form
10-Q as filed March 13, 2002.
10.18 Form of Ferdinand C. Kuznik nonqualified stock option grant, dated
January 21, 2002. Incorporated by reference to Exhibit 10.4 to CDT's
Report on Form 10-Q as filed March 13, 2002.
10.19 Amendment, dated December 10, 2001, to Cable Design Technologies
Corporation 2001 Long-Term Performance Incentive Plan. Incorporated
by reference to Exhibit 10.5 to CDT's Report on Form 10-Q as filed
March 13, 2002.
10.20 Form of Employment/Retention Agreement dated August 22, 2002 between
Cable Design Technologies Corporation and Kenneth O. Hale.
Incorporated by reference to Exhibit 10.24 to CDT's Annual Report on
Form 10-K, as filed on October 29, 2002.
10.21 Form of Employment Agreement dated October 15, 2002, between Cable
Design Technologies Corporation and William Cann.**
10.22 Form of Restricted Stock Grant, dated October 16, 2002, under the
2001 and Supplemental Long-Term Performance Incentive Plan.**
15.1 Letter of Deloitte & Touche regarding unaudited interim financial
statement information.**
99.1 Form of Credit Agreement dated December 17, 2001, among Cable
Design Technologies Corporation, Fleet National Bank, Fleet National
Bank, London Branch, Fleet Bank Europe Limited, and other lenders
party thereto. Incorporated by reference to Exhibit 99.1 to CDT's
Report on Form 10-Q as filed March 13, 2002.
99.2 Form of Credit Agreement dated December 17, 2001, among NORDX/CDT,
Inc., Cable Design Technologies Corporation, Cable Design
Technologies, Inc. and BNP Paribas (Canada). Incorporated by
reference to Exhibit 99.2 to CDT's Report on Form 10-Q as filed
March 13, 2002.
99.3 Asset Purchase Agreement dated October 22, 2002, between NORDX/CDT,
Inc., Belden (Canada) Inc. and Belden Communications Company.**
99.4 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
** Filed Herein
(b) Reports on Form 8-K:
None
21
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/ Ferdinand C. Kuznik
------------------------------------------------
December 16, 2002 Ferdinand C. Kuznik
Chief Executive Officer
/s/ Kenneth O. Hale
------------------------------------------------
December 16, 2002 Kenneth O. Hale
Vice President and Chief Financial Officer
22
CERTIFICATIONS
I, Ferdinand C. Kuznik, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cable Design
Technologies Corporation ("CDT");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of CDT as of, and for, the periods presented in this quarterly
report.
4. CDT's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for CDT and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to CDT, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of CDT's disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. CDT's other certifying officers and I have disclosed, based on our most
recent evaluation, to CDT's auditors and the audit committee of CDT's board
of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect CDT's ability to record, process,
summarize and report financial data and have identified for CDT's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in CDT's internal controls; and
6. CDT's other certifying officers and I have indicated in this quarterly
report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: December 16, 2002
/s/ Ferdinand C. Kuznik
-----------------------
Ferdinand C. Kuznik
Chief Executive Officer
23
I, Kenneth O. Hale, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cable Design
Technologies Corporation ("CDT");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of CDT as of, and for, the periods presented in this quarterly
report.
4. CDT's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for CDT and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to CDT, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of CDT's disclosure controls and procedures
as of a date within 90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. CDT's other certifying officers and I have disclosed, based on our most
recent evaluation, to CDT's auditors and the audit committee of CDT's board
of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect CDT's ability to record, process,
summarize and report financial data and have identified for CDT's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in CDT's internal controls; and
6. CDT's other certifying officers and I have indicated in this quarterly
report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: December 16, 2002
/s/ Kenneth O. Hale
--------------------------------
Kenneth O. Hale
Chief Financial Officer
24