** **

 

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 

**ý****                                 QUARTERLYREPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe Quarterly Period Ended March 31, 2002**

 

**o****                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe transition period from          to**

 

**Commission file number 1-9078**

 

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**THE ALPINE GROUP, INC.**

(Exact name of registrantas specified in its charter)

|                             |   |                |
|----------------------------------|--------|---------------------|
| **Delaware**                     |   | **22-1620387**      |
| (State or other  jurisdiction of |   | (I.R.S. Employer    |
| incorporation or  organization)  |   | Identification No.) |
|                             |   |                |
| **One Meadowlands Plaza**        |   |                |
| **East Rutherford, New Jersey**  |   | **07073**           |
| (Address of principal            |   | (Zip code)          |
| executive offices)               |   |                |

 

**201-549-4400**

Registrant’s telephonenumber, including area code

 

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                Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months and (2) has been subject to such filing requirements for the past 90days.               Yes ý Noo

 

*                Indicate the number of sharesoutstanding of each of the issuer’s classes of common stock, as of the latestpracticable date.*

 

| **Class**                     |   | **Outstanding at May 8, 2002** |
|-------------------------------|--------|--------------------------------|
| Common Stock, $.10 Par  Value |   | 14,061,495                     |

 

THIS FILING INCLUDES UNAUDITED FINANCIAL STATEMENTS THAT HAVE NOT BEENREVIEWED IN ACCORDANCE WITH RULE 10-01(d) OF REGULATION S-X PROMULGATED BY THESECURITIES AND EXCHANGE COMMISSION, BECAUSE THE COMPANY DETERMINED IT WASUNABLE TO OBTAIN SUCH A REVIEW FROM THE COMPANY’S CURRENT AUDITOR, ARTHURANDERSEN LLP.  SEE “INFORMATION WITHRESPECT TO FINANCIAL STATEMENTS” IN THIS FILING FOR MORE INFORMATION.

 

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**PART I. FINANCIALINFORMATION**

 

**INFORMATION WITH RESPECT TO FINANCIALSTATEMENTS**

 

This filing includesunaudited financial statements that have not been reviewed by the Company’sindependent auditors in accordance with Rule 10-01(d) of Regulation S-Xpromulgated by the Securities and Exchange Commission, because the Companydetermined it was unable to obtain such a review from its current auditors,Arthur Andersen LLP.

 

On May 8, 2002, the Company,based on the recommendation of the Audit Committee of the Company’s Board ofDirectors, terminated the engagement of Arthur Andersen LLP as the Company’sindependent auditors.  Subject to therecommendation of the Audit Committee of the Company’s Board of Directors, theCompany will retain new independent auditors, which will review the financialstatements for the quarterly period ended March 31, 2002 in accordance withRule 10-01(d).

 

No independent auditor hasreviewed the financial statements set forth below or opined that suchstatements present fairly, in all material aspects, the financial position,results of operations, cash flows and changes in stockholders’ equity of TheAlpine Group, Inc. and its majority-owned subsidiaries for the quarterly periodended March 31, 2002.

 

**ITEM1.          FINANCIAL STATEMENTS**

 

                    The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with the requirements ofForm 10-Q and, therefore, do not include all information and footnotes requiredby generally accepted accounting principles. However, in the opinion of management, all adjustments (which, except asdisclosed elsewhere herein, consist only of normal recurring accruals)necessary for a fair presentation of the results of operations for the relevantperiods have been made.  Results for theinterim periods are not necessarily indicative of the results to be expectedfor the year.  These financialstatements should be read in conjunction with the summary of significantaccounting policies and the notes to the consolidated financial statementsincluded in the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2001.

 

2

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** **

**THE ALPINE GROUP, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(in thousands, except share data)**

 
|                                                                                                                                                                        |   | **March 31,**   |      | **December  31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|-----------|-------------------|--------|
|                                                                                                                                                                        |   | **2002**        |      | **2001**          |   |
|                                                                                                                                                                        |   | **(unaudited)** |      |              |   |
| **ASSETS**                                                                                                                                                                  |   |            |      |              |   |
| Current assets:                                                                                                                                                             |   |            |      |              |   |
| Cash and cash  equivalents                                                                                                                                                  |   | $               | 19,498    |              | $      | 52,534 |   |
| Restricted cash                                                                                                                                                             |   | 3,853           |      | 3,835             |   |
| Accounts  receivable (less allowance for doubtful accounts of $8,487 and $8,391 at  March 31, 2002 and December 31, 2001, respectively)                                     |   | 231,758         |      | 201,376           |   |
| Inventories                                                                                                                                                                 |   | 242,366         |      | 263,210           |   |
| Other current  assets                                                                                                                                                       |   | 46,014          |      | 41,168            |   |
| Total current  assets                                                                                                                                                       |   | 543,489         |      | 562,123           |   |
| Property, plant  and equipment, net                                                                                                                                         |   | 488,568         |      | 510,120           |   |
| Long-term  investments and other assets                                                                                                                                     |   | 101,190         |      | 126,328           |   |
| Goodwill (less  accumulated amortization of $70,523 and $70,535 at March 31, 2002 and  December 31, 2001, respectively)                                                     |   | 753,566         |      | 753,580           |   |
| Total assets                                                                                                                                                                |   | $               | 1,886,813 |              | $      | 1,952,151 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                              |   |            |      |              |   |
| Current  liabilities:                                                                                                                                                       |   |            |      |              |   |
| Short-term  borrowings                                                                                                                                                      |   | $               | 130,666   |              | $      | 124,388 |   |
| Current portion  of long-term debt                                                                                                                                          |   | 144,031         |      | 106,343           |   |
| Accounts payable                                                                                                                                                            |   | 100,959         |      | 110,964           |   |
| Accrued expenses                                                                                                                                                            |   | 92,769          |      | 107,138           |   |
| Total current  liabilities                                                                                                                                                  |   | 468,425         |      | 448,833           |   |
| Long-term debt,  less current portion                                                                                                                                       |   | 1,100,183       |      | 1,162,644         |   |
| Minority  interest in subsidiaries                                                                                                                                          |   | 34,605          |      | 44,847            |   |
| Deferred taxes                                                                                                                                                              |   | 79,026          |      | 82,481            |   |
| Other long-term  liabilities                                                                                                                                                |   | 32,311          |      | 31,237            |   |
| Total  liabilities                                                                                                                                                          |   | 1,714,550       |      | 1,770,042         |   |
| Subsidiary-obligated  Mandatorily Redeemable Trust Convertible Preferred Securities of Superior Trust  I holding solely convertible debentures of Superior, net of discount |   | 136,335         |      | 136,040           |   |
| Commitments and  contingencies                                                                                                                                              |   |            |      |              |   |
| Stockholders’  equity:                                                                                                                                                 |   |            |      |              |   |
| 9% cumulative  convertible preferred stock at liquidation value                                                                                                             |   | 427             |      | 427               |   |
| Common stock, $.10  par value; 25,000,000 shares authorized; (21,960,772 shares and 21,923,705  shares issued at March 31, 2002 and December 31, 2001, respectively)        |   | 2,196           |      | 2,192             |   |
| Capital in  excess of par value                                                                                                                                             |   | 163,467         |      | 163,425           |   |
| Accumulated  other comprehensive deficit                                                                                                                                    |   | (8,871          | )         | (7,929            | )      |
| Retained deficit                                                                                                                                                            |   | (24,880         | )         | (15,582           | )      |
|                                                                                                                                                                        |   | 132,339         |      | 142,533           |   |
| Treasury stock,  at cost (8,018,495 shares at March 31, 2002 and December 31, 2001)                                                                                         |   | (95,592         | )         | (95,592           | )      |
| Receivable from  stockholders                                                                                                                                               |   | (819            | )         | (872              | )      |
| Total  stockholders’ equity                                                                                                                                            |   | 35,928          |      | 46,069            |   |
| Total  liabilities and stockholders’ equity                                                                                                                            |   | $               | 1,886,813 |              | $      | 1,952,151 |   |
|                                                                                                                                                                             |        |                 |           |                   |        |  |  |  |  |  |

 

The accompanying notesare an integral part of these condensed consolidated financial statements.

