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February Cablenomics With the NASDAQ up over 85% in 1999, it wasn’t surprising that there was a great deal of volatility in the first week of the new millennium, as many investors sought to lock in profits from 1999 and defer paying taxes until April of 2001. Nonetheless, the S&P, Dow Jones Industrial and NASDAQ indexes are all at record levels as of press time. It was especially encouraging that the doom and gloom of Y2K forecasters never materialized. Whether this was due to the efforts of the telecommunications and cabling industries, or to overly pessimistic individuals, the important thing is that a major obstacle to technology spending and investment is now behind us. With Internet appliances and broadband applications looming on the horizon, it seems clear that this will be the telecommunications century, which bodes well for the structured cabling industry. Interestingly enough, several companies and investment firms are taking advantage of this situation and are increasing their acquisition efforts, especially with contractors/installers/integrators. Many of Gerber & Company, LLC’s clients are these firms, who are looking to become part of a larger entity to help them withstand current profit pressures and cash flow issues, address national accounts, while simultaneously providing long-term upside with significantly less risk. If you are considering selling your firm and are interested in having an initial, exploratory meeting with Gerber & Company, LLC, then you should contact us at your earliest convenience. Additionally, if you are a well-connected, cabling/wiring professional who would like to join Gerber & Company, LLC and work in the exciting field of Mergers & Acquisitions, then you are also encouraged to call us. Ron Gerber, President of Gerber & Company, LLC can be reached at 212-879-6808 (phone) or via email at rgerber@gerbercompany.com. Please remember however that Cabling Business Magazine and Gerber & Company, LLC cannot be held responsible for any printing errors. Readers should use this article for informative purposes alone. Any investment decisions should be made with the advice of a financial professional.
Stock Price Table
Ortronics With all the interest in the Internet and its potential for altering the relationship between manufacturers and distributors, it was very interesting to listen to Ortronics articulate their ecommerce strategy. Currently, Ortronics sells through distribution, utilizing its outside salesforce to pull orders through this channel. And the Internet is not going to change this highly successful approach, according to a recent conversation between Gerber & Company, LLC and an Ortronics executive..
What Ortronics has done is evaluated its traditional strength of selling through distribution, versus the theoretical and unrealized advantages of potentially reaching its customers through alternative means, and decided that they need to embrace the distributors even more. Even in today’s highly virtual world, someone has to do fulfillment, someone has to do warehousing, and "it is not going to be us". Optical Cable Corporation Optical Cable Corporation (Nasdaq: OCCF - news) announced results for its fiscal fourth quarter and year ended October 31, 1999. Net sales for the fourth quarter of fiscal 1999 rose 11.4% to a record $14.8 million from $13.3 million in the same period last year. Net income for the fourth quarter of fiscal 1999 increased 76.5% to set a new record of $3.08 million, or $0.082 per diluted share, compared to net income of $1.74 million, or $0.046 per diluted share, in the year ago period. Net sales for the year ended October 31, 1999 rose 0.2% to $50.7 million from $50.6 million in the year ended October 31, 1998. Net income for fiscal 1999 increased 14.2% to $8.31 million, or $0.219 per diluted share, compared to net income of $7.27 million, or $0.188 per diluted share, in fiscal 1998. Results for the fourth quarter reflect a continued strengthening in sales as well as a broadening of the Company's customer base. The gross profit margin in the fourth quarter increased to 49.2%, a strong improvement over the gross profit margin of 40.9% reported in the fourth quarter of 1998 and the gross profit margin of 43.0% reported in the third quarter of 1999. For the month of October, the Company's gross profit margin reached approximately 54%. For the year, the gross profit margin improved to 45.7% from 42.0% in fiscal 1998. ``We are pleased to be able to report continued improvement in our sales and gross profit margin,'' stated Robert Kopstein, President and Chief Executive Officer. ``The gross profit margin reported in the fourth quarter is the best we have seen in approximately 29 quarters. We believe that much of the Y2K-related softness that the Company experienced over the last year is now behind us and the estimated $100 billion spent on Y2K preparedness in the U.S. and the equally large amount spent globally will be reallocated back into the communications sector. The potential for pent up demand for communication hardware and software causes us to be optimistic about the Company's prospects in fiscal 2000.'' Mr. Kopstein concluded, ``Optical Cable has continued to strengthen its market position during the year through an increased focus on building a strong domestic and international sales team. Also, the implementation of an Internet e-commerce site, which helped to facilitate sales of our standard products 24 hours a day, has allowed for better service to all our customers. We believe the Company's advanced manufacturing technology, including our unique computer automation hardware and software, gives us a tremendous edge and allows us to develop products faster than our global competitors. With a strong balance sheet, no