-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WhK5jkS3NcfzBXtyc006BgQJuECjyBDwRqNVn2Y6pRQKbuMH+9AffBVJpKRjJuqE p+m11RMRhULglYhFO1dX7A== 0000913360-99-000002.txt : 19990519 0000913360-99-000002.hdr.sgml : 19990519 ACCESSION NUMBER: 0000913360-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFC CABLE SYSTEMS INC CENTRAL INDEX KEY: 0000913360 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 951517994 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23070 FILM NUMBER: 99629598 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLAZA STREET 2: SUITE 1250 CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4014532000 MAIL ADDRESS: STREET 1: 50 KENNEDY PLAZA STREET 2: SUITE 1250 CITY: PROVIDENCE STATE: RI ZIP: 02903 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDED 4/3/99 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23070 AFC CABLE SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 95-1517994 (State or other jurisdiction of incorporation or organization) (I.R.S.Employer Identification No.) 50 KENNEDY PLAZA, SUITE 1250, PROVIDENCE, RHODE ISLAND 02903 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (401) 453-2000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes[X] No[ ]. Indicate the number of shares of the Registrant's Common Stock outstanding as of the latest practicable date: Class Outstanding as of May 17, 1999 ----- ------------------------------ Common Stock, $.01 par value 12,759,663 Page 1 of 14 pages PART I - FINANCIAL INFORMATION AFC CABLE SYSTEMS, INC. ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
April 3, December 31, 1999 1998 ---- ---- ASSETS Current assets: Cash and cash equivalents ................................... $ 2,477 $ 2,968 Investments, marketable securities (Note 6) ................. 74,377 75,510 Accounts receivable, net of allowance for doubtful accounts and sales allowances of $3,605 and $4,802, respectively .. 44,412 39,748 Inventories: Finished goods ........................................... 25,833 26,314 Work-in-process .......................................... 9,077 7,386 Raw materials ............................................ 7,412 7,477 ---------- ---------- 42,322 41,177 Current deferred taxes ...................................... 1,988 2,335 Other current assets ........................................ 2,844 1,984 ---------- ---------- Total current assets ........................................ 168,420 163,722 Property, plant and equipment, at cost ........................ 63,963 57,597 Less accumulated depreciation ................................. 17,903 16,459 --------- ---------- Net property, plant and equipment ............................. 46,060 41,138 Goodwill, net of accumulated amortization of $1,120 and $886, respectively .......................................... 34,014 34,230 Other long term assets, net ................................... 2,297 2,457 --------- ---------- Total assets .................................................. $250,791 $241,547 ========= ==========
Note: The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. 2 AFC CABLE SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS--Continued (In thousands, except share data)
April 3, December 31, 1999 1998 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt .......................... $ 2,426 $ 2,426 Revolving credit note payable .............................. 9,650 7,500 Accounts payable ........................................... 17,245 18,388 Accrued expenses: Payroll and employee benefits ........................... 2,748 4,811 Other ................................................... 7,117 6,242 --------- --------- Total accrued expenses .................................. 9,865 11,053 --------- --------- Total current liabilities .................................... 39,186 39,367 Long-term debt ............................................... 13,638 11,098 Deferred income taxes ........................................ 1,763 1,720 Other long-term liabilities .................................. 3,229 3,231 Shareholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued ................................. - - Common stock, $.01 par value, 50,000,000 shares authorized, 12,739,279 and 12,741,468 shares issued and outstanding, respectively ........................... 127 127 Paid-in capital ............................................ 118,362 117,621 Accumulated other comprehensive income (Note 8) ............ 349 580 Treasury stock, 30,732 shares and 14,137 shares, respectively, at cost ................................... (900) (364) Retained earnings .......................................... 75,037 68,167 --------- --------- 192,975 186,131 --------- --------- Total liabilities and shareholders' equity ................... $250,791 $241,547 ========= =========
Note: The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. 3 AFC CABLE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data)