** **

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** **

**THE ALPINE GROUP, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

**(in thousands, except per share data)**

**(unaudited)**

 
|                                                                                                                                         |   | **Three  Months Ended  March 31,** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                                                         |   | **2002**                           |    | **2001** |   |
|                                                                                                                                         |   |                               |    |   |   |
| Net  sales                                                                                                                                   |   | $                                  | 376,778 |   | $ | 478,316 |   |
| Cost of goods  sold                                                                                                                          |   | 330,813                            |    | 400,737 |   |
| Gross profit                                                                                                                                 |   | 45,965                             |    | 77,579 |   |
| Selling, general  and administrative expenses                                                                                                |   | 37,850                             |    | 39,670 |   |
| Amortization of  goodwill                                                                                                                    |   | —                             |    | 5,291 |   |
| Infrequent and  unusual charges                                                                                                              |   | 13,990                             |    | 823 |   |
| Operating income  (loss)                                                                                                                     |   | (5,875                             | )       | 31,795 |   |
| Interest expense                                                                                                                             |   | (25,658                            | )       | (33,765 | ) |
| Loss on sale of  securities                                                                                                                  |   | —                             |    | (3,342 | ) |
| Other income  (expense), net                                                                                                                 |   | (611                               | )       | 903 |   |
| Loss before  income taxes, distributions on preferred securities of subsidiary trust,  minority interest and equity in earnings of affiliate |   | (32,144                            | )       | (4,409 | ) |
| Benefit for  income taxes                                                                                                                    |   | 14,441                             |    | 882 |   |
| Loss before  distributions on preferred securities of subsidiary trust, minority interest  and equity in earnings of affiliate               |   | (17,703                            | )       | (3,527 | ) |
| Distributions on  preferred securities of subsidiary trust                                                                                   |   | (4,139                             | )       | (3,804 | ) |
| Loss before  minority interest and equity in earnings of affiliate                                                                           |   | (21,842                            | )       | (7,331 | ) |
| Minority  interest in losses of subsidiaries                                                                                                 |   | 11,164                             |    | 2,321 |   |
| Equity in  earnings of affiliate                                                                                                             |   | —                             |    | (847 | ) |
| Loss before  extraordinary gain                                                                                                              |   | (10,678                            | )       | (5,857 | ) |
| Extraordinary  gain on the early extinguishment of debt                                                                                      |   | 1,389                              |    | — |   |
| Net loss                                                                                                                                     |   | (9,289                             | )       | (5,857 | ) |
| Preferred stock  dividends                                                                                                                   |   | (9                                 | )       | (9 | ) |
| Net loss  applicable to common stock                                                                                                         |   | $                                  | (9,298  | ) | $ | (5,866 | ) |
|                                                                                                                                         |   |                               |    |   |   |
| Net loss per  share of common stock:                                                                                                         |   |                               |    |   |   |
| Basic                                                                                                                                        |   | $                                  | (0.63   | ) | $ | (0.40 | ) |
| Diluted                                                                                                                                      |   | $                                  | (0.63   | ) | $ | (0.40 | ) |
|                                                                                                                                         |   |                               |    |   |   |
| Weighted average  shares outstanding:                                                                                                        |   |                               |    |   |   |
| Basic                                                                                                                                        |   | 14,746                             |    | 14,498 |   |
| Diluted                                                                                                                                      |   | 14,746                             |    | 14,498 |   |

 

The accompanying notes are an integralpart of these condensed consolidated financial statements.

** **

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**THEALPINE GROUP, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY**

**(in thousands, except share data)**

**(unaudited)**

 
|                                                      |   | ***Three Months Ended   March 31, 2002*** |   |
|-----------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                      |   | ***Shares***                              |   | ***Amount*** |   |
|                                                      |   |                                      |   |   |   |
| 9% cumulative  convertible preferred stock:               |   |                                      |   |   |   |
| Balance at  beginning of period                           |   | 427                                       |   | $ | 427 |   |
| Balance at end  of period                                 |   | 427                                       |   | 427 |   |
|                                                      |   |                                      |   |   |   |
| Common stock:                                             |   |                                      |   |   |   |
| Balance at  beginning of period                           |   | 21,923,705                                |   | 2,192 |   |
| Employee stock  purchase plan                             |   | 31,342                                    |   | 3 |   |
| Stock grants                                              |   | 5,725                                     |   | 1 |   |
| Balance at end  of period                                 |   | 21,960,772                                |   | 2,196 |   |
|                                                      |   |                                      |   |   |   |
| Capital in  excess of par value:                          |   |                                      |   |   |   |
| Balance at  beginning of period                           |   |                                      |   | 163,425 |   |
| Effect of  subsidiaries’ equity transactions         |   |                                      |   | (393 | )  |
| Employee stock  purchase plan                             |   |                                      |   | 42 |   |
| Stock grants                                              |   |                                      |   | 393 |   |
| Balance at end  of period                                 |   |                                      |   | 163,467 |   |
|                                                      |   |                                      |   |   |   |
| Accumulated  other comprehensive deficit:                 |   |                                      |   |   |   |
| Balance at  beginning of period                           |   |                                      |   | (7,929 | )  |
| Foreign currency  translation adjustment                  |   |                                      |   | (922 | ) |
| Change in unrealized gains on derivatives, net of tax     |   |                                      |   | 17 |   |
| Realized losses on securities, net of tax                 |   |                                      |   | 1,824 |   |
| Change in unrealized losses on securities, net of tax     |   |                                      |   | (1,861 | ) |
| Balance at end  of period                                 |   |                                      |   | (8,871 | ) |
|                                                      |   |                                      |   |   |   |
| Retained  deficit:                                        |   |                                      |   |   |   |
| Balance at  beginning of period                           |   |                                      |   | (15,582 | )  |
| Net loss                                                  |   |                                      |   | (9,289 | )  |
| Dividends on  preferred stock                             |   |                                      |   | (9 | )  |
| Balance at end  of period                                 |   |                                      |   | (24,880 | )  |
|                                                      |   |                                      |   |   |   |
| Treasury stock:                                           |   |                                      |   |   |   |
| Balance at  beginning of period                           |   | (8,018,495                                | )      | (95,592 | ) |
| Balance at end  of period                                 |   | (8,018,495                                | )      | (95,592 | ) |
|                                                      |   |                                      |   |   |   |
| Receivable from  stockholders:                            |   |                                      |   |   |   |
| Balance at  beginning of period                           |   |                                      |   | (872 | ) |
| Compensation expense related to stock options and  grants |   |                                      |   | 53 |   |
| Balance at end  of period                                 |   |                                      |   | (819 | ) |
|                                                      |   |                                      |   |   |   |
| Total  stockholders’ equity                          |   |                                      |   | $ | 35,928 |   |
| Comprehensive  loss                                       |   |                                      |   | $ | (10,231 | ) |

The accompanying notes are an integral part ofthese consolidated financial statements.

