Superior TeleCom, Inc.
Filed 4/2/01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-12261
SUPERIOR TELECOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 58-2248978
incorporation or organization) (IRS Employer Identification No.)
1790 BROADWAY NEW YORK, NEW YORK 10019-1412
(Address of principal executive (zip code)
offices)
Registrant's telephone number, including area code 212-757-3333
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
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 requirements 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 not be contained, to the best of the 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. / /
At March 23, 2001, the registrant had 20,438,903 shares of common stock, par value $.01 per share, outstanding, and the
aggregate market value of the outstanding shares of voting stock held by non-affiliates of the registrant on such date was
approximately $41.2 million based on the closing price of $4.16 per share of such common stock on such date.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Company's Annual Meeting of Stockholders in
Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
Superior TeleCom Inc. (together with its subsidiaries, unless the context otherwise requires, the "Company" or "Superior") is
the largest wire and cable manufacturer in North America and the fourth largest in the world. Superior manufactures wire and
cable products for the communications, original equipment manufacturer, or "OEM", and electrical markets. Superior is a
leading manufacturer and supplier of communications wire and cable products; magnet wire and insulation materials for motors,
transformers and electrical controls; and building and industrial wire for applications in commercial and residential construction
and industrial facilities. Superior operates 31 manufacturing facilities in the United States, Canada, United Kingdom, Israel and
Mexico.
ORGANIZATIONAL HISTORY
Superior was incorporated in July 1996 as a wholly-owned subsidiary of The Alpine Group, Inc. ("Alpine"). On October 2,
1996, Alpine completed a reorganization whereby all of the issued and outstanding common stock of two of Alpine's
wholly-owned subsidiaries, Superior Telecommunications Inc. and DNE Systems, Inc., were contributed to Superior. On
October 17, 1996, Superior completed an initial public offering of its common stock, generating net proceeds of approximately
$100 million which were used to reduce outstanding bank debt and pay Alpine certain previously declared dividends. As a
result of the initial public offering, Alpine's common stock ownership position in Superior was reduced to approximately 50.1%.
As a result of treasury stock repurchases and other transactions, Alpine's current common stock interest in Superior is 51.5%.
Superior effected a five-for-four stock split on February 2, 1998 and on February 3, 1999, and issued a 3% stock dividend on
February 11, 2000. All references herein to shares of common stock (except shares authorized and issued) and to per share
information have been adjusted to reflect the stock splits and stock dividend on a retroactive basis.
RECENT SIGNIFICANT GROWTH
Over the past six years, Superior, including its predecessors, has led a consolidation of the North American wire and cable
industry. In May 1995, Superior Telecommunications Inc. acquired the North American copper telecommunications wire and
cable operations of Alcatel N.A. Cable Systems, Inc. and Alcatel Canada Wire, Inc. With this acquisition, Superior became
the largest North American manufacturer of copper telephone wire and cable.
On November 27, 1998, Superior, through a newly formed, wholly-owned subsidiary, acquired approximately 81% of the
outstanding shares of common stock of Essex International Inc. ("Essex") through a cash tender offer for an aggregate price of
approximately $770 million. Then, on March 31, 1999, Essex merged with that wholly-owned subsidiary of Superior. In the
merger, holders of the remaining 19% of the outstanding shares of common stock of Essex each received 0.64 (in the aggregate
$167 million liquidation value) of an 8 1/2% trust convertible preferred security of Superior Trust I, a Delaware trust in which
Superior owns all the common equity interests, for each share of Essex common stock owned. Upon completion of the merger,
Essex became a wholly-owned subsidiary of Superior. Essex, through its subsidiaries, manufactures and distributes wire and
cable products, including magnet wire for electromechanical devices, building wire for commercial and residential construction
applications, copper communications wire and cable and industrial wire. As a result of the acquisition of Essex, Superior has
diversified its wire and cable product offering and has become the largest wire and cable manufacturer in North America and
the fourth largest wire and cable manufacturer in the world.
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During 1998, Superior also expanded its international operations. On May 5, 1998, Superior acquired 51% of the issued and
outstanding shares of common stock of Cables of Zion United Works, Ltd. ("Cables of Zion") for approximately $25.0 million
in cash. Cables of Zion is an Israel-based cable and wire manufacturer whose primary products include fiber and copper
communications wire and cable and power cable. Cables of Zion products are sold primarily into the Israeli and European
markets.
On December 31, 1998, Superior, through Cables of Zion, acquired the business and certain operating assets of Cvalim-The
Electric Wire & Cable Company of Israel Ltd. and its wholly-owned subsidiary, Dash Cable Industries (Israel) Ltd., for
approximately $41.2 million in cash. Cvalim was the leading Israeli manufacturer of electrical, communications and industrial
wire and cable products. Furthermore, in October 1999 Cables of Zion acquired the business and certain operating assets of
Pica Plast Limited, the remaining major wire and cable company in Israel, for a purchase price of approximately $10.8 million.
As a result of these acquisitions, Cables of Zion, which has changed its name to Superior Cables Limited, is the dominant wire
and cable manufacturer in Israel with an approximate 80% market share. Superior believes that expanding its operational
presence in Israel will enable it to participate further in the growing communications wire and cable markets in Europe and the
Middle East. The operations of Superior Cables Limited, including the acquired operations of Cvalim and Pica Plast, are
hereinafter referred to as "Superior Israel".
RECENT CORPORATE REORGANIZATION AND OPERATIONAL RESTRUCTURINGS
During 1999 and continuing into 2000, the Company initiated and completed significant corporate reorganization at Essex and a
major restructuring of certain operations of Essex, including the sale of non-strategic business lines and the rationalization of
certain manufacturing assets.
In April 1999, the Company completed a corporate reorganization which included the elimination of more than 130 corporate
and divisional general and administrative positions at Essex. Annual savings in corporate expenses from these personnel
reductions, along with other corporate general and administrative cost reductions and synergies, approximate $25 million.
The Company has also divested non-core product lines, including the sale of the business and operating assets of Essex's
insulation products business in October 1999 and its Interstate operations (wiring assemblies for trucks and buses) in
December 1999. Total cash proceeds from these sales amounted to $11 million.
Additionally, the Company has substantially completed a restructuring and rationalization of the operating assets comprising
Essex's Electrical Group. During the past two years, the Company shut down or sold six electrical wire manufacturing plants.
This has resulted in the Electrical Group's manufacturing being consolidated into six remaining manufacturing facilities. This
restructuring resulted in the elimination of 600 positions and a reduction of 22% in the Electrical Group's manufacturing
capacity, all of which was considered excess capacity.
As a result of the above mentioned activities, the Company has eliminated approximately 1,100 positions in the aggregate, a
25% reduction in Essex's total workforce since the beginning of 1999.
COMMUNICATIONS GROUP
Superior's Communications Group includes its North American communications wire and cable operations as well as the
operations of Superior Israel.
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The Communications Group's North American operations manufacture and sell the following communications wire and cable
products:
(1) Copper outside plant ("OSP") wire and cable for voice and data transmission, used in the distribution or local loop portion
of the telecommunications infrastructure, principally by the local exchange carriers ("LECs");
(2) Fiber optic OSP cable products used principally for trunking and feeder applications in local exchange, CATV, and long
distance networks; and OSP composite (or hybrid) cables (including fiber optic/twisted pair and coaxial/twisted pair cables) for
local exchange feeder, distribution and service wire applications; and
(3) Copper and fiber optic premise wire and cable used within homes, offices and switching structures for local area networks
("LANs"), Internet connectivity and other applications.
Superior is the largest manufacturer of copper communications cable in North America, and the largest worldwide
manufacturer of copper OSP wire and cable products.
The Communications Group North American operations also include the operations of DNE Systems, Inc. ("DNE"). DNE
designs and manufactures data communications equipment, integrated access devices and other electronic equipment for
defense, government and commercial applications. DNE's net sales are not material in relation to the total net sales of the
Communications Group.
COPPER OSP PRODUCTS
Copper wire and cable are the most widely-used media for voice and data transmission in the local loop portion of the
traditional telecommunications infrastructure operated by the LECs, which include the regional Bell operating companies
("RBOCs") and the independent telephone operating companies. The local loop is the segment of the telecommunications
network that connects the customer's premises to the nearest telephone company switching center or central office. Superior
believes that copper will continue to be a leading transmission medium in the local loop due to factors such as:
- the installed base of copper cable and associated switches, connectors and other accessory components represents an
investment of over $150 billion that must be maintained by the LECs;
- the lower installation costs of copper compared to optical fiber and other media;
- technological advances, such as digital subscriber line ("xDSL") technologies and integrated services digital networks
("ISDN"), that increase the bandwidth of the installed local loop copper network;
- the increasing demand by consumers for affordable enhanced services, which, because of technological advances, can be
supported by the copper-based local loop; and
- the increasing demand for affordable multiple residential access lines to support fax machines, Internet access and multiple
voice lines.
Demand for copper OSP wire and cable is dependent on several factors, including the rate at which new access lines are
installed in homes and businesses, the level of infrastructure spending for items such as road-widenings and bridges, which
generally necessitates replacement of existing utilities, including telephone cable, and the level of general maintenance spending
by the LECs. The installation of new access lines is, in turn, partially dependent on the level of new home construction and
expansion of business and, increasingly in recent years, on demand for additional telephone and data lines dedicated to facsimile
machines and computer modems, which are used for, among other purposes, business communications and access to the
Internet.
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The local loop comprises approximately 185 million residential and business access lines in the United States. The installed base
of copper wire and cable and associated switches and other components utilized in the local loop represents an investment of
over $150 billion that must be maintained by the LECs. Although other media, such as fiber optic cable, are used for trunk lines
between central offices and for feeder lines connecting central offices to the local loop, a substantial portion of all local loop
lines and systems continue to be copper-based. Superior believes that in the local loop, copper-based networks require
significantly lower installation costs than other alternative networks such as fiber optics.
Copper usage in the local loop continues to be supported by technological advances that expand the use and bandwidth of the
installed local loop copper network. These advances include xDSL and ISDN technologies. These technologies, together with
regulatory developments and increased competition among service providers, have accelerated the demand for and the
introduction of new high-speed and bandwidth-intensive telecommunications services, such as integrated voice and data,
broadcast and conference quality video, Internet, high-speed LAN-to-LAN connectivity, and other specialized
bandwidth-intensive applications, all of which can now be provided over the copper based local loop network.