Quarter ended April 3, March 28, 1999 1998 ---- ---- Net sales ................................................... $72,888 $65,286 Cost of goods sold .......................................... 49,504 45,924 --------- --------- Gross profit ................................................ 23,384 19,362 Selling, general and administrative expenses ................ 12,862 10,802 --------- --------- Income from operations ...................................... 10,522 8,560 Other income (expense): Interest expense .......................................... (439) (133) Net investment and other income ........................... 1,088 579 --------- --------- 649 446 --------- --------- Income before taxes ........................................ 11,171 9,006 Income taxes ............................................... 4,301 3,516 --------- --------- Net income (Note 8) ........................................ $ 6,870 $ 5,490 ========= ========= Basic earnings per common share (Note 7) ................... $ .54 $ .48 ========= ========= Diluted earnings per common share (Note 7) ................. $ .53 $ .46 ========= =========
See accompanying notes 4 AFC CABLE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Quarter ended April 3, March 28, 1999 1998 ---- ---- OPERATING ACTIVITIES Net income ................................................... $ 6,870 $ 5,490 Adjustments to reconcile net income to cash provided by operating activities: Depreciation ............................................ 1,444 1,025 Amortization of intangibles ............................. 234 103 Net realized (gain) loss on available-for-sale securities 5 (52) Deferred income taxes ................................... 509 (113) Provision for bad debts ................................. 133 57 Provision for sales allowances .......................... (1,330) (980) Compensation expense for restricted stock and compensatory options ............................. 19 19 Increase (decrease) in cash arising from changes in assets and liabilities: Accounts receivable ................................ (3,467) (4,723) Inventories ........................................ (1,145) 2,356 Other current assets ............................... (860) (176) Other long-term assets ............................. 233 (26) Accounts payable ................................... 857 676 Accrued payroll and employee benefits .............. (2,063) (534) Other accrued liabilities .......................... 875 2,634 Long-term liabilities .............................. (2) 100 --------- -------- Net cash provided by operating activities .................... 2,312 5,856 INVESTING ACTIVITIES Acquisition expenses ......................................... (16) - Capital expenditures ......................................... (6,366) (2,077) Purchase of available-for-sale securities .................... (22,922) (9,056) Proceeds from sale of available-for-sale securities .......... 23,606 10,659 --------- -------- Net cash used in investing activities ........................ (5,698) (474) FINANCING ACTIVITIES Net revolving line of credit borrowings (repayments) ......... 2,150 (1,230) Net proceeds from long-term debt ............................. 950 - Payments on long-term debt, including current portion ........ (410) (53) Proceeds from issuance of common stock ....................... 741 193 Purchase of treasury stock ................................... (536) (272) --------- --------- Net cash provided by (used in) financing activities .......... 2,895 (1,362) --------- --------- Net increase (decrease) in cash and cash equivalents ......... (491) 4,020 Cash and cash equivalents at beginning of period ............. 2,968 2,803 --------- --------- Cash and cash equivalents at end of period ................... $ 2,477 $ 6,823 ========= ========= Supplemental schedule of cash flow information: Cash paid during the period for interest ................... $ 322 $ 47 ========= ========= Cash paid during the period for income taxes ............... $ 1,566 $ 1,333 ========= =========
See accompanying notes 5 AFC CABLE SYSTEMS, INC. NOTES TO FINANCIAL STATEMENTS APRIL 3, 1999 NOTE 1. BASIS OF PRESENTATION The accompanying unaudited financial statements of AFC Cable Systems, Inc. (the "Company" or "AFC") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended April 3, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. Certain prior year amounts have been reclassified to conform to current period presentation. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. NOTE 2. INCOME TAXES For the quarters ended April 3, 1999 and March 28, 1998, the Company's effective tax rates of approximately 38.5% and 39.0%, respectively, were greater than the statutory rate due primarily to state income taxes. NOTE 3. CONTINGENCIES The Company is a defendant in certain claims that relate to matters that occurred prior to present ownership. In accordance with the purchase and sale agreement, the prior owner has indemnified the Company for such claims and, accordingly, the matters are being defended by the prior owners and its insurance companies. Management is of the opinion that these claims relate to the prior owners and therefore will not have a material adverse effect on the Company's financial position or results of operations. Additionally, the Company is a party to one environmental matter not covered by the indemnification. In this matter, a number of responsible parties entered into a consent decree with the EPA in 1991 and subsequently, such parties as plaintiffs have sought contribution from the Company, which was not named as a responsible party by the EPA. The Company has admitted that a predecessor of the business currently operated by the Company had disposed of a de minimis amount of waste at the site. On December 17, 1996, the United States District Court for the District of Massachusetts entered a judgment in favor of the Company with respect to this claim. As of April 3, 1999, there is an appeal pending with the U.S. Court of Appeals for the First Circuit. On March 12, 1998, a municipality named one of the Company's wholly-owned subsidiaries in a suit seeking compensation for expenses allegedly incurred by the municipality in connection with environmental contamination apparently caused by the predecessor operator of the business. The Company believes that any amounts recovered by the municipality and other costs and expenses associated with this action are, subject to certain limitations, covered by indemnification from the predecessor entity and its stockholders under the related asset purchase agreement. NOTE 4. GOODWILL Goodwill consists of the excess cost over the fair value of the assets of acquired businesses and is amortized on a straight-line basis over periods of 20 to 40 years. Accumulated amortization of goodwill totaled $1,120,000 at April 3, 1999 and $886,000 at December 31, 1998. NOTE 5. FINANCING Borrowings under the unsecured revolving line of credit were $9.65 million at April 3, 1999. The weighted average interest rate on outstanding borrowings under the line of credit as of April 3, 1999 was 6.324%. Total letter of credit borrowings at April 3, 1999 under the line of credit were $1,121,485. On February 5, 1999, the Company borrowed $950,000 from a commercial bank 6 for the purpose of purchasing the Painesville, OH manufacturing facility formerly leased by the Company for its Federal Hose Manufacturing operation. The loan is for a term of fifteen years and is secured by a mortgage on the real estate. Principal is payable in equal monthly installments plus interest commencing March 1, 1999 and maturing on February 4, 2014. The loan will bear interest at one half of one percent below the prime rate or, at the Company's option, at a fixed annual rate equal to the LIBOR rate or a Cost of Funds rate selected by the Company and approved by the lender. At April 3, 1999, the loan bears an interest rate of 6.65%. On March 1, 1999, the Company issued promissory notes for a total of $2.0 million in connection with contingent consideration in the acquisition of Georgia Pipe Company. Principal is payable in full on March 1, 2001 along with all accrued interest. The notes bear interest on a floating basis at a rate equal to the prime rate. Interest is payable quarterly on the first day each of June, September, December and March commencing June 1, 1999. At April 3, 1999, the notes carried a rate of 7.75%. NOTE 6. INVESTMENTS The following is a summary of securities held by the Company. All securities are classified as available-for-sale.
Gross Estimated Gross Unrealized Fair Cost Unrealized Gains Losses Value -------------- ----------------- ---------------- --------------- (In Thousands) APRIL 3, 1999 U.S. corporate debt .......... $19,083 $ 104 $ (560) $ 18,627 securities U.S. treasury securities and obligations of U.S. Government agencies ..... 49,218 31 (501) 48,748 Equity securities ............ 6,013 1,251 (262) 7,002 ------------- -------------- -------------- -------------- Total included in investments $ 74,314 $1,386 $ (1,323) $ 74,377 ============= ============== ============== ============== DECEMBER 31, 1998 U.S. corporate debt .......... $ 13,806 $ 117 $(442) $ 13,481 securities U.S. treasury securities and obligations of U.S. Government agencies ..... 55,229 108 (187) 55,150 Equity securities ............ 6,002 1,193 (316) 6,879 ------------- -------------- -------------- -------------- Total included in investments $ 75,037 $ 1,418 $(945) $ 75,510 ============= ============== ============== ==============
Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties. Realized losses included in investment income amounted to $5,000 in the quarter ended April 3, 1999. 7 NOTE 7. EARNINGS PER SHARE Basic earnings per share represents net income divided by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings per share represents net income divided by weighted average shares outstanding adjusted for the dilutive effect of the assumed exercise of outstanding options and warrants. The following table sets forth the computation of basic and diluted earnings per share for the three-month periods ended April 3, 1999 and March 28, 1998:
Quarter ended April 3, March 28, 1999 1998 ------------- --------------- Net income (in thousands) ........ $6,870 $5,490 Basic average shares ............. 12,718,728 11,363,563 Effect of dilutive securities: Stock options and stock awards . 339,715 386,071 Stock warrants ................. - 91,830 ------------ ------------- 339,715 477,901 ------------ ------------- Dilutive average shares ......... 13,058,443 11,841,464 ============ ============= Basic earnings per share ........ $0.54 $0.48 ============ ============= Diluted earnings per share ...... $0.53 $0.46 ============ =============
NOTE 8. COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 establishes new rules for the reporting and display of comprehensive income and its components. The adoption of FAS 130, however, had no impact on the Company's net income or shareholders' equity. FAS 130 requires unrealized gains or losses on the Company's available-for-sale securities, which prior to adoption was reported separately in shareholders' equity, to be included in other comprehensive income. The components of comprehensive income, net of related tax, for the three month periods ended April 3, 1999 and March 28, 1998 are as follows:
Quarter ended April 3, March 28, (In thousands) 1999 1998 ------------ ------------ Net income $6,870 $5,490 Unrealized gains (losses) on securities 231 (101) ============ ============ Comprehensive income $7,101 $5,389 ============ ============
8 9. SEGMENT INFORMATION The Company has thirteen business units which have separate management teams and infrastructures that in most cases offer different products and services. The business units have been aggregated into two reportable segments, Wire and Cable and Modular Wiring and Components. The Wire and Cable segment produces armored cable, flexible conduit, specialty cable, electrical fittings, and connectors. These products are sold mainly to electrical distributors in the domestic market through a network of independent sales representatives. The Modular Wiring and Components segment produces flexible and premise wiring systems and related electrical components and lighting controls. These products are primarily sold to electrical distributors in the domestic market through a network of independent sales representatives, although some products are sold directly to the end user. Not included in the Company's two reportable segments are business units whose revenue consists of the manufacturing and distribution of plastic and fabric hoses and the manufacturing of special processed metal. These business units along with corporate investments are included within the "all other" category in the tables below. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on income before taxes of the respective business units. Intersegment sales, which are immaterial, are made on a basis intended to reflect the market value of products recognizing prevailing market prices and have been eliminated from sales data reported below. REPORTABLE SEGMENT DATA
Modular Wire and Wiring and All Cable Components Other Total --------------- --------------- -------------- --------------- QUARTER ENDED APRIL 3, 1999 Net sales .............. $56,328 $11,645 $4,915 $72,888 Income before taxes .... 8,294 1,445 1,432 11,171 Segment assets ......... 126,485 31,246 93,060 250,791 Depreciation ........... 1,142 187 115 1,444 Capital expenditures ... 4,956 382 1,028 6,366 QUARTER ENDED MARCH 28, 1998 Net sales .............. $48,778 $10,437 $6,071 $65,286 Income before taxes .... 6,511 1,336 1,159 9,006 Segment assets ......... 85,362 29,745 53,009 168,116 Depreciation ........... 798 146 81 1,025 Capital expenditures ... 1,564 369 144 2,077
9 NOTE 10. MERGER On January 27, 1999, the Company entered into a definitive agreement with Thomas & Betts Corporation ("T&B") whereby the Company would be acquired by T&B in a stock-for-stock merger to be accounted for as a pooling of interests. The merger agreement provides that each share of the Company's common stock outstanding immediately prior to the merger, except for treasury stock or stock owned by T&B (which immediately prior to the merger will be canceled and retired) will, at the time of the merger, be converted into the right to receive .83 shares of T&B common stock. The companies expect to complete the transaction in the first half of 1999. Upon the consummation of the merger, the Company will pay a contingent fee to its investment banker and recognize certain other merger-related costs. During the quarter ended April 3, 1999, a joint preliminary proxy statement was filed with the Securities and Exchange Commission and the transaction passed review by the Federal Trade Commission under the Hart-Scott-Rodino Act and is pending the filing of the definitive proxy statement and approval by the shareholders of both companies. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparative Results of Operations for the Three Months Ended April 3, 1999 and March 28, 1998 This report contains certain forward-looking statements within the meaning of section 21E of the Securities Exchange Act of 1934, as amended. These statements include, among others, statements relating to future events or the future financial performance of the Company. Such statements are only expectations and actual events or results may differ materially. Factors which could cause actual results to differ materially from those indicated in such forward-looking statements are set forth in "Factors That May Affect Future Performance" in the Company's Annual Report on Form 10-K for the year 1998. MERGER On January 27, 1999, the Company entered into an agreement with Thomas & Betts Corporation ("T&B") whereby the Company would become, through a stock-for-stock merger, a wholly-owned subsidiary of T&B. The transaction is intended to be accounted for as a pooling of interests. The transaction is subject to the approval of the shareholders of both companies. RESULTS OF OPERATIONS NET SALES. Net sales for the quarter ended April 3, 1999 increased $7.6 million, or 11.6%, to $72.9 million from $65.3 million for the quarter ended March 28, 1998. Net sales for the Wire and Cable Segment increased by $7.5 million, or 15.4%, to $56.3 million for the quarter ended April 3, 1999 from $48.8 million for the quarter ended March 28, 1998. The increase was attributable primarily to sales by Spiraduct and Georgia Pipe, which were acquired in May and October of 1998, respectively, and to higher sales of the Company's line of fittings and connectors. Net sales for the Modular Wiring and Components segment increased by $1.2 million, or 11.5%, to $11.6 million for the quarter ended April 3, 1999 from $10.4 million for the quarter ended March 28, 1998. This increase is attributable to higher sales of modular wiring systems, photo controls and other lighting products, and electronic interfaces and connectors for the computer industry. Net sales of other products decreased $1.2 million, or 19.7%, to $4.9 million for the quarter ended April 3, 1999 from $6.1 million for the quarter ended March 28, 1998. This decrease is attributable mainly to the slow-down in the oil drilling industry in which the Company's specialty coated metals products are used. Resulting excess capacity in the Company's specialty coated metals operation, however, was used for internal manufacturing requirements in the Wire and Cable segment. GROSS PROFIT. Gross profit for the quarter ended April 3, 1999 increased $4.0 million, or 20.6%, to $23.4 million from $19.4 million for the quarter ended March 28, 1998. Gross margin increased to 32.1% for the quarter ended April 3, 1999 from 29.7% for the quarter ended March 28, 1998. The increased gross margin is attributable to (i) improved operating efficiencies, (ii) more efficient material utilization resulting from improved manufacturing processes, (iii) increased sales of the Company's higher margin specialty application cables, modular wiring systems and electronic interface products and (iv) favorable margins on products sold by Georgia Pipe Company. INCOME FROM OPERATIONS. Income from operations for the quarter ended April 3, 1999 increased $1.9 million, or 22.1%, to $10.5 million from $8.6 million for the quarter ended March 28, 1998. Income from operations as a percentage of net sales increased to 14.4% for the quarter ended April 3, 1999 from 13.1% for the quarter ended March 28, 1998. This increase resulted from improved gross margin, partially offset by an increase in freight costs and sales agent commissions, compensation expense and advertising expense. NET INCOME. Net income for the quarter ended April 3, 1999 increased $1.4 million, or 25.5%, to $6.9 million from $5.5 million for the quarter ended March 28, 1998. Net income as a percentage of net sales increased to 9.4% for the quarter ended April 3, 1999 from 8.4% for the quarter ended March 28, 1998. This increase was primarily due to increased income from operations, increased investment income and a lower effective tax rate. INTEREST EXPENSE. Interest expense for the quarter ended April 3, 1999 increased to $439,000 from $133,000 for the quarter ended March 28, 1998. This increase is attributable to (i) an increase in average borrowings under the Company's revolving line of credit resulting from increased accounts receivable and inventories and decreased accounts payable and accrued payroll and employee benefits and (ii) higher long-term debt resulting from 1998 acquisitions. 