** **

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**THE ALPINE GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(in thousands)**

**(unaudited)**
|                                                                          |   | **Three  Months Ended  March 31,** |    |
|-------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                          |   | **2002**                           |    | **2001** |   |
|                                                                          |   |                               |    |   |   |
| Cash flows from  operating activities:                                        |   |                               |    |   |   |
| Net loss                                                                      |   | $                                  | (10,678 | ) | $ | (5,857 | ) |
| Adjustments to  reconcile net loss to net cash used for operating activities: |   |                               |    |   |   |
| Depreciation and  amortization                                                |   | 11,801                             |    | 16,306 |   |
| Deferred  distributions on Trust Convertible Preferred Securities             |   | 3,844                              |    | — |   |
| Amortization of  deferred debt issuance costs and accretion of debt discount  |   | 3,189                              |    | 1,647 |   |
| Write-down of  idled property, plant and equipment                            |   | 8,483                              |    | — |   |
| Gain on  settlement of derivatives                                            |   | (917                               | )       | — |   |
| Compensation  expense related to stock options and grants                     |   | 447                                |    | 716 |   |
| Benefit for  deferred income taxes                                            |   | (4,980                             | )       | (774 | ) |
| Minority  interest in losses of subsidiary                                    |   | (11,164                            | )       | (2,321 | ) |
| Equity in  earnings of affiliates                                             |   | —                             |    | 847 |   |
| Change in assets  and liabilities:                                            |   |                               |    |   |   |
| Accounts  receivable                                                          |   | (32,428                            | )       | (3,865 | ) |
| Inventories                                                                   |   | 19,613                             |    | (24,877 | ) |
| Other current  and non-current assets                                         |   | 532                                |    | (1,584 | ) |
| Accounts payable  and accrued expenses                                        |   | (21,067                            | )       | 7,977 |   |
| Other, net                                                                    |   | (6,071                             | )       | 3,725 |   |
| Cash flows used  for operating activities                                     |   | (39,396                            | )       | (8,060 | ) |
|                                                                          |   |                               |    |   |   |
| Cash flows from  investing activities:                                        |   |                               |    |   |   |
| Capital  expenditures                                                         |   | (3,329                             | )       | (7,361 | ) |
| Proceeds from  sale of investment                                             |   | 23,530                             |    | 8,103 |   |
| Superior Israel  customer loans                                               |   | 2,726                              |    | (4,440 | ) |
| Restricted cash                                                               |   | (18                                | )       | 6,638 |   |
| Other                                                                         |   | 79                                 |    | 62 |   |
| Cash flows  provided by investing activities                                  |   | 22,988                             |    | 3,002 |   |
|                                                                          |   |                               |    |   |   |
| Cash flows from  financing activities:                                        |   |                               |    |   |   |
| Borrowings under  revolving credit facilities, net                            |   | 10,443                             |    | 17,857 |   |
| Short-term  borrowings (repayments), net                                      |   | 5,314                              |    | (7,467 | ) |
| Repayments of  long-term borrowings                                           |   | (27,573                            | )       | (21,981 | ) |
| Long-term  borrowings                                                         |   | —                             |    | 6,255 |   |
| Debt issuance  costs                                                          |   | (3,966                             | )       | — |   |
| Purchase of  treasury shares                                                  |   | —                             |    | (145 | ) |
| Other                                                                         |   | (821                               | )       | 298 |   |
| Cash flows used  for financing activities                                     |   | (16,603                            | )       | (5,183 | ) |
|                                                                          |   |                               |    |   |   |
| Effect of  exchange rate on cash                                              |   | (25                                | )       | (185 | ) |
| Net increase  (decrease) in cash and cash equivalents                         |   | (33,036                            | )       | (10,426 | ) |
| Cash and cash  equivalents at beginning of period                             |   | 52,534                             |    | 22,553 |   |
| Cash and cash  equivalents at end of period                                   |   | $                                  | 19,498  |   | $ | 12,127 |   |
|                                                                          |   |                               |    |   |   |   |   |
| Supplemental  disclosures:                                                    |   |                               |    |   |   |
| Cash paid for  interest                                                       |   | $                                  | 32,255  |   | $ | 40,956 |   |
| Cash paid  (received) for income taxes, net                                   |   | $                                  | (3,287  | ) | $ | 2,971 |   |

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

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**THE ALPINE GROUP, INC. AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**MARCH 31, 2002**

**(unaudited)**

 

**1.     General**

 

**                *Basisof presentation***

 

                The accompanying unaudited condensed consolidatedfinancial statements include the accounts of The Alpine Group, Inc. and itsconsolidated subsidiaries (collectively, unless the context otherwise requires,“Alpine” or the “Company”).  Certainreclassifications have been made to the prior period presentation to conform tothe current period presentation.

 

                Alpine’s operations include theconsolidated results of Superior TeleCom Inc. (together with its subsidiaries,unless the context otherwise requires, “Superior”), a manufacturer of wire andcable products for the communications, original equipment manufacturer (“OEM”)and electrical markets.  As a result ofthe vesting of certain Superior TeleCom restricted stock arrangements duringthe quarter ended March 31, 2002, Alpine’s common equity ownership in Superiordeclined from 50.2% at December 31, 2001 to 49.0% at March 31, 2002.  Notwithstanding the decline in Alpine’sequity ownership in Superior, Alpine currently believes it maintains acontrolling financial interest in Superior, based on its equity ownershipposition and certain control aspects related to executive management and Boardof Director constituencies. Accordingly, consistent with past presentations, Alpine’s March 31, 2002financial statements reflect Superior’s accounts on a consolidated basis.  The Company will review its consolidationpolicy with respect to Superior at its future financial reporting dates basedon the facts and circumstances at such respective times.

 

*                **New accounting standards for goodwill and other intangible assets***

 

                In July 2001, the Financial Accounting StandardsBoard (“FASB”) issued SFAS No. 141 “Business Combinations” and SFAS No. 142“Goodwill and Other Intangible Assets.” SFAS No. 141 requires use of the purchase method of accounting forbusiness combinations initiated after June 30, 2001.  SFAS No. 142, which is effective for the Company beginningJanuary 1, 2002, requires that the amortization of goodwill and certain otherintangible assets cease and that the related asset values be reviewed annuallyfor impairment.  Beginning in 2002, theCompany’s goodwill (including principally the goodwill of Superior), which amountedto $753.6 million at December 31, 2001, is no longer being amortized; howeverit is subject to an initial impairment review. If the carrying value (including goodwill) of any of the Company’sbusiness segments exceeds the fair value (determined on a discounted cash flowbasis or other fair value method), impairment of goodwill may exist which wouldresult in a charge to earnings for the amount of any such impairment.  The Company’s initialimpairment assessment under SFAS No. 142 is currently in process.  Although the assessment has not yet beencompleted, the impact on operating results of recent economic and industryspecific conditions is likely to result in reduced fair values for certain ofthe Company’s business segments and, thus may give rise to material non-cashgoodwill impairment charges in 2002. The Company anticipates that its initial impairment assessment and anyimpairment charge from such assessment will be finalized during its secondquarter ended June 30, 2002 and reflected retroactively.  Any impairment charge incurred will notimpact cash flow or the Company’s compliance with any covenants related to itsprincipal credit agreements.

 

*                **Derivative financial instruments***

 

                Superior, to a limited extent,uses derivative financial instruments to manage foreign currency exchange andcommodity price risks.  Alpine, to alimited extent, has used derivative financial instruments to manage marketprice risk related to investments.  TheCompany does not hold or issue derivative financial instruments for tradingpurposes.

 

7

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                Effective January 1, 2001, theCompany adopted SFAS No. 133 “Accounting for Derivative Instruments and HedgingActivities” as amended by SFAS No. 137 and SFAS No. 138.  These statements establish accounting andreporting standards for derivative instruments and require recognition of allderivatives as either assets or liabilities in the statements of financialposition and measurement of those instruments at fair value.  The cumulative effect of the change in accountingupon adoption of SFAS No. 133 was not material.

 

                All derivatives are recognizedon the balance sheet at fair value.  Onthe date the derivative contract is entered, the Company designates thederivative as either (i) a fair value hedge of a recognized liability, (ii) acash flow hedge of a forecasted transaction, (iii) a hedge of a net investmentin a foreign operation, or (iv) a non-designated derivative instrument.  The Company currently engages in certain derivativesthat are classified as fair value hedges and non-designated derivativeinstruments.  Changes in the fair valueof a derivative that is designated as a fair value hedge are recorded in theconsolidated statements of operations in the same line item as the underlyingexposure being hedged with any ineffective portion of a financial instrumenthedge immediately recognized in earnings. Changes in the fair value of non-designated derivative contracts and theineffective portion of designated derivative instruments are reported incurrent earnings.