Superior's copper OSP products include distribution cable and service wire products, ranging in size from a single twisted pair
wire to a 4,200-pair cable. The basic unit of virtually all copper OSP wire and cable is the "twisted pair," a pair of insulated
conductors twisted around each other. Twisted pairs are bundled together to form communications wire and cable. Superior's
copper OSP wire and cable products are differentiated by a multitude of design variations, depending on where the cable is to
be installed. Copper OSP products normally have metallic shields for mechanical protection and electromagnetic shielding, as
well as an outer polyethylene jacket.
For the year ended December 31, 2000, net sales of copper OSP products accounted for 63% of the Communications
Group's net sales.
Superior has historically been a key supplier of copper OSP wire and cable to the RBOCs and the two major independent
telephone companies, GTE Corporation and Sprint Corporation. It is estimated that the RBOCs, GTE and Sprint comprise
approximately 80% of the approximately $1.3 billion North American copper OSP market. The remaining 20% of the North
American market is comprised of more than 1,200 smaller independent telephone companies. Prior to the Essex acquisition,
Superior was not a major supplier to the smaller independent telephone companies due to capacity constraints and lack of
established distributor relationships. However, the Essex acquisition provided Superior both the capacity and the established
distributor network to address this market. For the year ended December 31, 2000, 63% of Superior's OSP net sales were to
the RBOCs and the two major independent telephone companies. Superior sells to the RBOCs and major independent
telephone companies through a direct sales force. With the acquisition of Essex, Superior's OSP wire and cable products are
increasingly being sold through domestic and international distributors and sales representatives.
Superior's sales to the RBOCs and the major independent telephone operating companies are generally pursuant to multi-year
supply arrangements in which the customer agrees to have Superior supply a certain percentage of the customer's OSP wire or
cable needs during the term of the arrangement. Typically, customers are not required to purchase any minimum quantities of
product under these arrangements. At December 31, 2000, Superior had multi-year arrangements with two of the four RBOCs
and with the two major independent telephone companies.
BROADBAND PRODUCTS
The Company's broadband products include: (i) OSP fiber and composite cables and (ii) copper and fiber optic premise wire
and cable products. These products are designed to meet the highest
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bandwidth requirements necessary in trunking and feeder applications to service the growing demand for increasing
transmission rates within the copper based local loop distribution network, and to service the high transmission rate
requirements of local area and wide area networks. Sales of broadband products in 2000 were $141 million, representing a
growth rate of 69% over 1999.
FIBER OPTIC OSP PRODUCTS
For many years the use of fiber optic OSP cable was principally limited to trunking applications and, to a lesser degree, high
density feeder applications within the local exchange network. During this period the fiber optic OSP cable market was
dominated by major vertically integrated optical fiber producers, including Corning, Inc. and Lucent Technologies Inc., who
held significant technological and cost advantages. In recent years, the demand for fiber optic cable has increased dramatically
in the feeder network as a funnel to support the emerging high bandwidth digital copper loops, and as both a backbone and
distribution medium for CATV applications. Further, technological advances now have allowed other manufacturers to cost
efficiently produce fiber optic OSP cable products and effectively compete with the major vertically integrated fiber optic cable
producers.
Superior began manufacturing fiber optic OSP cable products in 1999. In 2000 Superior completed a major expansion of its
fiber optic cabling capabilities and successfully produced and sold $47 million of fiber optic OSP cable products, a growth rate
of 273% over 1999. The Company expects to continue to invest in expanding its fiber optic cabling capabilities and anticipates
continued revenue growth in this product segment.
The fiber optic OSP cables Superior manufacturers can be used in a variety of installations such as aerial, buried and
underground conduit and can be configured with two to over 280 fibers, which are typically single-mode fibers. These cables
are sold to traditional customers, such as distributors and LECs (including the RBOCs), as well as new customers, such as
CATV companies, inter-exchange carriers and competitive access providers.
PREMISE PRODUCTS
Premise wire and cable is used within buildings to provide connectivity for telecommunications networks and LANs and within
switching structures to connect various electronic switching and testing components. Rapid technological advances in
communication and computer system capabilities have created increasing demand for greater bandwidth capabilities in wire and
cable products. Superior expects demand for premise wire and cable products to continue to increase, particularly as new
office buildings are constructed, existing office buildings are upgraded to accommodate advanced network requirements and
multiple residential access lines for facsimile machines, home offices, home networks and access to the Internet are installed.
There are two primary applications for communications wiring systems within buildings: voice applications, estimated at 15% of
new wiring system investment, and data applications, estimated at 85% of new wiring system investment. The primary voice
application consists of networking telephone stations. The primary data application is LANs, which require the wired
interconnection of workstations and peripherals, such as printers and file servers, to form a network.
Four major types of cables are currently deployed in premise applications:
(1) LAN copper twisted pair (unshielded twisted pair or "UTP" and shielded twisted pair or "STP"), (2) LAN fiber optic cable,
(3) LAN coaxial cable and
(4) voice grade twisted copper pair. Superior anticipates that UTP and fiber optic cable will provide the most significant growth
opportunities due to increasing demands in the premise market for cost-effective, high bandwidth solutions.
Continued high growth for new LAN installations, as well as voice system upgrades, have resulted in increased demand for
LAN UTP cables, particularly Category 5, Category 5e and Category 6 cables.
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These high bandwidth cables have made it possible for UTP to compete with fiber and LAN STP for high-speed LAN
applications. The other large component of the premise segment is fiber optic cable, which meets the needs of communications
services requiring bandwidth capabilities greater than can be provided by copper based technologies.
Superior's current premise wire and cable product offerings include voice grade twisted pair, LAN UTP and LAN fiber optic
cable. Superior's LAN UTP product offerings include Category 6 cables, Category 5e and Category 5 cables ranging in size
from 4-pair to 25-pair. These cables are designed and manufactured for use in both plenum (horizontal) and riser (vertical)
applications. Superior has recently developed and has begun manufacturing, marketing and selling LAN fiber optic cables.
These cables, which may be used for LAN trunking or distribution applications, contain from one to 144 fibers, and are used in
plenum and riser applications within buildings. Superior is continuing to expand its manufacturing capabilities for both copper
UTP and fiber optic cable products with an anticipated increase in sales and market share in 2001.
Superior's premise wire and cable products are sold primarily through major national and international distributors, smaller
regional distributors who in turn resell to contractors, international and domestic telephone companies and private overseas
contractors for installation in the industrial, commercial and residential markets.
The premise wire and cable market is fragmented, with nearly 25 premise wire and cable manufacturers in North America and
more than 75 worldwide. Major suppliers in North America include Lucent Technologies Inc., Cable Design Technologies
Corporation, Berk-Tek (an Alcatel company), Belden Inc., CommScope Inc., General Cable Corporation, Corning, Inc. and
Avaya Inc. Superior estimates the North American market for premise wire and cable products similar to those manufactured
by Superior to be approximately $2.0 billion.
SUPERIOR ISRAEL
As previously discussed, during 1998 Superior acquired 51% of the outstanding common stock of Cables of Zion, an Israeli
wire and cable company. Cables of Zion, in subsequent transactions, acquired the business and certain operating assets of
Cvalim and Pica Plast. With the consolidation of these three businesses, Superior Israel is the largest Israeli wire and cable
manufacturer with an approximate 80% share of the Israeli wire and cable market.
Superior Israel's major product offerings include: (1) communications cable including copper and optical fiber OSP and
premise products; (2) high and medium voltage power cable utilized by power utilities; and (3) industrial and automotive wire
and cable.
Superior Israel's major customers include the two largest public utilities in Israel: Bezeq, the largest Israeli telephone company;
and IEC, the largest Israeli power utility. Product export sales outside of Israel amounted to 27% of total sales for the year
ended December 31, 2000. The major export markets include Europe, Latin America and Southeast Asia.
As a result of the combination of the operations of Cables of Zion, Cvalim and Pica Plast, Superior has consolidated certain
manufacturing facilities and administrative functions. This restructuring resulted in closure of five manufacturing facilities, closure
of administrative offices in Rishon LeZion and elimination of 299 personnel to date. Superior Israel currently operates three
manufacturing plants.
OEM GROUP
Superior's OEM Group develops, manufactures and markets magnet wire and other related products to major OEMs for use
in motors, transformers and electrical controls. Through its Essex
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Brownell distribution business, Superior also distributes its magnet wire and certain related accessory products to smaller
OEMs as well as to motor repair facilities.
In 1998, Essex, prior to its acquisition by Superior, acquired BICC's UK-based magnet wire operations. Superior has
completed a manufacturing restructuring project to improve and expand this operation. This enhanced production capability
provides Superior an opportunity to participate in growth arising from the consolidation of the Western European magnet wire
market and from economic growth and development in Eastern Europe. During 2000, Superior substantially completed
construction of a new 280,000 square foot magnet wire manufacturing facility located in Torreon, Mexico. This new facility is
strategically located to service, on a cost effective basis, Mexican based manufacturing locations of current major OEM
customers as well as to take advantage of one of the world's largest and fastest growing markets for magnet wire. With the
addition of the Torreon facility, the OEM Group operates 12 manufacturing plants and 21 warehousing and distribution
locations in North America and the U.K.
For the year ended December 31, 2000, sales of magnet wire accounted for 74% of the OEM Group's net sales.
MAGNET WIRE
Superior is the leading manufacturer and supplier of magnet wire in the North American market. Magnet wire is used in
electrical motors, with the principal end market applications including electrical motors used in automotive and industrial
applications, and for appliances. Magnet wire is also used in transformers for power generation by power utilities and for
power conversion and electrical controls in industrial applications.
The North American market demand for magnet wire has experienced continued growth since 1991. Sales growth in the
magnet wire industry is driven by increasing demand for electrical devices containing motors for, among other things, home
appliances and automobiles. Additionally, federal government mandates are requiring higher energy efficiency from electric
devices, which is achieved by using, on average, 25% more magnet wire in motors and transformers. Strong consumer demand
for greater numbers of electrical convenience items in homes, offices and vehicles has resulted in increased sales of household
appliances and increased demand for magnet wire for use in electric motors and coils.
Due to the substantial initial capital costs associated with magnet wire production, the importance of consistent quality, stringent
technological requirements and the cost efficiencies achieved by larger magnet wire producers, significant industry consolidation
has occurred during the past ten years in the North American magnet wire industry. In addition, the percentage of domestic
magnet wire produced by independent magnet wire manufacturers, such as Superior, has grown over the last several years as
the manufacturing capacity of captive magnet wire producers (electrical equipment manufacturers who internally produce their
own magnet wire) has declined as a result of outsourcing. It is estimated that captive magnet wire manufacturers now represent
only 7% of total magnet wire production in North America.