long-term debt and approximately $7.0 million in cash, we seek to capitalize on the tremendous growth expected in the fiber optic cable industry.'' Optical Cable Corporation manufactures and markets a broad range of fiber optic cables for ``high bandwidth'' transmission of data, video and audio communications over moderate distances. Optical Cable Corporation's cables can be used both indoors and outdoors and utilize a tight-buffered coating that protects the optical fiber. Superior Telecom/Leviton Superior TeleCom Inc. (NYSE: SUT - news) announced that it has entered into a letter of intent with American Insulated Wire Corporation providing for the sale of Superior's industrial wire manufacturing business located in Pawtucket, RI. The transaction is subject to the execution by the parties of a definitive agreement that is expected to close during the first quarter of 2000. A previously announced agreement in principle to sell the business to another buyer was terminated since the parties were unable to conclude the terms of a definitive agreement within the prescribed time parameters. ``We are pleased to have reached a new agreement for the sale of our Pawtucket plant that also maintains the operation as a going concern,'' said Steven S. Elbaum, Chairman and Chief Executive Officer of Superior. ``The sale addresses both our strategic focus on core products within our Industrial Group and our desire to see operations and jobs maintained in the Pawtucket operation.'' ``We also intend to enter into a supply agreement with American Insulated Wire Corporation. In so doing we can continue to supply our customers with certain products manufactured at the Pawtucket facility.'' American Insulated Wire Corporation, a national manufacturer of power cable products founded in 1924, is headquartered in Pawtucket, RI. It is a subsidiary of Leviton Manufacturing Company, Inc., a manufacturer and supplier of both thermoset and thermoplastic types of wire, including: cable, power cable, portable cord, building wire and cord set products. It operates four manufacturing facilities and also maintains a comprehensive distribution network. Superior also reported that it had completed the sale of its recently closed Lithonia, GA manufacturing facility. Superior TeleCom Inc. is the largest North American wire and cable manufacturer and the fourth largest wire and cable manufacturer in the world. Superior manufactures a broad portfolio of products with primary applications in the communications, original equipment manufacturer (OEM) and electrical wire and cable markets. The company is a leading manufacturer and supplier of communications wire and cable products to telephone companies, distributors and system integrators; magnet wire for motors, transformers, generators and electrical controls; and building and industrial wire for applications in construction, appliances, recreational vehicles and industrial facilities. Black Box Black Box Corporation (NASDAQ: BBOX - news) reported record revenues and net income and strong cashflow for the third quarter ended December 31, 1999. Revenues for the quarter increased 50% to $127.1 million, up from $84.8 million for the same period last year. Net income was $12.3 million, or 65(cent) per share, an increase of 28% from $9.6 million, or 53(cent) per share, for the same period last year. Free cashflow was $10.3 million for the quarter. Revenues for the nine-month period ended December 31, 1999 also set a new record, increasing to $342.5 million, up 45% from $237.0 million for the first nine months last year. Net income for the first nine months increased to a record $34.5 million, or $1.85 per share, up 30% from $26.6 million, or $1.47 per share, for the same period last year. Free cashflow was $26.0 million for the first nine months of the year. The Company's net income excluding amortization for the third quarter ended December 31, 1999 was $13.9 million, or 73(cent) per share, an increase of 29% from $10.8 million, or 59(cent) per share, for the same period last year. Net income excluding amortization for the nine-month period ended December 31, 1999 was $38.8 million, or $2.08 per share, an increase of 30% from $29.7 million, or $1.64 per share, for the same period last year.
The Company also announced it has increased its FY00 annualized revenue target for on-site services from $200 million to $225 million. Current annualized revenue from on-site revenues is approximately $200 million compared to $55 million for the previous year. Commenting on the quarter, Fred C. Young, Chief Executive Officer, said, ``We are pleased to report record revenues and income. Revenue growth by region for the third quarter was 85% in North America, 22% in the Pacific Rim (8% in local currency), 9% in Europe (19% in local currency) and 2% in Latin America (4% in local currency). Revenue growth by service type was 12% for phone support services and 567% for on-site services. Same store basis growth for on-site services was 26%. Our overall EBITA remained strong at 18%, with our phone support services steady at 19% and on-site services slightly over 13%. With a current annualized revenue run rate of approximately $200 million, we believe achieving $225 million in annualized revenue for on-site services by March 31, 2000 is attainable.'' Mr. Young went on to say, ``What a great marketplace to be participating in. With the growing need for high quality technical services, a solid strategy and a dedicated team, we should be able to continue Black Box's success into the future.'' Black Box is a leading worldwide technical service provider of computer communications and networking services and related products to businesses of all sizes, operating in 77 countries throughout the world. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||