 

                During2001, the Company entered into certain forward sale derivative transactionsrelated to 10.5 million ordinary shares of the Cookson Group plc(“Cookson”).  Under these arrangements,the Company executed “collar” agreements, protecting the Company against futuredeclines in Cookson share price while limiting the Company’s participation inCookson share value appreciation beyond certain threshold levels.  These arrangements allowed borrowings by theCompany against minimum threshold share value levels.  In February 2002, pursuant to a negotiated agreement, the Companyaccelerated the maturity of the forward sale of 10.5 million Cookson shares fortotal proceeds of $23.5 million which were used to liquidate borrowings securedby the investment in Cookson shares.

 

**2.     Liquidity andoperating plan**

 

                Theconsolidated financial statements of Alpine include the operating results andbalance sheet of its consolidated subsidiary, Superior. Superior has aleveraged capital structure including substantial debt.  Alpine has not guaranteed nor is it liablewith respect to Superior’s debt (except for guarantees related to certaincapital lease arrangements and a commitment related to one quarterly interestpayment). See Note 6. Accordingly, the following discussion of Superior’sliquidity and operating plans is limited to Superior and does not reflectAlpine’s liquidity or operating plans on a stand-alone basis.

 

8

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                Superior has indebtedness whichis substantial in relation to its stockholders’ equity and current cash flowsfrom operations.  As of March 31, 2002,Superior had total debt of approximately $1.2 billion (excluding (i) debt ofits 50.2% owned Israeli subsidiary, Superior Cables Limited ("Superior Israel"),which debt is non-recourse to Superior TeleCom or its other subsidiaries and(ii) approximately $167 million of Trust Convertible Preferred Securities duein 2014) compared to approximately $55.5 million of stockholders’ equity.  As of April 30, 2002, Superior hadadditional borrowings available under its revolving credit facility ofapproximately $49 million and a cash balance of approximately $10 million.  Superior also has a $160 million accountsreceivable securitization facility of which $140 million was drawn at April 30,2002, constituting the maximum available borrowings based on the level ofqualified accounts receivable as of such date. The accounts receivables securitization facility was scheduled to expireon June 30, 2002, but has been extended through September 30, 2002.  Superior is currently in discussion withother financial institutions for a longer-term refinancing of suchfacility.  Although there can be nocertainty, Superior believes it will be able to obtain further extensions ofthe existing accounts receivable securitization facility or refinance suchfacility so as not to adversely impact Superior’s liquidity.

 

                Superior’s leveraged financialposition exposes it to the risk of increased interest rates, may impede itsability to obtain financing in the future for working capital, capitalexpenditures and general corporate purposes, and may make Superior morevulnerable to economic downturns and limit its ability to withstand competitivepressures.

 

                Superior’s results of operationshave declined over the past two years with the most pronounced reductionsoccurring in the third and fourth quarters of 2001 and the first quarter of2002.  Superior believes the recentdeclines in sales relate to generally depressed economic conditions andspecific industry conditions in its key business segments.  Pursuant to agreements reached in 2001 withits subordinated debt holders, Superior has suspended cash interest payments onits subordinated debt in 2002 and Superior has deferred and expects to continueto defer the payment of distributions on the Trust Convertible PreferredSecurities (which deferral is contractually permitted for a period of up to 20consecutive quarters).  Superior’s termloan payment requirements also have been reduced in 2002 pursuant to amendmentsto its credit agreements reached in March 2002.  Notwithstanding these reductions in cash outflows in 2002,Superior still will need to use a large portion of its future cash flows to payprincipal and interest on its debt obligations, which will reduce the amount offunds available for use in its operations or for responding to potentialbusiness opportunities if these arise. While Superior believes it will generate enough cash to service itsmodified debt obligations and fund necessary capital expenditures during 2002,there can be no assurance that Superior will be able to meet all of theseobligations during 2002.

 

                Superior must also meet financial covenantrequirements so as to be in compliance with its principal credit agreements andhave access to liquidity under its revolving credit facility.  Superior was in compliance with itsfinancial covenants at March 31, 2002. Based on current operating results there can be no certainty thatSuperior can continue to comply with such covenants for 2002 and furtherSuperior has more restrictive covenants beginning in 2003.  If Superior is unable to maintain financialcovenant compliance then it would seek to obtain requisite waivers and/or furthermodifications to such covenants so as not to be in default under its creditagreements, but there can be no assurance that any such waivers and/or furthermodifications will be obtained.

 

9

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**3.     Inventories**

 

                At March 31, 2002 and December 31, 2001, thecomponents of inventories were as follows:

 
|             |   | **March 31,**       |       | **December 31,** |   |
|------------------|--------|---------------------|------------|------------------|--------|
|             |   | **2002**            |       | **2001**         |   |
|             |   | **(in  thousands)** | ** ** |
|             |   |                |       |             |   |
| Raw materials    |   | $                   | 35,441     |             | $      | 37,743 |   |
| Work  in process |   | 30,232              |       | 35,148           |   |
| Finished  goods  |   | 177,467             |       | 185,688          |   |
|             |   | 243,140             |       | 258,579          |   |
| LIFO  reserve    |   | (774                | )          | 4,631            |   |
|             |   | $                   | 242,366    |             | $      | 263,210 |   |

 

Inventories valuedusing the LIFO method amounted to $136.0 million and $149.8 million at March 31, 2002 and December 31, 2001,respectively.

 

**4.    ****Comprehensiveloss**

 

The components of comprehensiveloss for the three months ended March 31, 2002 and 2001 were as follows:

 

 
|                                                   |   | **Three  Months Ended March 31,** |    |
|--------------------------------------------------------|--------|-----------------------------------|---------|
|                                                   |   | **2002**                          |    | **2001** |   |
|                                                   |   | **(in  thousands)**               |    |
|                                                   |   |                              |    |   |   |
| Net  loss                                              |   | $                                 | (9,289  | ) | $ | (5,857 | ) |
| Foreign currency  translation adjustment               |   | (996                              | )       | (1,587 | ) |
| Change in  unrealized gains on derivatives, net of tax |   | 17                                |    | — |   |
| Realized losses  on securities, net of tax             |   | 2,389                             |    | 2,089 |   |
| Change in  unrealized losses on securities, net of tax |   | (2,352                            | )       | (4,737 | ) |
| Comprehensive  loss                                    |   | $                                 | (10,231 | ) | $ | (10,092 | ) |

 

**5.     Restructuring andinfrequent and unusual charges**

 

***               ***During thethree months ended March 31, 2002, Superior recorded infrequent and unusualcharges of $12.6 million related to the closure of its Communications GroupElizabethtown, Kentucky manufacturing facility.  These actions were taken to more closely align the productivecapacity of the Communications Group with current market demand levels.  The $12.6 million charge included an $8.5million write-down of idled property, plant and equipment, $3.0 million ofemployee separation costs and $1.1 million of other facility related closurecosts.  Costs to relocate inventory andmachinery from the Elizabethtown facility into the Communication Group’sremaining facilities will be expensed as incurred.  Additionally, during the three months ended March 31, 2002,Alpine recorded infrequent and unusual charges of $1.4 million related tocertain termination and retirement benefits paid in connection with Alpine’scorporate administrative staffing reductions.

 

                Duringthe three months ended March 31, 2001, Superior recorded infrequent and unusualcharges of $0.8 million related to operational restructuring activities atSuperior Israel.

 

10

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**6.     Debt**

 

                Long-term debt of Superior amounted to $1,239.3million at March 31, 2002.  Alpine isnot liable directly or indirectly, for the long-term debt of Superior (otherthan for guarantees under certain capitalized lease obligations).

 

***Superior long-term debt***

 

                Superior's principal debt arrangements (exclusive ofdebt of Superior Israel which is financed under separate credit arrangementsand is non-recourse to Superior and its subsidiaries other than SuperiorIsrael) include borrowings under a senior credit facility and an accountsreceivable securitization facility, as well as outstanding senior subordinatednotes.  Superior finances its operatingactivities, debt service requirements and other capital requirements fromoperating cash flow and from availability under its revolving credit facilityand allowable borrowings under its accounts receivable securitization financingarrangement.