Superior offers a comprehensive line of magnet wire products, including over 500 types of magnet wire used in a wide variety
of applications. Magnet wire is insulated copper or aluminum wire that is wound into coils for use in electromagnetic devices
including motors, alternators, transformers, control devices and power generators. Electromagnetic devices have numerous
applications in industrial and household settings.
Superior works closely with global OEMs to develop new magnet wire for applications in energy efficient motors, generators
and transformers. In recent years, Superior has introduced the Ultra Shield-TM- Plus wire, for use by global OEM motor
manufacturers in inverter drive motors where high
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voltage spikes are encountered. Other new products include Soderon-Registered Trademark-/180 and Soderex-Registered
Trademark-/180, two new magnet wires that are used in appliance controls in higher temperature applications. These products
allow for increased throughput with faster soldering times than conventional high temperature type products. Superior is also a
leader in product palletizing and packaging with a focus on ease of handling, reduced freight damage, environmental disposal
issues and cost reduction.
Superior's magnet wire products are sold directly to major OEMs and, through its Essex Brownell distribution business, to
secondary OEMs, aftermarket repair facilities, coil manufacturers and distributors. Products are also marketed internationally
through authorized distributors.
Sales to major OEMs, including, among others, Emerson, Delphi Automotive Systems, A.O. Smith, Howard Industries,
Cooper Power and Tecumseh, are typically pursuant to annual or multi-year supply agreements based on a percentage of the
customers' total requirements and on a negotiated fixed price, subject to adjustment for the cost of copper. For the year ended
December 31, 2000, approximately 84% of magnet wire sales were pursuant to such supply arrangements.
ESSEX BROWNELL DISTRIBUTION AND ACCESSORY PRODUCTS
Through its Essex Brownell distribution operations, Superior sells magnet wire, insulation and other related accessory products
to the motor repair and secondary OEM markets. The Essex Brownell distribution operations include a nationwide sales force,
supported by over 20 strategically located distribution and warehouse locations. In addition to magnet wire, the Essex Brownell
line includes products from manufacturers such as 3M, Permacel, Dow Corning and P.D. George. Superior believes that it has
a distinct competitive advantage in that it is the only major North American magnet wire producer that also distributes a full line
of complementary electrical accessory products used by the motor repair and secondary OEM markets.
ELECTRICAL GROUP
Superior's Electrical Group manufactures and distributes a complete line of building wire products as well as a limited line of
industrial wire products. As discussed above in "Recent Corporate Reorganization and Operational Restructurings", the
Electrical Group has consolidated its manufacturing operations, reducing its manufacturing facilities from twelve to six remaining
manufacturing facilities in the United States. This manufacturing consolidation eliminated excess capacity and is expected to
result in lowered manufacturing cost and an overall improved cost structure.
Building wire products include a wide variety of thermoplastic and thermoset insulated wires for the commercial and industrial
construction markets and service entrance cable, underground feeder wire and nonmetallic jacketed wire and cable for the
residential construction market. These products are generally installed behind walls, in ceilings and underground. The industrial
wire product segment (which forms a much smaller component of sales than building wire) includes appliance wire, motor lead
wire, submersible pump cable, power cable, bulk flexible cord, power supply cord sets, welding cable and recreational vehicle
wire.
Superior is one of the leading manufacturers in North America of copper building wire products used in commercial and
residential applications. Superior estimates that the building wire market has grown, on average, approximately 2%-4% per
annum over the past five years. Sales growth in the building wire industry has resulted primarily from renovation activity, as well
as new nonresidential and residential construction. Both new construction and renovation growth are being affected by the
increased number of circuits and amperage handling capacity needed to support the increasing demand for electrical services.
In addition, there has been a greater wiring density required in new construction and renovation projects to provide for the
electrical needs of appliances such as trash compactors, microwave ovens, air conditioners, entertainment centers, lighting and
climate controls, specialty and task lighting, electric garages and outdoor lighting systems. New home automation and computer
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systems contribute to the increased cable and wire density requirements in new and renovation construction as well. The
average new home is also increasing in size and thus influencing demand in this industry.
The building wire industry has experienced significant consolidation in recent years, declining from approximately 28
manufacturers in 1980 to nine primary manufacturers in 1999. Superior believes this consolidation is due primarily to cost
efficiencies achieved by the larger building wire producers as they capitalize on the benefits of vertical integration and
manufacturing, purchasing and distribution economies of scale.
In the industrial wire market, Superior has a significantly smaller market position than in the building wire industry. Factors
impacting sales growth in this market include the construction and expansion of manufacturing plants, mine expansion and
consumer spending for hard goods. Due to the diversity of product offerings within this industry, Superior's competition is
fragmented across product lines and markets served.
Superior sells its electrical wire and cable products nationally through an internal sales force and through manufacturers'
representatives. Its customer base is large and diverse, consisting primarily of wholesale electrical and specialty distributors,
consumer product retailers and hardware wholesalers. No single customer accounts for more than 10% of the Electrical
Group's net sales.
Notwithstanding this consolidation of suppliers, there still exists manufacturing overcapacity for building wire, which is generally
viewed as a commodity product. As a result, the market is extremely competitive, with price and availability being the most
important factors. During 1999 and 2000, market pricing for building wire products declined substantially, with copper
adjusted pricing reaching five year lows through much of this period. As previously discussed, the Company has responded to
these conditions by eliminating excess capacity and consolidating remaining production capacity to achieve cost reductions
necessary to offset, in part, the impact of the recent period price declines.
Prior to 1998, Superior served the wholesale electrical and specialty distributors through a network of over 30 service centers
and stocking locations in the United States. In 1998, Essex, prior to its acquisition by Superior, began an initiative to
consolidate the service centers and stocking locations into a smaller number of strategically located regional distribution centers
("RDCs"). These RDCs provide for centralized stocking of "off-the-shelf" products, including substantially all of Superior's
building and industrial wire products. To a lesser degree, these RDCs provide regionally centralized distribution for
communication wire and cable, magnet wire and related insulation products. The Company currently operates four RDCs
located in Georgia, Missouri, California and Indiana.
RAW MATERIALS AND MANUFACTURING
The principal raw materials used by Superior in the manufacture of its wire and cable products are copper, aluminum, bronze,
steel, optical fibers and plastics, such as polyethylene and polyvinyl chloride. Copper rod is the most significant raw material
used in Superior's manufacturing process. Superior estimates it is the largest North American consumer of copper rod with
over 900 million pounds used annually in its production process. Due to the importance of copper to its business, Superior
maintains a centralized metals operation that manages copper procurement and provides vertical integration in the production of
copper rod and in scrap recycling.
Superior maintains four copper rod continuous casting units, strategically located in proximity to many of its major wire
producing plants to minimize freight costs. These facilities convert copper cathode into copper rod which is then shipped and
utilized directly in Superior's manufacturing operations. Through these continuous casting units, Superior is able to produce
approximately 70% of its North American copper rod requirements.
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In addition to converting copper cathode into copper rod, Superior's metal processing center also processes copper scrap,
both internally generated scrap as well as scrap purchased from other copper wire producers. Copper scrap is processed in
rotary furnaces, which also have refining capability to remove impurities. Superior uses a continuous casting process to convert
scrap material directly into copper rod. Management believes that internal reclamation of scrap copper provides greater control
over the cost to recover Superior's principal manufacturing by-product.
Superior purchases copper cathode and, to the extent not provided internally, copper rod from a number of copper producers
and metals merchants. Generally, copper cathode and rod purchases are pursuant to contracts which extend for a one-year
period and are normally based on the COMEX price, plus a premium to cover transportation and payment terms.
Historically, Superior has had adequate supplies of copper and other raw materials available to it from producers and
merchants, both foreign and domestic. In addition, competition from other users of copper has not affected Superior's ability to
meet its copper procurement requirements. Although Superior has not experienced any shortages in the recent past, no
assurance can be given that Superior will be able to procure adequate supplies of its essential raw materials to meet its future
needs.
The cost of copper has been subject to considerable volatility over the past several years. Fluctuations in the cost of copper
have not had a material impact on profitability due to the ability of Superior in most cases to adjust product pricing in order to
properly match the price of copper billed with the copper cost component of its inventory shipped. Additionally, Superior, to a
limited extent, utilizes COMEX fixed price futures contracts to manage its commodity price risk. Superior does not hold or
issue such contracts for trading purposes.
During 2000 the Company substantially increased its production capability for fiber optic cable, requiring a significant increase
in procurement of optical fiber. The Company was able to satisfy its requirement for fiber in 2000 and believes it has secured
an available supply of optical fiber from multiple suppliers sufficient to meet its 2001 production plan. However, demand for
optical fiber has increased dramatically in recent years and there is no assurance that existing optical fiber producers can
continue to meet the growing demand of manufacturers of fiber optic cable such as Superior.
Superior's manufacturing strategy is primarily focused on maximizing product quality and production efficiencies while
maintaining a high level of vertical integration through internal production of its principal raw materials. In addition to copper
rod, Superior is also vertically integrated in the production of magnet wire enamels and extrudable polymeric compounds.
Superior believes one of its primary cost and quality advantages in the magnet wire business is the ability to produce most of its
enamel and copper rod requirements internally. Similarly, Superior believes its ability to develop and produce PVC and rubber
compounds, which are used as insulation and jacketing materials for many of its building wire, communication wire and
industrial wire products, provides competitive advantages because greater control over the cost and quality of essential
compounds used in production can be achieved.
EXPORT SALES
Superior's export sales during the year ended December 31, 2000 were $98.7 million. Superior's primary markets for export
sales are Latin America and Europe.
BACKLOG; RETURNS
Backlog in the communications wire and cable segment typically consists of 3-5 weeks of sales depending on seasonal issues.
Superior's other product lines have no significant order backlog because Superior follows the industry practice of manufacturing
products on an ongoing basis to meet customer demand on a just-in-time basis. Superior believes that the ability to supply
orders in a timely fashion is
10
a competitive factor in the markets in which it operates. Historically, sales returns have not had a material adverse effect on
Superior's results of operations.
COMPETITION
The market for wire and cable products is highly competitive. Each of Superior's businesses competes with at least one major
competitor. However, due to the diversity of Superior's product lines as a whole, no single competitor competes with Superior
across the entire spectrum of Superior's product lines.
Many of Superior's products are made to industry specifications and, therefore, may be interchangeable with competitors'
products. Superior is subject to competition in many markets on the basis of price, delivery time, customer service and its
ability to meet specialty needs. Superior believes it enjoys strong customer relations resulting from its long participation in the
industry, emphasis on customer service, commitment to quality control, reliability and substantial production resources.