11 LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations totaled $2.3 million for the quarter ended April 3, 1999 and was mainly attributable to increased profitability partially offset by an increase in accounts receivable resulting from higher sales, increased inventories and decreased accrued payroll and employee benefits . Working capital on April 3, 1999 was $129.2 million and the ratio of current assets to current liabilities was 4.30 to 1.00 compared to 4.16 to 1.00 at December 31, 1998. The Company believes that existing cash and marketable securities, cash generated from operations and available borrowings under its revolving line of credit will be sufficient to meet its on-going working capital and capital expenditure requirements for the foreseeable future. YEAR 2000 The Company has identified four areas of the business on which the year 2000 ("Y2K") issue will have an impact. The company's work on the Y2K compliance initiative began in 1997 with the assessment process which defined the following four Y2K impact areas: computer systems and hardware, manufacturing support processes, plant facility HVAC systems and manufactured products. The risk assessment and exposure analysis was completed in 1997 and each of the four areas was ranked as high, medium or low. The only high-risk area identified was computer systems and hardware. As a result, the Company is replacing its existing computer infrastructure with an Enterprise Resource Planning ("ERP") information system. The software and computer hardware has been installed and implementation configuration is in process with an anticipated production date in the third quarter 1999. Additional software systems are presently being upgraded to a Y2K compliant version of the currently operational software. These systems were substantially compliant in the first quarter of 1999. Project expenditures to date total approximately $2.0 million which includes the purchase of new mainframe computer hardware, ERP application software and consulting services. These costs have been funded through operating cash flows and most have been capitalized. The Company expects to incur an additional $1.5 million of incremental costs throughout the 1999 fiscal year. This will cover hardware platforms, personnel costs related to software configuration, conversion and training of the workforce. Management feels that replacing the Company's information system addresses the majority of the Company's Y2K computer issues, reducing the likelihood that a contingency plan will be necessary. In addition, management will implement a company-wide program to strictly control and limit changes to major information technology ("IT") systems during the second half of 1999 to reduce potential additional exposures and to concentrate IT resources on integration testing and other Y2K-related efforts. The three remaining areas, manufacturing support processes, plant facility HVAC systems and manufactured products have been assessed and remediation for these areas is scheduled for completion by the middle of the 1999 fiscal year without significant incremental costs. Based upon progress to date, the Company currently does not anticipate the need to develop an extensive contingency plan for these areas. The Company's largest suppliers and customers are in their certification process to validate that they will be Y2K compliant before the end of calendar year 1999. A supplier survey is scheduled for completion by the first half of calendar year 1999. Alternative suppliers will be identified for those suppliers not expected to be compliant by the end of 1999. The Company's financial institutions are currently being surveyed and the Company anticipates that they are Y2K compliant, or will be before the end of the calendar year 1999. The Company believes its Y2K program is adequate to detect year 2000 compliance issues, and that it has the necessary resources to remedy them. However, the Y2K problem has many aspects and potential consequences, some of which are not reasonably foreseeable. The Company could be adversely impacted by the Y2K issue if suppliers, customers and other businesses do not address this issue successfully. There can be no assurance that unforeseen circumstances will not arise. 12 PART II - OTHER INFORMATION AFC CABLE SYSTEMS, INC. ITEM 1. LEGAL PROCEEDINGS. None ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit 2. Agreement and Plan of Merger dated January 27, 1999 by and between AFC Cable Systems, Inc., TB Acquisition Corp. and Thomas & Betts Corporation (incorporated herein by reference to Exhibit 2.1 of the current report on Form 8-K filed by AFC Cable Systems, Inc. on February 2, 1999, File No. 000-23070). Exhibit 27. Financial Data Schedule. (b) Current Report on Form 8-K filed with the Commission on February 2, 1999. Under Item 5 of Form 8-K, AFC Cable Systems, Inc. reported the merger agreement between AFC Cable Systems, Inc. and Thomas & Betts Corporation entered into on January 27, 1999. 13 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 17, 1999 AFC CABLE SYSTEMS, INC. By:/s/Ralph R. Papitto ------------------------- Ralph R. Papitto Chairman of the Board and Chief Executive Officer By:/s/Raymond H. Keller ------------------------- Raymond H. Keller Vice President and Chief Financial Officer 14 EX-27 2 FDS --
5 1000 3-MOS DEC-31-1999 JAN-01-1999 APR-03-1999 2,477 74,377 48,017 3,605 42,322 168,420 63,963 17,903 250,791 39,186 0 0 0 127 192,848 250,791 72,888 72,888 49,504 49,504 0 133 439 11,171 4,301 6,870 0 0 0 6,870 .54 .53
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