 

                Therevolving credit facility is a component of the senior credit facility which isfurther comprised of a Term Loan A ($310 million outstanding at March 31, 2002)and a Term Loan B ($393 million outstanding at March 31, 2002), all of whichare governed by an Amended and Restated Credit Agreement (the “CreditAgreement”).  During December 2001 andMarch 2002 Superior entered into amendments to the Credit Agreement whichincluded, among other things, (i) a reduction in operating performance levelsrequired to meet certain financial covenants through December 31, 2002; (ii) adeferral until January 31, 2003 of term loan payments otherwise due on March31, 2002 amounting to $19.4 million and (iii) elimination of a required $175million accelerated term loan payment due on January 3, 2003.

 

                Therevolving credit facility provides for borrowings up to $225 million (subjectto certain interim reductions in 2002 which limit the total facility to $214million) and matures in May 2004. $184 million was outstanding under therevolving credit facility at March 31, 2002.

 

                Superior’s accounts receivablesecuritization program provides for funding up to $160 million (based on thelevel of qualified accounts receivable) in short-term financing through theissuance of commercial paper. At March 31, 2002, $130 million was outstandingunder this program which, based on the then current level of qualified accountsreceivable, was fully drawn.  The accounts receivables securitization facilitywhich was scheduled to expire on June 30, 2002, has been extended to September30, 2002.  Superior is currently indiscussion with other financial institutions for a longer-term refinancing ofsuch facility.  Although there can be noassurance, Superior presently believes it will be able to obtain furtherextensions of the existing accounts receivable securitization facility orrefinance such facility so as not to adversely impact Superior’s liquidity.  Failure to obtain further extensions or analternative receivables financing arrangement is an event of default under theCredit Agreement.

 

                Inaddition to the senior credit facility and the accounts receivablesecuritization facility, Superior’s other principal debt obligation includes$207 million outstanding under Senior Subordinated Notes which are due in 2009and have no principal amortization requirements.  InDecember 2001, Superior entered into a major amendment to the agreementgoverning the Senior Subordinated Notes. Such amendment grants Superior theoption in certain circumstances to make three of the four quarterly interestpayments due in 2002 in the form of payment-in-kind notes (“PIK notes”) in lieuof cash interest payments.  Additionally,Alpine has provided a funded cash commitment on behalf of Superior that willmake available to Superior

 

11

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sufficient cash tomake one quarterly cash interest payment in 2002.  PIK notes were issued (in lieu of cash) for the February 2002interest payment, causing the interest rate on the Senior Subordinated Notes toincrease to LIBOR plus 9% from LIBOR plus 5%. If PIK notes are issued (in lieuof cash) for the August and November quarterly interest payments, then theinterest rate on the Senior Subordinated Notes will increase to LIBOR plus 11%and LIBOR plus 12%, respectively.

 

                In order to maintain adequateliquidity during 2002 to continue to operate its business on a normal basis,Superior must generate sufficient cash flow to meet scheduled payments on itsterm loans A and B (which term loan payments aggregate approximately $64million for 2002) so as not to be in default under the Credit Agreement.  While Superior’s operating results and cashflow declined in 2001 and operating results in 2002 may decline further,Superior believes, although there can be no assurance, that it will be able tomeet all schedule principal payments in 2002 as modified.  The Credit Agreement contains certainrestrictive covenants, including, among others, limitations on the amount ofdividends Superior is allowed to pay on its common stock and restrictions onadditional indebtedness.  The CreditAgreement further requires Superior to maintain compliance with certain financialcovenants including an interest coverage ratio, as defined, and a fixed chargecoverage ratio, as defined.  At March31, 2002, Superior was in compliance with all covenants.  Based on current operating results there canbe no assurance that Superior can continue to comply with such covenants for2002 and further, Superior has more restrictive covenants beginning in2003.  If Superior is unable to maintainfinancial covenant compliance then it would seek to obtain requisite waiversand/or further modifications to such covenants so as not to be in default underits credit agreements, but there can be no assurance that any such waiversand/or further modifications will be obtained.

 

##### *                **Alpine debt***

 

                Alpine’s debt (exclusive of debt of Superior)amounted to $4.9 million at March 31, 2002, including $3.8 million of 12.25%Senior Secured Notes due in 2003. The Senior Notes were issued at a price of91.74% and the discount is being added to the recorded amount through maturityutilizing the effective interest method. In February 2002, the Company redeemed $8.2 million in face amount ofthe 12.25% Senior Secured Notes for a cash payment of $5.8 million resulting inan after-tax extraordinary gain of approximately $1.4 million.  Further in February 2002, Alpine prepaidloans totaling approximately $22 million upon the early settlement of certainforward sale derivative contracts related to 10.5 million ordinary shares ofCookson Group, plc.  The Companyrecognized a gain of $0.9 million for the quarter ended March 31, 2002(included in other income) from the early settlement of the Cookson forwardsale derivatives.

 

**7.     Earnings per share**

 

                Thecomputation of basic and diluted earnings per share for the three months endedMarch 31, 2002 and 2001 is as follows:

 

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|                                                                         |   | **Three  Months Ended March 31,**             |   |
|------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                         |   | **2002**                                      |   | **2001** |   |
|                                                                         |   | **Net Loss**                                  |   | **Shares** |   | **Per Share  Amount** |   | **Net Loss** |   | **Shares** |   | **Per Share  Amount** |   |
|                                                                         |   | **(in  thousands, except per share amounts)** |   |
| Net loss                                                                     |   | $                                             | (9,289 | ) |   |   |   |   | $ | (5,857 | ) |   |   |   |   |
| Less:  preferred stock dividends                                        |   | (9                                            | )      |   |   |   |   | (9 | ) |   |   |   |   |
| Basic loss per  common share                                                 |   | (9,298                                        | )      | 14,746 |   | $ | (0.63 | ) | (5,866 | ) | 14,498 |   | $ | (0.40 | ) |
| Dilution in subsidiary and affiliate earnings from common stock  equivalents |   | —                                        |   | — |   |   |   | (1 | ) | — |   |   |   |
| Diluted loss per  common share                                               |   | $                                             | (9,298 | ) | 14,746 |   | $ | (0.63 | ) | $ | (5,867 | ) | 14,498 |   | $ | (0.40 | ) |

 

                The Company has excluded theassumed conversion of Superior’s Trust Convertible Preferred Securities fromthe diluted earnings per share calculation as the impact would beanti-dilutive.

 

**8.     Business segments**

 

                TheCompany’s reportable segments are strategic businesses that offer differentproducts and services to different customers. These include Superior’scommunications, original equipment manufacturer (“OEM”) and electricalsegments. The communications segment includes (i)  copper and fiber opticoutside plant wire and cable for voice and data transmission intelecommunications networks, (ii) copper and fiber optic datacom orpremise wire and cable for use within homes and offices for local areanetworks, Internet connectivity and other applications, and (iii) all of theoperations of Superior’s 50.2% owned Superior Israel subsidiary.  The OEM segment includes magnet wire and relatedproducts.  The electrical segment includesbuilding and industrial wire and cable.

 

The Company evaluates segmentperformance based on a number of factors, with operating income being the mostcritical.  Intersegment sales aregenerally recorded at cost, are not significant and, therefore, have beeneliminated below.

 

                Operating results for each ofthe Company’s three reportable segments are presented below. Corporate andother items shown below are provided to reconcile to the Company’s condensedconsolidated statements of operations and balance sheets.