Furthermore, Superior believes that its distribution networks enable it to compete effectively with respect to delivery time.
RESEARCH AND DEVELOPMENT
In response to the changing requirements of the communications industry, Superior established a product development center
during the fourth quarter of fiscal 1997. This 58,000 square foot facility is located in Kennesaw, Georgia and is dedicated to
defining and creating new wire and cable systems that meet the needs of the evolving communications networks. Recent
projects include the development of single mode and multimode fiber optic cable products for use in LANs as well as telephone
networks. Initial sales and shipments of these products began in 1998.
Superior also has development projects underway for performance enhanced copper-based communications wire products
that are designed to meet the existing and future needs of telephone and datacom customers. Several of these projects have
been undertaken in conjunction with Superior's telephone company customers and include the development of composite
cables that incorporate copper twisted pair wire and coaxial cable or optical fibers in a single cable construction.
Superior also operates research and development facilities in Lafayette and Fort Wayne, Indiana. Research activities at the
Lafayette facility are focused on development of improved PVC and rubber compounds, which are used as insulation and
jacketing materials for many communication, automotive, building and industrial wire products. At the Fort Wayne facility,
Superior's metallurgical and chemical labs are focused on the development of magnet wire metal properties and processing
qualities, as well as enhancement of enamels and their application in the magnet wire manufacturing process.
Aggregate research and development expenses of Superior during the fiscal year ended April 30, 1998, the eight months ended
December 31, 1998 and the years ended December 31, 1999 and 2000, amounted to $3.0 million, $2.7 million, $6.6 million
and $7.2 million, respectively.
Although Superior holds certain trademarks, licenses and patents, none is considered to be material to its business.
EMPLOYEES
As of December 31, 2000, Superior employed approximately 5,900 employees. Approximately 2,350 persons employed by
Superior are represented by unions. Collective bargaining agreements expire at various times between 2001 and 2004, with
contracts covering approximately 41% of Superior's unionized work force due to expire at various times in 2001. Superior
considers relations with its employees to be satisfactory.
11
ENVIRONMENTAL MATTERS
The manufacturing operations of Superior's subsidiaries are subject to extensive and evolving federal, foreign, state and local
environmental laws and regulations relating to, among other things, the storage, handling, disposal, emission, transportation and
discharge of hazardous substances, materials and waste products, as well as the imposition of stringent permitting requirements.
Superior does not believe that compliance with environmental laws and regulations will have a material effect on the level of
capital expenditures of Superior or its business, financial condition, liquidity or results of operations. No material expenditures
relating to these matters were made in 1998, 1999 or 2000. However, violation of, or non-compliance with, such laws,
regulations or permit requirements, even if inadvertent, could result in an adverse impact on the operations, business, financial
condition, liquidity or results of operations of Superior.
12
ITEM 2. PROPERTIES
The Company conducts its principal operations at the facilities set forth below:
SQUARE
OPERATION LOCATION FOOTAGE LEASED/OWNED
--------- ------------------------- -------- ---------------------
COMMUNICATIONS
OSP/Datacom....................... Brownwood, Texas 415,000 Leased (expires 2013)
Chester, South Carolina 210,000 Owned
Elizabethtown, Kentucky 165,000 Owned
Hoisington, Kansas 275,000 Owned
Kennesaw, Georgia 58,000 Leased (expires 2002)
Tarboro, North Carolina 295,000 Owned
Winnipeg, Manitoba 184,000 Owned
DNE............................... Wallingford, Connecticut 65,000 Leased (expires 2007)
Superior Israel Shaar Hanegav, Israel 351,000 Owned
Bet-Shean, Israel 181,000 Leased (expires 2002)
Maalot, Israel 46,000 Leased (expires 2003)
OEM
Magnet Wire....................... Charlotte, North Carolina 26,000 Leased (expires 2006)
Fort Wayne, Indiana 181,000 Owned
Franklin, Indiana 35,000 (a)
Franklin, Tennessee 289,000 Leased (expires 2008)
Huyton Quarry, U.K. 146,000 Owned
Kendallville, Indiana 88,000 Owned
Rockford, Illinois 319,000 Owned
Torreon, Mexico 317,000 Owned
Vincennes, Indiana 267,000 Owned
Accessory Products................ Athens, Georgia 30,000 Leased (expires 2016)
Clifton Park, New York 22,000 Leased (expires 2016)
Willowbrook, Illinois 60,000 Leased (expires 2016)
ELECTRICAL
Building Wire..................... Anaheim, California 174,000 Owned
Columbia City, Indiana 400,000 Owned
Florence, Alabama 129,000 Owned
Orleans, Indiana 425,000 Owned
Sikeston, Missouri 189,000 Owned
Industrial Wire................... Lafayette, Indiana 350,000 Owned
METALS PROCESSING................... Columbia City, Indiana 75,000 Owned
Jonesboro, Indiana 56,000 Owned
ADMINISTRATIVE OFFICES.............. Atlanta, Georgia 39,000 Leased (expires 2008)
Fort Wayne, Indiana 295,000 Owned
New York, New York 5,400 Leased (expires 2002)
(a) The Franklin, Indiana facility is approximately 70,000 square feet, of which 35,000 square feet is leased to Femco Magnet
Wire Corporation as a joint venture between Superior and the Furukawa Electric Co., Ltd., Tokyo, Japan. Femco
manufactures and markets magnet wire with special emphasis on products required by Japanese manufacturers with production
facilities in the United States.
13
In addition to the facilities described in the table above, Superior owns or leases 29 warehousing and distribution facilities
throughout the United States, Canada and United Kingdom to facilitate the sale and distribution of its products.
Superior believes that its plants are generally suitable and adequate for the business being conducted and to service the
requirements of its customers. Capital spending plans are primarily designed to keep up with current and best available
technology, to increase capacity in existing product lines and for cost reduction initiatives. The extent of current utilization is
generally consistent with historical patterns and, in the view of management, is satisfactory. Superior does not view any of its
plants as being underutilized. A majority of Superior's plants operate on 24 hour-a-day schedules, on either a five day or seven
day per week basis. During the year ended December 31, 2000, Superior's facilities have operated at approximately 90%
capacity.
ITEM 3. LEGAL PROCEEDINGS
The Company is engaged in certain routine litigation arising in the ordinary course of business. While the outcome of litigation
can never be predicted with certainty, the Company does not believe that any of its existing litigation, either individually or in the
aggregate, will have a material adverse effect upon its business, financial condition, liquidity or results of operations.
Superior's operations are subject to environmental laws and regulations in each of the jurisdictions in which it operates
governing, among other things, emissions into the air, discharges to water, the use, handling and disposal of hazardous
substances and the investigation and remediation of soil and groundwater contamination both on-site at Superior's facilities and
at off-site disposal locations. On-site contamination at certain of Superior's facilities is the result of historic disposal activities,
including activities attributable to Superior's operations and those occurring prior to the use of a facility by Superior. Off-site
liability includes clean-up responsibilities at various sites, to be remedied under federal or state statutes, for which Superior has
been identified by the United States Environmental Protection Agency, or the equivalent state agency, as a Potentially
Responsible Party ("PRP").
Essex (including subsidiaries thereof) has been named as a PRP at a number of sites. Most of the sites for which Essex is
currently named as a PRP are covered by an indemnity from United Technologies Corporation provided in connection with the
February 1988 sale of Essex by United Technologies to Essex. Pursuant to the indemnity, United Technologies agreed to
indemnify Essex against losses incurred under any environmental protection and pollution control laws or resulting from, or in
connection with, damage or pollution to the environment arising from events, operations or activities of Essex prior to February
29, 1988, or from conditions or circumstances existing at or prior to February 29, 1988. In order to be covered by the
indemnity, the condition, event or circumstance must have been known to United Technologies prior to February 29, 1988.
The sites covered by the indemnity are handled directly by United Technologies and all payments required to be made are paid
directly by United Technologies. These sites are all mature sites where allocations have been settled and remediation is well
underway or has been completed. Superior is not aware of any inability or refusal on the part of United Technologies to pay
amounts that are owing under the indemnity or any disputes with United Technologies concerning matters covered by the
indemnity.
United Technologies also provided an additional environmental indemnity, referred to as the "basket indemnity." This indemnity
relates to liabilities arising from environmental events, conditions or circumstances existing at or prior to February 29, 1988 that
only became known to United Technologies in the five-year period commencing February 29, 1988. As to such liabilities,
Essex is responsible for the first $4.0 million incurred. Thereafter, United Technologies has agreed to indemnify Essex fully for
any liabilities in excess of $4.0 million. To date, Essex has incurred less than $0.2 million in the basket.
14
Apart from the indemnified sites and those subject to the basket indemnity, Essex has been named as a PRP or a defendant in a
civil lawsuit at eleven sites. Operations of Superior Telecommunications Inc. and DNE have resulted in releases of hazardous
substances or wastes at sites currently or formerly owned or operated by such companies. Superior Telecommunications Inc. is
involved in investigatory and remedial activities at one site subject to the oversight of a state governmental authority. Essex is
cooperating with a state environmental agency to resolve a notice of violation issued against one Essex facility alleging that
certain of such facility's operations are in violation of that state's air quality rules (the "Air Quality Matter"). Essex anticipates
resolving the matter through agreed administrative order providing for the installation of certain air emission control equipment
and possibly a monetary penalty in an amount not yet specified by the state regulatory agency. Superior has provided an
accrual in the amount of $2.5 million to cover its environmental contingencies as of December 31, 2000. This accrual is based
on management's best estimate of Superior's exposure in light of relevant available information. Superior currently does not
believe that any of the environmental proceedings in which it is involved, and for which it may be liable, will individually, or in
the aggregate, have a material adverse effect upon its business, financial condition, liquidity or results of operations. There can
be no assurance that future developments will not alter this conclusion. Except for the Air Quality Matter, none of the sites or
matters mentioned above involves sanctions, fines or administrative penalties against Superior.
Since approximately 1990, Essex has been named as a defendant in a number of product liability lawsuits brought by
electricians and other skilled tradesmen claiming injury from exposure to asbestos found in electrical wire products produced
many years ago. Litigation against various past insurers of Essex who had previously refused to defend and indemnify Essex
against these lawsuits was settled during 1999. Pursuant to the settlement, Essex was reimbursed for substantially all of its costs
and expenses incurred in the defense of these lawsuits, and the insurers have undertaken to defend, are currently directly
defending and, if it should become necessary, will indemnify Essex against such asbestos lawsuits, subject to the express terms
and limits of the respective policies. Superior believes that Essex's liability, if any, in these matters will not have a material
adverse effect either individually, or in the aggregate, upon its business, financial condition, liquidity or results of operations.