 

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|                           |   | **Three Months Ended****March 31,** |    |
|--------------------------------|--------|-------------------------------------|---------|
|                           |   | **2002**                            |    | **2001** |   |
|                           |   | **(in thousands)**                  |    |
| Net sales:                     |   |                                |    |   |   |
| Communications                 |   | $                                   | 125,235 |   | $ | 205,631 |   |
| OEM                            |   | 128,330                             |    | 150,591 |   |
| Electrical                     |   | 123,213                             |    | 122,094 |   |
|                           |   | $                                   | 376,778 |   | $ | 478,316 |   |
|                           |   |                                |    |   |   |
|                           |   |  

                       |    |   |   |
| Operating income (loss):       |   |                                |    |   |   |
| Communications                 |   | $                                   | 6,706   |   | $ | 29,920 |   |
| OEM                            |   | 10,182                              |    | 15,940 |   |
| Electrical                     |   | (3,030                              | )       | (2,013 | ) |
| Corporate and other            |   | (5,743                              | )       | (5,938 | ) |
| Amortization of goodwill       |   | —                              |    | (5,291 | ) |
| Infrequent and unusual charges |   | (13,990                             | )       | (823 | ) |
|                           |   | $                                   | (5,875) |   | $ | 31,795 |   |

** **
|                                     |   | **March** 31, 2002 |      | **December  31,**2001 |   |
|------------------------------------------|--------|--------------------|-----------|-----------------------|--------|
|                                     |   | **(in thousands)** |      |
| Total assets:                            |   |               |      |                  |   |
| Communications                           |   | $                  | 455,334   |                  | $      | 482,886 |   |
| OEM                                      |   | 293,554            |      | 294,674               |   |
| Electrical                               |   | 262,529            |      | 256,370               |   |
| Corporate and other (including goodwill) |   | 875,396            |      | 918,221               |   |
|                                     |   | $                  | 1,886,813 |                  | $      | 1,952,151 |   |

** **

 

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL**

**                        CONDITION AND RESULTS OFOPERATIONS**

 

**General**

 

                The Alpine Group, Inc. (togetherwith its subsidiaries, unless the context otherwise requires, “Alpine” or the“Company”) is an industrial holding company with investments in itsconsolidated subsidiary, Superior TeleCom Inc. (together with its subsidiaries,unless the context otherwise requires, “Superior”), as well as othernon-controlling cash and equity investments.

 

***Superior TeleCom Inc.***

 

                Alpine holds a 49.0% common equity interest in itsconsolidated subsidiary, Superior TeleCom Inc. whose balance sheet accounts andresults of operations are consolidated in the financial statements of Alpine.

 

Superior manufactures a broad portfolio of wire andcable products grouped into the following primary industry segments: (i)communications, (ii) original equipment manufacturer (“OEM”) and (iii)electrical.  The Communications Groupincludes communications wire and cable products sold to telephone companies,other local exchange and interexchange carriers, distributors and systemsintegrators, principally in North America. In addition, included within the Communications Group is Superior’s50.2% owned Israeli subsidiary, Superior Cables Limited (“Superior Israel”),which manufactures a range of wire and cable products in Israel, includingcommunications cable, power cable and other industrial and electronic wire andcable products.  The OEM Group includesmagnet wire and accessory products for motors, transformers and electricalcontrols sold primarily to OEMs.  TheElectrical Group includes building and industrial wire for applications incommercial and residential construction and industrial facilities.  Industry segment financial data forSuperior’s principal industry segments is included in Note 8 to theaccompanying condensed consolidated financial statements.

## ** **

## ***Impact of copper price fluctuationson operating results***

** **

**                Copper is one of the principalraw materials used in Superior’s wire and cable product manufacturing.  Fluctuations in the price of copper doaffect per unit product pricing and related revenues.  However, the cost of copper has not had a material impact onprofitability as Superior, in most cases, has the ability to adjust pricesbilled for its products to properly match the copper cost component of itsinventory shipped.**

** **

**Resultsof Operations — Three Month Period Ended March 31, 2002 as Compared to theThree Month Period Ended March 31, 2001**

** **

**                Consolidated sales for the quarter ended March 31,2002 were $376.8 million, a decrease of 21% as compared to sales of $478.3million for the quarter ended March 31, 2001. Adjusted for a constant cost of copper, the sales decline in the March2002 quarter as compared to the March 2001 quarter was approximately 17%.**

** **

**                Superior’s Communications Groupsales for the March 31, 2002 quarter were $125.2 million, a decrease of 36% ona copper-adjusted basis from the March 31, 2001 quarter.  The sales decline in the current quarter ascompared to the prior year period was due primarily to a 45% reduction incomparative sales of copper and fiber outside plant (“OSP”) cables, which areused principally by telephone companies in the local loop segment of thetelephony network.  OSP cables saleswere lower due to**

** **

**15**

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** **

**significantlyreduced spending levels by major telephone company customers following recentbudgetary constraints imposed during the second half of 2001.**

** **

**                Superior’s OEM Group sales were$128.3 million for the quarter ended March 31, 2002, a copper-adjusted declineof 11% as compared to the March 31, 2001 quarter.  The sales decline in the March 31, 2002 quarter as compared tothe March 31, 2001 quarter was due to reduced demand for magnet wire from theCompany’s major OEM customers due principally to the comparative decline on ayear-over-year basis in the general industrial economy.  OEM Group sales for the March 31, 2002quarter did increase 11% on a copper-adjusted basis as compared to the quarterended December 31, 2001, reflecting to some degree seasonal improvements, but alsomoderate sequential quarter strengthening in demand from the Company’s coreindustrial sector customers.**

** **

**                Superior’s Electrical Groupsales were $123.2 million for the March 31, 2002 quarter representing anincrease of 8% on a copper-adjusted basis as compared to the quarter endedMarch 31, 2001.  The comparative salesincrease was due principally to higher shipment volumes driven by improvedproduction capabilities and market share gains, partially offset by extremelyweak industry-wide pricing conditions.**

** **

**                Gross profit for the March 31, 2002quarter was $46.0 million, a decline of $31.6 million as compared to grossprofit of $77.6 million for the quarter ended March 31, 2001.  The gross profit margin in the March 31,2002 quarter was 12.2%, a decline on a copper-adjusted basis of 4.7%, as comparedto the prior year March quarter.  Thecomparative decline in gross profit margin was principally attributable to (i)current depressed pricing conditions in the building wire market (ElectricalGroup) which significantly impacted gross profit and gross profit margins inthe 2002 first quarter and (ii) the impact of unfavorable manufacturing costabsorption due to lower production volumes, particularly in Superior’sCommunications Group, where production levels were substantially scaled back inresponse to reduced demand and initiatives to significantly reduce inventorylevels during the 2002 first quarter. Manufacturing cost absorption and gross profit margins should befavorably impacted in future periods as a result of production throughput increases(subject to improved product demand levels) and cost reductions associated withthe closure of the Superior’s Communications Group Elizabethtown, Kentuckyfacility in March 2002.**

** **

**                Selling, general andadministrative expense (“SG&A expense”) for the three month period endedMarch 31, 2002 was $37.9 million, a decrease of 4.5%, as compared to SG&Aexpense of $39.7 million for the three months ended March 31, 2001, reflectingcost reductions in all of Superior’s business units in response to reduced salesand commercial activity.**

** **

**                The Company incurred infrequentand unusual charges of $14.0 million for the three month period ended March 31,2002.  $12.6 million related to theclosure of Superior’s Communications Group manufacturing facility in Elizabethtown,Kentucky. These actions were taken to more closely align the productivecapacity of the Communications Group with market demand and to reduce overallmanufacturing costs.  $1.4 millionrelated to certain termination and retirement benefits paid in connection withAlpine’s corporate administrative staffing reductions.  For the three month period ended March 31,2001, the Company incurred infrequent and unusual charges of $0.8 millionrelated to restructuring activities of Superior Israel.**

** **

**                The Company incurred anoperating loss for the March 31, 2002 quarter of $5.9 million.  Before infrequent and unusual charges, theCompany’s generated operating income of $8.1 million, a decline of $24.5million as compared to the March 31, 2001 quarter.  The comparative decline in operating income for the current yearthree month period was principally attributable to lower sales in Superior’sCommunications Group and reduced gross margins, primarily in Superior’sCommunications and Electrical business segments.**

** **

**16**

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** **

** **

**                Interest expense for the threemonth period ended March 31, 2002 was $25.7 million representing a decrease of$8.1 million as compared to the prior year three month period.  The decrease in interest expense reflectslower short-term (LIBOR) interest rates as well as reduced levels of debtoutstanding in the current year three month period as compared to the 2001first quarter.**

** **

**                Loss before infrequent andunusual charges and extraordinary gain for the quarter ended March 31, 2002 was$5.9 million or $0.40 per diluted share. Net loss for the March 31, 2002 quarter was $9.3 million or $0.63 perdiluted share as compared to a net loss of $5.9 million or $0.40 per dilutedshare for the quarter ended March 31, 2001. The reduction in earnings in the current period was due principally tolower operating income at Superior and the impact of infrequent and unusualcharges partially offset by lower interest costs.**

 

**Liquidity andCapital Resources**

 

### ***General***

 

                Forthe three months ended March 31, 2002, the Company used $39.4 million in cashflows for operating activities which was used for net working capitalchanges.  Cash used for investingactivities amounted to $23.0 million and consisted principally of $23.5 millionin cash proceeds from the sale of a portion of Alpine’s Cookson ordinary sharespartly offset by $3.3 million of capital expenditures at Superior.  Cash used for financing activities whichprincipally related to net reductions in debt, amounted to $16.6 million.

#  

                As previously mentioned, the consolidated financialstatements of Alpine include the operating results and balance sheet ofSuperior. Superior has a leveraged capital structure with approximately $1.2billion in debt.  Alpine has notguaranteed nor is it liable with respect to Superior’s debt (except forguarantees related to certain capital lease arrangements). Accordingly, thefollowing discussion of the Company’s liquidity and capital resources addressesseparately: (i) Alpine corporate, excluding the accounts of Superior and (ii)Superior as a stand-alone entity.

 

## ***AlpineCorporate***

 

                As of March 31, 2002, Alpine hadcorporate cash, cash equivalents and marketable securities (excluding itsinvestments in Superior and Cookson) of approximately $18.2 million.  Alpine also owns at March 31, 2002approximately 10.5 million common shares of Superior (NYSE:SUT) with a fairmarket value on May 13, 2002 of approximately $8.1 million and 3.8 millionordinary shares of Cookson (FTSE: CKSN.L) with a fair market value as of May13, 2002 of $4.9 million.

 

                Duringthe quarter ended March 31, 2002 Alpine substantially reduced its corporatedebt.  In February 2002, Alpine redeemed$8.2 million in face amount of 12.25% Senior Secured Notes for a cash paymentof $5.8 million.  Further, in February2002, Alpine prepaid loans totaling $22 million upon early settlement ofcertain forward sale derivative contracts related to 10.5 million ordinaryshares of Cookson.

 

                As a result of theabove described transaction, Alpine’s total corporate debt at March 31, 2002approximated $5 million, including $4 million in 12.25% Senior Secured Notesdue in July 2003.

 

                Alpinehas no other major commitments over the next twelve months other than periodicinterest cost on Alpine’s remaining debt ($0.6 million annually) and Alpinecorporate overhead expense (which

 

17

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on an annual cash basis is expected to approximate $2million).  For the next twelve month period, Alpine expects to fund theseaforementioned commitments from available cash reserves.

 

# ***Superior TeleCom***

 

                For the three months ended March31, 2002, Superior used $26.5 million in cash flows in operatingactivities consisting of $2.1 million in cash flows generated fromoperations (net loss plus non-cash charges) and $28.6 million in cashflows used for net working capital changes including an anticipated seasonalincrease in receivables of $32.4 million partially offset by inventoryreductions of $19.6 million.  Cash usedfor investing activities amounted to $0.5 million and consistedprincipally of capital expenditures of $3.3 million offset by payments receivedon pre-arranged long-term loans made to one of Superior Israel’s principalcustomers. Cash provided by financing activities amounted to$12.9 million, principally consisting of borrowings under Superior’scredit facilities.

 

                Superior finances its operating activities (exclusiveof operating activities of Superior Israel which are financed under separatefinancing arrangements and non-recourse to Superior and its subsidiaries otherthan Superior Israel) and other capital requirements principally from (i)operating cash flow, (ii) funding availability under its revolving creditfacility and (iii) allowable borrowings under its accounts receivablesecuritization financing arrangement.

 

                Therevolving credit facility provides for borrowings up to $225 million (subjectto certain interim reductions in 2002 which limit the total facility to $214million) and matures in May 2004. $184 million was outstanding under therevolving credit facility at March 31, 2002, and $168 million was outstandingunder the facility at April 30, 2002. The revolving credit facility along with term loan A and term loan Bcomprise Superior’s senior credit facilities which are governed by an Amendedand Restated Credit Agreement (the “Credit Agreement”). The total balanceoutstanding on term loans A and B at March 31, 2002 amounted to $703 million.Obligations under the Credit Agreement are secured by substantially all of theassets of Superior and its subsidiaries. The Credit Agreement contains certainrestrictive covenants, including, among other things, requirements to maintaincertain financial ratios, limitations on the amount of dividends Superior isallowed to pay on its capital stock and restrictions on additionalindebtedness.

 

                Superior’saccounts receivable securitization program provides for funding up to $160million (based on the level of qualified accounts receivable) in short-termfinancing through the issuance of commercial paper. At March 31, 2002, $130million was outstanding under this program which, based on the then currentlevel of qualified accounts receivable, was fully drawn.  Theaccounts receivables securitization facility which was scheduled to expire onJune 30, 2002 has been extended through September 30, 2002.  Superior is currently in discussion withother financial institutions for a longer-term refinancing of such facility.  Although there can be no assurance, Superiorpresently believes it will be able to obtain further extensions of the existingaccounts receivable securitization facility or refinance such facility so asnot to adversely impact Superior’s liquidity. Failure to obtain further extensions or an alternative receivablesfinancing arrangement is an event of default under the Credit Agreement.

 

                Inaddition to the above, Superior also has outstanding $207 million in seniorsubordinated notes due in December 2007 (“Senior Subordinated Notes”).

 

                InMarch 2002, Superior entered into an amendment to the Credit Agreement which(i) reduced operating performance levels required to meet certain financialcovenants through December 31, 2002; (ii) deferred until January 31, 2003 termloan principal payments otherwise due March 31, 2002 amounting to $19.4 millionand (iii) eliminated a required $175 million accelerated term loan payment dueon January 3, 2003.

 

18

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                InDecember 2001, Superior entered into a major amendment to the agreementgoverning the Senior Subordinated Notes. Such amendment grants the Company theoption in certain circumstances to make three of the four quarterly interestpayments due in 2002 in the form of payment-in-kind notes (“PIK notes”) in lieuof cash interest payments. Additionally, Alpine has provided a funded cash commitment on behalf ofSuperior that will make available to Superior sufficient cash to make onequarterly cash interest payment in 2002. PIK notes were issued (in lieu of cash) for the February 2002 interestpayment causing the interest rate on the Senior Subordinated Notes to increaseto LIBOR plus 9% from LIBOR plus 5%. If PIK notes are issued (in lieu of cash)for the August and November quarterly interest payments, then the interest rateon the Senior Subordinated Notes will increase to LIBOR plus 11% and LIBOR plus12%, respectively.

 

                At April 30, 2002, Superior had unused and excessborrowing availability under its revolving credit facility of $49 million andcash on hand of $10 million resulting in total operating funds availability of$59 million which, along with its operating cash flow, is used to serviceSuperior’s normal operating commitments.

 

                During the first quarter of 2002, Superior (excludingits Superior Israel operations) has experienced, and expects to continue toexperience throughout 2002, reduced cash outlay requirements for servicinginterest costs, dividends on its Trust Convertible Preferred Securities andcapital expenditures.  Also, as a resultof the March 2002 amendment to the Credit Agreement, Superior’s term loanprincipal amortization requirements have been reduced in 2002 as compared to2001.