There can be no assurance, however, that future developments will not alter this conclusion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders during the fourth quarter of the year ended December 31,
2000.
15
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
(a) Market Information
The Company's common stock, $.01 par value, is listed on the New York Stock Exchange (the "NYSE") under the symbol
SUT. The following table sets forth the high and low daily closing sales prices for the Superior common stock as reported on
the NYSE (adjusted for the impact of stock splits and a stock dividend) for the years ended December 31, 1999 and 2000.
HIGH LOW
-------- --------
Year Ended December 31, 1999
First Quarter ended March 31, 1999........................ $38.06 $16.99
Second Quarter ended June 30, 1999........................ 30.89 18.75
Third Quarter ended September 30, 1999.................... 28.70 13.47
Fourth Quarter ended December 31, 1999.................... 16.08 11.59
Year Ended December 31, 2000
First Quarter ended March 31, 2000........................ $17.48 $11.06
Second Quarter ended June 30, 2000........................ 13.69 9.94
Third Quarter ended September 30, 2000.................... 10.63 6.00
Fourth Quarter ended December 31, 2000.................... 6.19 1.81
(b) Holders
The Company's transfer agent is American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
At March 23, 2001, 20,438,903 shares of Superior common stock were issued and outstanding, and there were
approximately 55 record holders (exclusive of beneficial owners of shares held in street name or other nominee form) thereof.
(c) Dividends
The Company paid regular quarterly cash dividends on the Superior common stock at a rate of $0.25 per share, beginning in
January 1998 and continuing through October 1999. In January 2000, the Company suspended the payment of quarterly cash
dividends on the Superior common stock. The Company does not currently anticipate reinstating any regular common stock
cash dividend payments. The Company's principal credit agreements contain certain limitations and restrictions on the payment
of cash dividends on the Superior common stock.
On December 28, 2000, the Board of Directors of the Company declared a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of Superior common stock, payable to the stockholders of record on
January 10, 2001. The Board of Directors also authorized and directed the issuance of one Right with respect to each share of
Superior common stock issued thereafter until the date of distribution of separate certificates evidencing the Rights (or the
earlier redemption or expiration of the Rights).
Subject to certain exceptions, each Right, when it becomes exercisable, entitles the registered holder to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock, $.01 par value, at a price of $10.88, subject to
adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of December 28, 2000,
between the Company and American Stock Transfer & Trust Company, as Rights Agent.
16
ITEM 6. SELECTED FINANCIAL DATA
HISTORICAL FINANCIAL DATA
Set forth below are certain selected historical consolidated financial data of the Company. This information should be read in
conjunction with the consolidated financial statements of the Company and related notes thereto appearing elsewhere herein
and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected historical
consolidated financial data for, and as of the end of, the years ended December 31, 2000 and 1999, for, and as of the end of,
the eight months ended December 31, 1998, and for, and as of the end of, each of the fiscal years in the three-year period
ended April 30, 1998, are derived from the audited consolidated financial statements of Superior.
YEAR ENDED YEAR ENDED EIGHT MONTHS FISCAL YEAR ENDED APRIL 30,
DECEMBER 31, DECEMBER 31, ENDED DECEMBER 31, ------------------------------
2000 1999 1998(A) 1998 1997 1996
------------ ------------ ------------------- -------- -------- --------
STATEMENT OF OPERATIONS DATA(B)(C)(D):
Net sales.............................. $2,049,048 $2,036,732 $ 488,279 $518,459 $463,840 $410,413
Cost of goods sold..................... 1,708,920 1,652,839 385,284 419,218 384,271 362,854
---------- ---------- --------- -------- -------- --------
Gross profit......................... 340,128 383,893 102,995 99,241 79,569 47,559
Selling, general and administrative
expenses............................. 156,437 150,833 32,333 22,181 17,166 14,223
Infrequent and unusual charges......... 14,961 8,431 13,511 -- -- --
Amortization of goodwill............... 20,959 19,629 2,447 1,715 1,726 1,556
---------- ---------- --------- -------- -------- --------
Operating income..................... 147,771 205,000 54,704 75,345 60,677 31,780
Interest expense....................... (129,905) (120,100) (16,651) (8,090) (12,907) (17,355)
Other income (expense), net............ 976 2,503 (346) 206 (305) 404
---------- ---------- --------- -------- -------- --------
Income before income taxes,
distributions on preferred securities
of Superior Trust I, minority
interest and extraordinary (loss).... 18,842 87,403 37,707 67,461 47,465 14,829
Provision for income taxes............. (10,925) (36,733) (15,544) (26,786) (18,989) (6,722)
---------- ---------- --------- -------- -------- --------
Income before distributions on
preferred securities of Superior
Trust I, minority interest and
extraordinary (loss)................. 7,917 50,670 22,163 40,675 28,476 8,107
Distributions on preferred securities
of Superior Trust I.................. (15,145) (11,289) -- -- -- --
---------- ---------- --------- -------- -------- --------
Income (loss) before minority interest
and extraordinary (loss)............. (7,228) 39,381 22,163 40,675 28,476 8,107
Minority interest in (earnings) losses
of subsidiaries...................... 5,088 (596) 93 -- -- --
---------- ---------- --------- -------- -------- --------
Income (loss) before extraordinary
(loss)............................... (2,140) 38,785 22,256 40,675 28,476 8,107
Extraordinary (loss) on early
extinguishmentof debt................ -- (1,617) (1,243) -- -- (2,645)
---------- ---------- --------- -------- -------- --------
Net income (loss).................... $ (2,140) $ 37,168 $ 21,013 $ 40,675 $ 28,476 $ 5,462
========== ========== ========= ======== ======== ========
Net income per share of common stock:
Basic:
Income (loss) before extraordinary
(loss)............................. $ (0.11) $ 1.91 $ 1.07 $ 1.95
Extraordinary (loss) on early
extinguishment of debt............. -- (0.08) (0.06) --
---------- ---------- --------- --------
Net income (loss) per basic share
of common stock.................. $ (0.11) $ 1.83 $ 1.01 $ 1.95
========== ========== ========= ========
Diluted:
Income (loss) before extraordinary
(loss)............................. $ (0.11) $ 1.86 $ 1.04 $ 1.91
Extraordinary (loss) on early
extinguishment of debt............. -- (0.08) (0.06) --
---------- ---------- --------- --------
Net income (loss) per diluted share
of common stock.................. $ (0.11) $ 1.78 $ 0.98 $ 1.91
========== ========== ========= ========
17
YEAR ENDED YEAR ENDED EIGHT MONTHS FISCAL YEAR ENDED APRIL 30,
DECEMBER 31, DECEMBER 31, ENDED DECEMBER 31, ------------------------------
2000 1999 1998(A) 1998 1997 1996
------------ ------------ ------------------- -------- -------- --------
BALANCE SHEET DATA (AT END OF PERIOD):
Current assets......................... $ 596,657 $ 627,464 $ 629,953 $100,847 $109,967 $117,908
Current liabilities.................... 532,061 465,915 397,556 62,315 62,350 59,182
Total assets........................... 1,991,669 2,000,354 1,886,556 232,243 238,108 244,065
Total long-term debt(e)................ 1,224,364 1,255,974 1,278,197 75,380 122,089 125,760
Mandatorily redeemable preferred
stock................................ 134,941 133,959 -- -- -- --
---------- ---------- --------- -------- -------- --------
Total debt, including mandatorily
redeemable preferred stock........... 1,359,305 1,389,933 1,278,197 75,380 122,089 125,760
Total stockholders' equity............. 110,003 113,008 91,380 82,206 44,028 51,656
(a) On December 15, 1998, the Company elected to change its fiscal year end to December 31 from April 30. This change
was made effective on December 31, 1998.
(b) The results of operations set forth above for the period May 1, 1995 through October 1, 1996 include the combined
operations of Superior Telecommunications Inc. and DNE Systems, Inc. From October 2, 1996 through December 31, 1998,
the results of operations represent the consolidated results of the Company subsequent to its reorganization and initial public
offering as described in Note 1 to the accompanying consolidated financial statements.
(c) The results of operations include, on a prospective basis, the acquisition of Alcatel N.A., which was acquired by Superior
Telecommunications Inc. on May 11, 1995; the acquisition of 51% of Cables of Zion on May 5, 1998; the acquisition of 81%
of Essex on November 27, 1998; and the acquisition of the remaining 19% of Essex on March 31, 1999.
(d) Certain reclassifications have been made to net sales and cost of goods sold for the fiscal year ended April 30, 1998, the
eight months ended December 31, 1998 and the year ended December 31, 1999 to conform with the December 31, 2000
presentation as discussed in Note 2 to the accompanying consolidated financial statements. The fiscal years ended April 30,
1997 and 1996 have not been restated.
(e) Total debt includes debt of the Company's 50.2% owned Israeli subsidiary, Superior Israel, of $153.9 million, $120.7
million and $53.2 million at December 31, 2000, 1999 and 1998, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Superior TeleCom Inc. ("Superior" or the "Company") manufactures a portfolio of wire and cable products grouped into the
following primary industry segments:
(i) communications, (ii) original equipment manufacturer ("OEM") and
(iii) electrical. The Communications Group includes communications wire and cable products sold to telephone companies,
distributors and systems integrators, principally in North America. In addition, included within the Communications Group is the
Company's 50.2% owned Israeli subsidiary, Superior Cables Limited ("Superior Israel"), which manufactures a range of wire
and cable products in Israel, including communications cable, power cable and other industrial and electronic wire and cable
products. The OEM Group includes magnet wire and accessory products for motors, transformers and electrical controls sold
primarily to OEMs. The Electrical Group includes building and industrial wire for applications in commercial and residential
construction and industrial facilities.
Prior to the acquisitions of Essex and Superior Israel (see Note 5 to the consolidated financial statements), the Company's
operations consisted principally of its North American communications wire and cable business. The Essex acquisition, which
occurred on November 27, 1998, resulted in the addition of the OEM and Electrical Group product lines as well as
incremental sales of communications wire and cable. The May 1998 acquisition of 51% of Superior Israel and Superior Israel's
subsequent acquisition of two major Israeli competitors resulted in the addition to the Company's operating results of its Israeli
operations. These acquisitions were accounted for under the purchase method of accounting with the operating results from
these acquired businesses being included in the Company's consolidated statements of operations prospectively, from the date
of acquisition.