 

                Superior is currently benefiting from the substantialreduction in market interest rates that has occurred over the past fifteenmonths which, along with Superior’s option to pay interest on the SeniorSubordinated Notes in the form of PIK notes rather than cash under certaincircumstances, is resulting, and is expected to continue to result, in areduction in cash outlays for interest expense in 2002. Cash interest expense,based on current market interest rates, is expected to approximate only $65-$70million in 2002, a reduction of approximately $35 million as compared to cashinterest costs incurred in 2001.  Forthe first quarter of 2002, Superior’s incurred cash interest costs of $16million as compared to $30 million in the first quarter of 2001.  Capital expenditures are expected toapproximate $15-$20 million in 2002. For the first quarter of 2002, capital expenditures were only $3.3million.  Superior also intends tocontinue to defer during 2002 distributions on its outstanding TrustConvertible Preferred Securities which will result in additional annualizedcash flow savings of $7 million as compared to cash distributions paid in2001.  In addition to outlays for cashinterest and capital expenditures, Superior also has principal amortizationrequirements on its term loans A and B and on certain capital leases, whichaggregate $74 million during 2002 (as compared to $80 million in 2001). Intotal, Superior’s 2002 cash outlays for interest, distributions on its TrustConvertible Preferred Securities, capital expenditures and term loan principalamortization are estimated to be more than $50 million less than comparableoutflows in 2001.

 

                Superiorintends to service the aforementioned 2002 cash requirements from operatingcash flow and, to the extent required, availability under its revolving creditfacility, its accounts receivable securitization and available cashbalances.  As discussed below, Superiorpresently believes its operating cash flow, combined with revolver availabilityand cash on hand will be sufficient to fund these commitments in 2002.

 

                Despitereduced operating cash flows in the first quarter of 2002, Superior’sborrowings under its revolving credit facility have not increased significantlythrough April 30, 2002, as Superior has benefited from the aforementionedreduction in cash outlays for interest, principal amortization and capital expenditures.Cash flows and availability under the revolver facility borrowings have beenenhanced

 

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further in 2002 through reductions in inventories ($17million reduction through March 31, 2002) and additional borrowings underSuperior’s accounts receivable securitization facility (based on seasonalincreases in accounts receivable).

 

                Forthe balance of 2002, Superior has term loan amortization requirements in theaggregate of $64 million under its Credit Agreement.  During this period Superior expects to continue to benefit fromlower cash interest costs and lower capital expenditure levels.  Superior also expects improved operatingcash flow levels for the balance of 2002 as compared to the first quarter of2002, based on anticipated seasonal strengthening in revenues and operatingprofit.  Thus, Superior presentlybelieves its operating cash flow along with availability under its revolvingcredit facility will be sufficient to meet all of its commitments for theremainder of 2002 based upon its current operating outlook.  However, Superior is subject to risksassociated with increases in working capital and fluctuations in interest rateswhich, along with lower than anticipated operating cash flow, could impairSuperior’s ability to meet its aforementioned commitments in 2002.  In the first quarter of 2003, Superior’scash commitment requirements will significantly increase as Superior has termloan amortization requirements of $46 million and further must eitherrenegotiate an extension of PIK (versus cash) payments of interest under itsSenior Subordinated Notes or recommence paying such interest in cash.  If operating cash flow is insufficient tomeet commitments during 2002 or the first quarter of 2003, Superior will needto obtain further amendments and/or modifications to, or a negotiatedrestructuring of, its credit facilities to appropriately support the continuedoperations of its business, however there can be no assurance that any suchmodification or restructuring would occur.

 

                Superior’s access to availability under its revolvingcredit facility is also subject to Superior maintaining compliance with thefinancial covenants under the Credit Agreement.  Superior was in compliance with its financial covenants at March31, 2002.  Based on current operatingresults there is no assurance that Superior can continue to comply with suchcovenants for 2002 and further Superior has more restrictive covenants beginningin 2003.  If Superior is unable to maintainfinancial covenant compliance, then it will seek to obtain requisite waiversand/or further modification to such covenants so as to avoid default under itscredit agreements, but there can be no assurance that any such waivers and/orfurther modifications will be obtained.

 

                Superior Israel’s operations are funded and financedseparately, on a non-recourse basis to Superior and its subsidiaries other thanSuperior Israel, and include a $93.0 million credit facility consisting of a$63.0 million term loan and a $30.0 million revolving credit facility. At March31, 2002, Superior Israel had $17.4 million in excess availability under itsrevolving credit facility.

 

**RecentAccounting Pronouncements**

 

                In July 2001, the Financial Accounting StandardsBoard (“FASB”) issued SFAS No. 141 “Business Combinations” and SFAS No. 142“Goodwill and Other Intangible Assets.” SFAS No. 141 requires use of the purchase method of accounting forbusiness combinations initiated after June 30, 2001.  SFAS No. 142, which is effective for the Company beginningJanuary 1, 2002, requires that the amortization of goodwill and certain otherintangible assets cease and that the related asset values be reviewed annuallyfor impairment.  Beginning in 2002, theCompany’s goodwill, which amounted to $753.6 million at December 31, 2001, isno longer being amortized; however it is subject to an initial impairmentreview.  If the carrying value(including goodwill) of any of the Company’s business segments exceeds the fairvalue (determined on a discounted cash flow basis or other fair value method),impairment of goodwill may exist which would result in a charge to earnings forthe amount of any such impairment.  The Company’sinitial impairment assessment under SFAS No. 142 is currently in process.  Although the assessment has not yet beencompleted, the impact on operating results of recent economic and industryspecific conditions is likely to result in reduced fair values for certain ofits business

 

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segmentsand, thus may give rise to material non-cash goodwill impairment charges in2002.  The Company anticipates that itsinitial impairment assessment and any impairment charge from such assessmentwill be finalized during its second quarter ended June 30, 2002 and reflectedretroactively.  Any impairment chargeincurred will not impact cash flow or the Company’s compliance with anycovenants related to its principal credit agreements.

 

## **ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

                The Company’s exposure to market risk primarilyrelates to interest rates on long-term debt. The Company enters into interestrate swap and cap agreements to manage its exposure to interest rate changes.At March 31, 2002, Superior had an interest rate cap on $362 million principalamount with a 90-day LIBOR cap at 4.4% expiring December 27, 2002. A onepercent increase in interest rates affecting Superior’s $1.15 billion creditagreement and its $200 million senior subordinated notes would increase annualinterest expense by approximately 9% or $10.8 million.

 

____________________

*                    Exceptfor the historical information herein, the matters discussed in this Form 10-Qinclude forward-looking statements that may involve a number of risks and uncertainties.  Actual results may vary significantly basedon a number of factors, including, but not limited to, risks in product andtechnology development, market acceptance of new products and continuing productdemand, prediction and timing of customer orders, the impact of competitiveproducts and pricing, changing economic conditions, including changes inshort-term interest rates and foreign exchange rates, and other risk factorsdetailed in the Company’s most recent filings with the Securities and ExchangeCommission.*

 

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**PART II.        OTHERINFORMATION**

** **

**ITEM 6.          EXHIBITSAND REPORTS ON FORM 8-K**

 

**(a)****                     ****Exhibits**

 

                                    None.

 

**(b)**       **Reports onForm 8-K**

 

                                    None.

 

_______________________

*****Filed herewith

 

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**SIGNATURES**

 

            Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

 
|               | THE ALPINE GROUP, INC.                               |
|--------------------|------------------------------------------------------|
|               |                                                 |
| Date: May 15, 2002 | By:                                                  |   /s/  David S. Aldridge |
|               | David S. Aldridge                                    |
|               | Chief Financial Officer                              |
|               | (duly authorized officer and principal financial and |
|               | accounting officer)                                  |

 

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