18
Industry segment financial data (including sales and operating income by industry segment) for the twelve month periods ended
December 31, 2000 and 1999, the eight-month transition period ended December 31, 1998, and the twelve month period
ended April 30, 1998 is included in Note 20 to the accompanying consolidated financial statements.
IMPACT OF COPPER PRICE FLUCTUATIONS ON OPERATING RESULTS
Copper is one of the principal raw materials used in the Company's wire and cable product manufacturing. Fluctuations in the
price of copper do affect per unit product pricing and related revenues. However, the cost of copper has not had a material
impact on profitability as the Company, in most cases, has the ability to adjust prices billed for its products to properly match
the copper cost component of its inventory shipped.
RESULTS OF OPERATIONS--TWELVE MONTHS ENDED DECEMBER 31, 2000 (2000)
COMPARED TO THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (1999)
Net sales for 2000 were $2.05 billion as compared to sales of $2.04 billion for 1999. Adjusted to a constant cost of copper,
net sales in 2000 declined 4% as compared to 1999. The reduction in copper-adjusted sales for 2000 was due to lower sales
in the Company's Electrical and OEM Groups partially offset by comparative sales growth in the Company's Communications
Group.
Communications Group sales for 2000 were $848.1 million, an increase of 8% on a copper-adjusted basis over 1999. Sales
growth in 2000 as compared to 1999 was due to a 69% increase in sales of broadband products (which include fiber optic,
copper premise and composite cables). Total broadband sales were $141.0 million in 2000 and reached an annualized run rate
of $163.0 million in the fourth quarter of 2000. Sales growth in this product line was the result of strong industry demand trends
as well as market share gains attributable to recent capacity additions, new product introductions and broadened marketing and
sales activities. 2000 sales of copper outside plant (OSP) products, which are used principally by telephone companies in the
local loop segment of the telephony network, decreased 1% as compared to copper-adjusted sales for the prior year primarily
due to the loss of business under a major customer contract impacting the second half of 2000. This volume decline was offset
partially by overall industry demand growth and increased sales in the distributor and international market.
OEM Group sales were $613.4 million for 2000, reflecting a copper-adjusted decline of 1% as compared to 1999. The
comparative sales decline reflected softening demand for magnet wire from the Company's major OEM customers due
principally to an industry-wide economic slowdown in the second half of 2000, particularly impacting the construction,
refrigeration, consumer durables and automotive sectors. The Company believes that the impact of end market demand
slowdown was exacerbated by inventory reductions at several major customers.
Electrical Group sales were $587.6 million for 2000, representing a decline of 21% on a copper-adjusted basis as compared
to 1999. Sales volume in the Electrical Group was impacted by lower available productive capacity during 2000 as the
Company was in the process of relocating and consolidating manufacturing equipment and balancing capacity in its building wire
operations. Additionally, softening industry demand also impacted sales volume in the fourth quarter of 2000. The Company,
having substantially completed its equipment relocation and capacity consolidation program, achieved a modest increase in
production capacity and, subject to strengthening end market demand, has the capability for improving sales volume levels.
Gross profit in 2000 was $340.1 million, a decline of $43.8 million as compared to gross profit of $383.9 million in 1999. The
gross profit percentage in 2000 was 16.6%, a decline on a copper-adjusted basis of 130 basis points as compared to the prior
year. The decline in gross profit and gross profit percentage was principally attributable to the Electrical Group, where
comparative pricing pressures,
19
lower sales and higher per unit production costs negatively impacted the gross profit and margin. Also impacting gross profit in
all business segments during 2000 were increased raw material, freight and fuel costs, most of which were not recoverable
through price adjustments due to competitive market factors.
Selling, general and administrative expenses ("SG&A expenses") in 2000 were $156.4 million, an increase of 4% as compared
to SG&A expenses of $150.8 million in 1999. The 2000 increase in SG&A expenses included higher Communications Group
selling and marketing expenses to support broadband sales growth and incremental Superior Israel SG&A expenses related to
entities acquired in late 1999, partially offset by the benefit of corporate restructuring actions initiated in the second quarter of
1999.
Goodwill amortization increased from $19.6 million in 1999 to $21.0 million in 2000 principally as a result of incremental
goodwill charges incurred after the acquisition of the minority interest component (19%) of Essex in March 1999.
The Company incurred infrequent and unusual charges of $15.0 million during 2000 and $8.4 million during 1999. The
infrequent and unusual charges in 2000 include $12.4 million related to the restructuring and consolidation program in the
building wire (Electrical Group) operations and in the Company's Superior Israel operations and $2.6 million of start-up costs
for the Company's Mexican magnet wire facility. The charges incurred during 1999 included $4.4 million associated with the
evaluation and termination of a management information system project at Essex, $2.2 million related to manufacturing
rationalization activities at Essex, $1.3 million related to manufacturing and corporate restructuring activities of Superior Israel
and $0.5 million of start-up costs for the Company's Mexican magnet wire facility.
Operating income before infrequent and unusual charges was $162.7 million, a decline of $50.7 million as compared to 1999.
The comparative decline in operating income for the current year was principally attributable to lower sales and margins in the
Electrical Group and the impact of increased raw material and other costs impacting all of the Company's business segments.
Interest expense for 2000 was $129.9 million representing an increase of $9.8 million over the prior year. The increase in
interest expense was the result of higher short-term (LIBOR) interest rates in 2000 and, to a lesser degree, higher interest costs
at Superior Israel associated with acquisition related debt.
Other income, net amounted to $1.0 million for 2000 and $2.5 million for 1999, with such income due primarily to currency
translation gains at Superior Israel on certain debt linked to non-functional currencies (principally Euro-linked), as well as gains
on the sale of certain fixed assets and investments.
For 2000, the Company recorded income of $5.1 million related to the common equity minority interest component (49.8%) of
losses incurred by Superior Israel. For 1999, the Company recorded a minority interest charge of $0.6 million reflecting the
common equity minority interest component (19%) of Essex net income for the March 31, 1999 quarter, reduced by the
minority interest component of Superior Israel's net loss for 1999.
The Company recorded an after tax extraordinary charge of $1.6 million, or $0.08 per diluted share, in 1999. This charge
represented previously capitalized deferred financing fees written off in connection with the refinancing of the Company's
$200.0 million senior subordinated notes.
Income before infrequent and unusual charges and goodwill amortization for 2000 was $27.5 million, or $1.37 per diluted
share, as compared to income before infrequent, unusual and extraordinary charges and goodwill amortization of $62.9 million,
or $3.01 per diluted share, for 1999, with the reduction in income in the current year being due to lower operating income
combined with the impact of rising interest rates and higher interest expense. After infrequent, unusual and goodwill
20
amortization charges, the Company incurred a net loss of $2.1 million, or $0.11 per diluted share, for 2000 as compared to net
income of $37.2 million, or $1.78 per diluted share, for 1999.
RESULTS OF OPERATIONS--TWELVE MONTHS ENDED DECEMBER 31, 1999
COMPARED TO THE EIGHT MONTHS ENDED DECEMBER 31, 1998
Net sales were $2.037 billion for the twelve months ended December 31, 1999 as compared to net sales of $488.3 million
during the eight months ended December 31, 1998. The comparative increase in net sales was due to the longer 1999 period
used for comparison (twelve months versus eight months) and the inclusion of net sales from the acquired operations of Essex
for twelve months versus only one month during the eight months ended December 31, 1998.
The Communications Group net sales were $755.2 million for the twelve months ended December 31, 1999 compared to
$386.2 million for the eight months ended December 31, 1998. The comparison is impacted by the longer 1999 period, the
inclusion of net sales from the acquired operations of Essex for a full year in 1999, and growth in net sales of broadband
products in 1999, partially offset by a reduction in sales of OSP cable products to major telephone exchange carriers during the
second half of 1999.
The OEM Group net sales were $594.7 million for the twelve months ended December 31, 1999 as compared to $43.9
million for the 1998 eight month period, with the 1998 period reflecting only one month's activity following the Essex
acquisition.
Net sales for the Electrical Group were $686.8 million for the twelve months ended December 31, 1999 as compared to $58.2
million for the 1998 eight month period, which 1998 period also reflects only one month's activity following the Essex
acquisition.
Gross profit for the twelve months ended December 31, 1999 was $383.9 million as compared to $103.0 million for the eight
months ended December 31, 1998. The increase in gross profit resulted from the longer 1999 period (twelve months versus
eight months) and the inclusion of gross profit contributed by the acquired operations of Essex for a full twelve month period.
The gross margin percentage was 18.9% for the twelve months ended December 31, 1999 and 21.1% for the eight months
ended December 31, 1998. The reduction in gross margin percentage was primarily attributable to the significant change in
product mix resulting from the product lines acquired in the acquisition of Essex.
SG&A expenses increased from $32.3 million for the eight months ended December 31, 1998 to $150.8 million for the twelve
months ended December 31, 1999. The increase resulted from the longer comparison period (twelve month versus eight
months) and the incremental expenses associated with the acquired operations of Essex, offset to some degree by corporate
cost reductions instituted during 1999.
Goodwill amortization increased from $2.4 million for the eight months ended December 31, 1998 to $19.6 million for the
twelve months ended December 31, 1999 with such increase due to incremental goodwill associated with the acquisition of
Essex.
Operating income (excluding infrequent and unusual charges) was $213.4 million for the twelve months ended December 31,
1999 as compared to $68.2 for the eight months ended December 31, 1998. The increase reflects the longer comparison
period and the operating income contribution from the acquired operations of Essex.
The Company incurred infrequent and unusual charges of $8.4 million during the twelve months ended December 31, 1999 as
previously discussed and $13.5 million during the eight months ended December 31, 1998. The infrequent and unusual charges
in 1998 consisted of a $10.0 million investment advisory fee for services provided by Alpine related to the acquisition of Essex,
a $2.9 million restructuring charge at Superior Israel related to plant consolidations and corporate
21
rationalization activities and $0.6 million associated with the evaluation of management information systems at Essex.
Interest expense was $120.1 million for the twelve months ended December 31, 1998, as compared to $16.7 million for the
eight months ended December 31, 1998. The increase in interest expense in 1999 was attributable to the longer comparison
period and to the debt incurred in connection with the Essex acquisition.
Other income of $2.5 million for the twelve months ended December 31, 1999 related principally to foreign currency
conversion associated with certain debt of Superior Israel which is linked to nonfunctional (principally euro-based) currency.
The Company recorded after tax extraordinary charges of $1.6 million, or $0.08 per diluted share, and $1.2 million, or $0.06
per diluted share, during the twelve months ended December 31, 1999 and eight months ended December 31, 1998,
respectively. These charges represented the write-off of capitalized deferred financing fees associated with debt that was
refinanced during these periods.
Income before infrequent, unusual and extraordinary charges and goodwill amortization for the twelve month period ended
December 31, 1999 was $62.9 million, or $3.01 per diluted share, as compared to income before infrequent, unusual and
extraordinary charges and goodwill amortization of $31.9 million, or $1.49 per diluted share, for the eight months ended
December 31, 1998. After infrequent, unusual and extraordinary charges and goodwill amortization, net income for the twelve
months ended December 1999 was $37.2 million, or $1.78 per diluted share, as compared to $21.0 million, or $0.98 per
diluted share, for the eight months ended December 31, 1998.
RESULTS OF OPERATIONS--EIGHT MONTHS ENDED DECEMBER 31, 1998
COMPARED TO THE YEAR ENDED APRIL 30, 1998
Net sales were $488.3 million for the eight months ended December 31, 1998, representing a decrease of $30.2 million, as
compared to net sales of $518.5 million for the fiscal year ended April 30, 1998. The comparative decrease in net sales for the
eight month period ended December 31, 1998 was due to the shorter period comparison (eight months versus twelve months)
and the impact of lower copper prices in the December 31, 1998 eight month period, partially offset by the inclusion in the
1998 eight month period of $114.2 million and $43.5 million in net sales contributed by the acquired operations of Essex and
Superior Israel, respectively.
Gross profit increased to $103.0 million during the eight month period ended December 31, 1998, as compared to gross profit
of $99.2 million for the fiscal year ended April 30, 1998. The comparative increase in gross profit for the eight month period
ended December 31, 1998 included the gross profit contribution from the Essex and Superior Israel acquisitions of $20.1
million and $7.1 million, respectively, and a comparative increase in gross margin percentage in the operations of the
Communications Group, offset by the impact of the shorter period comparison.
SG&A expenses increased to $32.3 million during the eight month period ended December 31, 1998, as compared to $22.2
million for the fiscal year ended April 30, 1998. The increase in SG&A expenses of $10.1 million during the eight month period
ended December 31, 1998 was due to $11.7 million and $4.1 million in incremental SG&A expenses associated with the
acquired operations of Essex and Superior Israel, respectively, partially offset by the shorter period comparisons.
As previously discussed, during the eight month period ended December 31, 1998, the Company incurred infrequent and
unusual charges of $13.5 million.
Operating income was $54.7 million for the eight month period ended December 31, 1998, representing a decrease of $20.6
million, as compared to operating income of $75.3 million for the fiscal year ended April 30, 1998. The comparative decrease
in operating income for the eight months ended December 31, 1998 reflects the shorter period comparison and the impact of
the aforementioned
22
infrequent charges, offset by the operating income contribution of the acquired operations of Essex and Superior Israel.
Interest expense was $16.7 million for the eight month period ended December 31, 1998, representing an increase of $8.6
million, as compared to interest expense of $8.1 million during the fiscal year ended April 30, 1998. The increase in interest
expense reflects the increase in debt associated with the Essex and Superior Israel acquisitions offset by the shorter period
comparison.
Income before infrequent, unusual and extraordinary charges and goodwill amortization during the eight month period ended
December 31, 1998 was $31.9 million, or $1.49 per diluted share, as compared to $42.4 million, or $1.99 per diluted share,
for the fiscal year ended April 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 2000, the Company generated $105.9 million in cash flows from operating activities
consisting of $68.3 million in cash flows generated from operations (net income plus non-cash charges) plus $37.6 million in
cash flows provided from reductions in net working capital. Included in cash flows generated from operating activities was a
use of cash flow from operating activities of $5.1 million in the Company's 50.2% owned, separately financed Israeli subsidiary,
Superior Israel. The remainder of the Company's wholly-owned operations generated $111.0 million in cash flow from
operating activities, including $32.6 million in cash flow generated primarily from net working capital reductions, principally from
inventory reduction. Cash used for investing activities amounted to $90.7 million and consisted principally of capital
expenditures and pre-arranged long-term loans ("Israel Customer Loans") made to one of Superior Israel's principal customers.
Cash used for financing activities amounted to $16.5 million. The major components were a net increase in borrowings of
Superior Israel of $32.9 million (including $24.0 million related to Superior Israel Customer Loans) and other debt reductions
(net) of $45.2 million.
The Company finances its operating activities (exclusive of operating activities of Superior Israel which are financed under
separate, non recourse, financing arrangements) and other capital requirements from operating cash flow and funding availability
under its $1.15 billion amended and restated credit agreement (the "Credit Agreement") and a $200 million senior subordinated
credit agreement (the "Sub Notes"). Obligations under the Credit Agreement are secured by substantially all of the assets of the
Company and its domestic subsidiaries, and by the common stock of the Company's domestic subsidiaries and 65% of the
common stock of its principal foreign subsidiaries. At December 31, 2000, the Company had $149.7 million in unused and
excess borrowing availability under the Credit Agreement. The Credit Agreement contains certain performance and financial
covenants that are measured on a quarterly basis. As of December 31, 2000, the Company was in compliance with all
performance and financial covenants. The Company believes it can maintain compliance with such financial covenants through
2001 or obtain waivers from, or modifications to such covenants. In 2002, these financial covenants do require a significant
improvement in financial performance from current operating levels to maintain compliance with such covenants.
In addition to financing provided by the Credit Agreement and Sub Notes, the Company has financing availability under a
receivable securitization program providing for up to $160.0 million in short term financing through the issuance of secured
commercial paper. The receivable securitization program expires on November 30, 2001, although it may be extended for
successive one-year periods, subject to agreement. The Company intends to seek an extension of this agreement prior to its
expiration. At December 31, 2000, $160.0 million was outstanding under this program bearing an interest rate of 7.23%.
The Company's principal debt service commitments for the next 12 months (excluding Superior Israel) amount to $80.4 million.
Capital expenditures (excluding Superior Israel) for the next twelve months which are substantially discretionary are expected
to approximate $30-$35 million. Management
23
anticipates that the Company will continue to generate positive cash flows from its operating activities over the next twelve
months subject to fluctuations resulting from operating performance and working capital changes. The Company believes that
operating cash flows plus excess funds available under the Company's Credit Agreement will be sufficient to fund the
aforementioned debt service obligations and estimated capital expenditure levels over the next twelve month period.
Superior Israel's operations are funded and financed separately, on a non recourse basis to the Company, and include a $93.0
million credit facility consisting of a $63.0 million term loan and a $30.0 million revolving credit facility. Obligations under this
credit facility are secured by all of the assets of Superior Israel. The credit facility contains customary performance and financial
covenants. At December 31, 2000 Superior Israel had $7.7 million in excess availability under its revolving credit facility.
DERIVATIVE FINANCIAL INSTRUMENTS
To a limited extent, the Company uses forward fixed price contracts and derivative financial instruments to manage foreign
currency exchange and commodity price risks. To protect the Company's anticipated cash flows from the risk of adverse
foreign currency exchange fluctuations for firm sales and purchase commitments, the Company enters into foreign currency
forward exchange contracts. Superior TeleCom's principal raw material, copper, experiences marked fluctuations in market
prices, thereby subjecting the Company to copper price risk with respect to copper repurchases on fixed customer sales
contracts. Forward fixed price contracts and derivative financial instruments in the form of copper futures contracts are utilized
by the Company to reduce those risks. The Company does not hold or issue financial instruments for financial or trading
purposes. The Company is exposed to credit risk in the event of nonperformance by counterparties for foreign exchange
forward contracts, metal forward price contracts and metals futures contracts; however, the Company does not anticipate
nonperformance by any of these counterparties. The amount of such exposure is generally the unrealized gains with respect to
the underlying contracts.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of Effective Date of FASB Statement No. 133--an amendment of FASB Statement No. 133"
which delayed SFAS No. 133's effective date for one year. In June 2000, the FASB issued SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an amendment of FASB Statement No. 133" which amends
certain paragraphs of SFAS No. 133. SFAS No. 133 as amended, which is effective for the Company beginning January 1,
2001, establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as
either assets or liabilities in the statements of financial position and measurement of those instruments at fair value. The
cumulative effect of the change in accounting for derivative instruments recorded on January 1, 2001 was not material.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk primarily relates to interest rates on long-term debt. The Company enters into interest
rate swap and cap agreements to manage its exposure to interest rates changes. At December 31, 2000, the Company has an
interest rate cap on $400 million principal amount with a 90-day LIBOR rate cap at 7.0% expiring December 20, 2001. A one
percent increase in interest rates affecting the Company's $1.15 billion credit agreement and its $200 million senior
subordinated notes would increase annual interest expense by approximately 8% or $10.5 million.
24
EXCEPT FOR THE HISTORICAL INFORMATION HEREIN, THE MATTERS DISCUSSED IN THIS ANNUAL
REPORT ON FORM 10-K INCLUDE FORWARD-LOOKING STATEMENTS THAT MAY INVOLVE A NUMBER
OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY SIGNIFICANTLY BASED ON A NUMBER
OF FACTORS, INCLUDING, BUT NOT LIMITED TO, RISKS IN PRODUCT AND TECHNOLOGY
DEVELOPMENT, MARKET ACCEPTANCE OF NEW PRODUCTS AND CONTINUING PRODUCT DEMAND,
PREDICTION AND TIMING OF CUSTOMER ORDERS, THE IMPACT OF COMPETITIVE PRODUCTS AND
PRICING, CHANGING ECONOMIC CONDITIONS, INCLUDING CHANGES IN SHORT TERM INTEREST
RATES AND FOREIGN EXCHANGE RATES, AND OTHER RISK FACTORS DETAILED IN THE COMPANY'S
MOST RECENT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements as of December 31, 2000 and 1999 and for the years ended December 31,
2000 and 1999, the eight months ended December 31, 1998 and the year ended April 30, 1998 and the report of the
independent public accountants thereon and financial statement schedules required under Regulation S-X are submitted herein
as a separate section following Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this Item is incorporated herein by reference to the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year
covered by this report (the "Company's Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to the Company's Proxy Statement.
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1), (a)(2) See the separate section of this report following Item 14 for a list of financial statements and schedules filed
herewith.
(a)(3) Exhibits as required by Item 601 of Regulation S-K are listed in Item
14(c) below.
(b) None.
ITEM 14(C) EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
2(a) Stock Purchase Agreement, dated February 14, 1992, by and
between Alpine and Dataproducts Corporation, relating to the
purchase of shares of capital stock of DNE Systems, Inc.
(incorporated herein by reference to Exhibit 1 to the
Current Report on Form 8-K of Alpine dated March 2, 1992).
2(b) Agreement and Plan of Merger, dated as of June 17, 1993 and
amended on September 24, 1993, by and between Alpine and
Superior TeleTec Inc. (incorporated herein by reference to
Exhibit 2 to the Registration Statement on Form S-4
(Registration No. 33-9978) of Alpine, as filed with the
Securities and Exchange Commission (the "Commission") on
October 5, 1993).
2(c) Asset Purchase Agreement, dated as of March 17, 1995, by and
among Alcatel NA Cable Systems, Inc., Alcatel Canada
Wire, Inc., Superior Cable Corporation and Superior
TeleTec Inc. (the "Alcatel Acquisition Agreement")
(incorporated herein by reference to Exhibit 1 to the
Current Report on Form 8-K of Alpine dated May 24, 1995).
2(d) Amendment dated May 11, 1995 to Asset Purchase Agreement by
and among Alcatel NA Cable Systems, Inc., Alcatel Canada
Wire, Inc., Superior Cable Corporation and Superior
TeleTec Inc. (incorporated herein by reference to Exhibit 2
to the Current Report on Form 8-K of Alpine dated May 24,
1995).
2(e) Agreement Regarding Certain Employee Benefit Plans, amending
the Alcatel Acquisition Agreement, dated June 10, 1996
(incorporated herein by reference to Exhibit 2(b) to the
Annual Report on Form 10-K of Alpine for the year ended
April 30, 1996).
2(f) Share Purchase Agreement, dated as of May 5, 1998, among
CLAL Industries and Investments Ltd., ISAL Holland B.V. and
Halachoh Hane'eman Hashivim Veshmona Ltd. (incorporated
herein by reference to Exhibit 1 to the Current Report on
Form 8-K of the Company dated May 5, 1998).
2(g) Agreement and Plan of Merger, dated as of October 21, 1998,
by and among the Company, SUT Acquisition Corp. and Essex
International Inc. (incorporated herein by reference to
Appendix A-1 to the Joint Proxy Statement/Prospectus filed
as part of the Registration Statement on Form S-4
(Registration No. 333-68889) of the Company and Superior
Trust I, as filed with the Commission on December 14, 1998,
as amended (the "S-4"))
2(h) Amendment No. 1 to Agreement and Plan of Merger, dated as of
February 24, 1999, by and among the Company, SUT Acquisition
Corp. and Essex International Inc. (incorporated herein by
reference to Appendix A-2 to the Joint Proxy Statement/
Prospectus filed as part of the S-4).
2(i) Asset Purchase Agreement, dated October 2, 1998, among
Cables of Zion United Works Ltd., Cvalim--The Electric Wire
and Cable Company of Israel Ltd. and Dash Cable Industries
(Israel) Ltd. (incorporated herein by reference to
Exhibit 1 to the Current Report on Form 8-K of the Company
dated December 31, 1998 (the "Cvalim 8-K")).
26
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
2(j) Amendment No. 1 to Asset Purchase Agreement, dated
December 31, 1998, among Cables of Zion United Works Ltd.,
Cvalim--The Electric Wire and Cable Company of Israel Ltd.
and Dash Cable Industries (Israel) Ltd. (incorporated herein
by reference to Exhibit 2 to the Cvalim 8-K).
3(a) Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.2 to the Registration
Statement on Form S-1 (Registration No. 333-09933) of the
Company, as filed with the Commission on August 9, 1996, as
amended (the "S-1")).
3(b) Certificate of Amendment, dated July 12, 1996, to the
Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.2 to the S-1).
3(c) Certificate of Amendment, dated August 6, 1996, to the
Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.3 to S-1).
3(d) Certificate of Amendment, dated March 31, 1999, to the
Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 4.4 to the Registration
Statement on Form S-3 (Registration No. 333-68889) of the
Company, as filed with the Commission on August 17, 1999
(the "S-3")).
3(e) By-laws of the Company (incorporated herein by reference to
Exhibit 3.4 to the S-1).
3(f)* Amendment to the By-Laws of the Company.
4(a) Amended and Restated Declaration of Trust of Superior Trust
I, dated as of March 31, 1999, among the Company, American
Stock Transfer & Trust Company, as Property Trustee,
Wilmington Trust Company, as Delaware Trustee, and the
Administrative Trustees named therein (incorporated herein
by reference to Exhibit 4.6 to the S-3).
4(b) Indenture for the 8 1/2% Convertible Subordinated Debentures
of the Company Due 2014, dated as of March 31, 1999, between
the Company and American Stock Transfer & Trust Company, as
Indenture Trustee (incorporated herein by reference to
Exhibit 4.7 to the S-3).
4(c) Guarantee Agreement for the 8 1/2% Trust Convertible
Preferred Securities of Superior Trust I, dated as of
March 31, 1999, between the Company and American Stock
Transfer & Trust Company, as Guarantee Trustee (incorporated
herein by reference to Exhibit 4.8 to the S-e).
4(d) Rights Agreement, dated as of December 28, 2000, between the
Company and American Stock Transfer & Trust Company, as
Rights Agent (incorporated herein by reference to
Exhibit 4.1 to the Form 8-A of the Company, as filed with
the Commission on January 9, 2001).
10(a) Amended and Restated Superior TeleCom Inc. 1996 Stock Option
Plan (incorporated herein by reference to Appendix D to the
Joint Proxy Statement/Prospectus filed as part of the S-4).
10(b) Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.1 to the S-1).
10(c) Lease Agreement, dated as of December 16, 1993, by and
between ALP(TX) QRS 11-28, Inc. and Superior TeleTec
Transmission Products, Inc. (incorporated herein by
reference to Exhibit (i) to the Quarterly Report on
Form 10-Q of Alpine for the quarter ended January 31, 1994).
10(d) First Amendment to Lease Agreement, dated as of May 10,
1995, by and between ALP (TX) QRS 11-28, Inc. and Superior
TeleTec Inc. (incorporated herein by reference to
Exhibit 10(o) to the Annual Report on Form 10-K of the
Alpine for the year ended April 30, 1995 (the "1995 Alpine
10-K")).
10(e) Second Amendment to Lease Agreement, dated as of July 21,
1995, by and between ALP (TX) QRS 11-28, Inc. and Superior
Telecommunications Inc. (incorporated herein by reference to
Exhibit 10(x) to the 1995 Alpine 10-K).
10(f) Third Amendment to Lease Agreement, dated as of October 2,
1996, by and between ALP (TX) QRS 11-28, Inc. and Superior
Telecommunications Inc. (incorporated herein by reference to
Exhibit 10.8 to the S-1).
27
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10(g) First Amendment to Guaranty and Surety Agreement, dated as
of October 2, 1996, among the Company, Alpine and ALP (TX)
QRS 11-28, Inc. (incorporated herein by reference to
Exhibit 10.12 to the S-1).
10(h) Employment Agreement, dated April 26, 1996, between Superior
Telecommunications Inc. and Justin F. Deedy, Jr.
(incorporated herein by reference to Exhibit 10.3 to the
S-1).
10(i) Employment Agreement, dated as of October 17, 1996, between
the Company and Steven S. Elbaum (incorporated herein by
reference to Exhibit 10(14) to the Quarterly Report on
Form 10-Q of the Company for the quarter ended January 31,
1997).
10(j) Letter Agreement, dated October 8, 1996, between the Company
and Alpine relating to a capital contribution by Alpine to
the Company (incorporated herein by reference to
Exhibit 10.2 to the S-1).
10(k) Letter Agreement, dated October 2, 1996, between the Company
and Alpine relating to tax indemnification (incorporated
herein by reference to Exhibit 10.5 to the S-1).
10(l) Tax Allocation Agreement, dated as of October 2, 1996, among
Alpine, the Company and its subsidiaries (incorporated
herein by reference to Exhibit 10.9 to the S-1).
10(m) Exchange Agreement, dated October 2, 1996, between the
Company and Alpine (incorporated herein by reference to
Exhibit 10.10 to the S-1).
10(n) Registration Rights Agreement, dated October 2, 1996,
between the Company and Alpine (incorporated herein by
reference to Exhibit 10.11 to the S-1).
10(o) Services Agreement, dated October 2, 1996, between the
Company and Alpine (incorporated herein by reference to
Exhibit 10.4 to the S-1).
10(p) Amendment No. 1, dated as of May 1, 1997, to the Services
Agreement (incorporated herein by reference to
Exhibit 10(t) to the Annual Report on Form 10-K of the
Company for the year ended April 30, 1997).
10(q) Amendment No. 2, dated as of May 1, 1998, to the Services
Agreement (incorporated herein by reference to
Exhibit 10(w) to the Annual Report on Form 10-K of the
Company for the year ended April 30, 1998).
10(r) Amended and Restated Credit Agreement, dated as of
November 27, 1998 (the "Credit Agreement"), among
Superior/Essex Corp., Essex Group, Inc., the guarantors
named therein, various lenders, Merrill Lynch & Co., as
documentation agent, Fleet National Bank, as syndication
agent, and Bankers Trust Company, as administrative agent
(incorporated herein by reference to Exhibit 99.7 to the
Schedule 13D/A of Alpine, the Company, Superior/Essex Corp.
and SUT Acquisition Corp., as filed with the Commission on
December 7, 1998).
10(s) Senior Subordinated Credit Agreement, dated as of May 26,
1999 (the "Senior Subordinated Credit Agreement"), among
Superior/Essex Corp., as borrower, the Company, as parent,
the subsidiary guarantors named therein, various lenders,
Fleet Corporate Finance, Inc., as syndication agent, and
Bankers Trust Company, as administrative agent (incorporated
herein by reference to Exhibit 10(s) to the Annual Report on
Form 10-K of the Company for the year ended December 31,
1999 (the "1999 10-K").
10(t) Addendum No. 1 to the Application to Open an Account, dated
December 29, 1998, between Cables of Zion United Works Ltd.
and Bank Hapoalim B.M. (incorporated herein by reference to
Exhibit 3 to the Cvalim 8-K).
10(u) Superior TeleCom Inc. Stock Compensation Plan for
Non-Employee Directors (Amended and Restated effective as of
May 1, 2000) (incorporated herein by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q of the
Company for the quarter ended June 30, 2000).
10(v) Amendment No. 1, dated as of December 10, 1999, to the
Senior Subordinated Credit Agreement (incorporated herein by
reference to Exhibit 10(v) to the 1999 10-K).
10(w) Amendment No. 2, dated as of February 18, 2000, to the
Senior Subordinated Credit Agreement (incorporated herein by
reference to Exhibit 10(w) to the 1999 10-K).
28
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10(x) Fourth A