UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C.
      20549****___________**FORM 10-K**(Mark
      One)**x
    **ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934****For
      the fiscal year ended December 31, 2004****OR**o
    **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934****For
      the transition period from  to****Commission file number
      000-02249****___________**THE ALPINE
      GROUP, INC.(Exact name
      of registrant as specified in its charter)






**Delaware**
    
    
    
    **22-1620387**(State or other jurisdiction
      of
    
    
    
    (I.R.S.
      Employer Identification No.)incorporation
      or organization)**One Meadowlands
      Plaza****East Rutherford, New
      Jersey**
    
    
    
    **07073**(Address
      of principal executive offices)
    
    
    
    (Zip
      code)Registrant's
      telephone number, including area code**201-549-4400**___________Securities registered pursuant to
      Section 12(b) of the Act: **None**Securities registered pursuant to
      Section 12(g) of the Act:Common
      Stock, par value $.10 per share[Title
      of class]





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. o
 
 Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2) Yes o No x
 
 At June
30, 2004, the registrant had 13,030,685 shares of common stock, par value $.10
per share outstanding. The aggregate market value of the outstanding shares of
common stock held by non-affiliates of the registrant on such date was
approximately $ 30.8 million based on the closing price of $3.40 per share of
such common stock as of June 30, 2004.
 
 At March
22, 2005, the registrant had 15,775,615 shares of common stock, par value $.10
per share outstanding.
  **DOCUMENTS
INCORPORATED BY REFERENCE**
 None.
 
 1
 **PART
I**
 
 **Item
1. Business**
 
 The
Alpine Group, Inc. (together with its subsidiaries, unless the context otherwise
requires, "Alpine" or the "Company") is a holding company which over the past
several years has owned controlling equity interests in industrial businesses
which have been operated as subsidiaries. Alpine currently owns approximately
84% of Essex Electric Inc. ("Essex Electric"), which is engaged in the
manufacture and sale of electrical wire and 47% of Superior Cables Ltd., the
largest Israeli based producer of wire and cable products.
 
 Over the
past several years Alpine has also owned substantial equity interests in
PolyVision Corporation ("PolyVision"), Premier Refractories International Inc.
("Premier"), Superior TeleCom Inc. ("Superior") and DNE Systems, Inc. (“DNE
Systems”). In August 1999 Alpine sold its common equity interest in Premier and
in November 2001 Alpine sold its equity interest in PolyVision. The equity
interest of all of Superior's stockholders, including Alpine, was cancelled as a
result of the consummation of Superior’s Plan of Reorganization in November
2003. In July 2004, Alpine sold DNE Systems.
 
 On
December 11, 2002, Alpine's wholly-owned subsidiary, Alpine Holdco Inc. ("Alpine
Holdco") acquired from Superior: (1) substantially all of the assets, subject to
related accounts payable and accrued liabilities, of Superior's electrical wire
business, which is currently owned and operated by Essex Electric (then a
wholly-owned subsidiary of Alpine Holdco); (2) all of the outstanding shares of
capital stock of DNE Systems; and (3) all of the outstanding shares of capital
stock of Texas SUT Inc. and Superior Cable Holdings (1997) Ltd., which together
own approximately 47% of Superior Cables Ltd.. The aggregate purchase price was
approximately $85 million in cash plus the issuance of a warrant (the "Warrant")
to Superior to purchase 199 shares of the common stock of Essex Electric. We
sometimes refer to this acquisition as the "Electrical Acquisition". In
September 2003, Alpine Holdco and Superior Essex, Inc. (the successor to
Superior) subscribed for and purchased 681and 169 newly issued shares of common
stock of Essex Electric, respectively. As a result, as of December 31, 2004
Alpine Holdco and Superior owned approximately 90% and 10%, respectively, of the
total outstanding capital stock of Essex Electric. In January 2005, Alpine
Holdco and Superior Essex Inc. subscribed for and purchased an additional 1,792
and 445 shares of newly issued shares of common stock of Essex Electric,
respectively. Accordingly, Alpine Holdco and Superior currently own
approximately 84% and 16%, respectively, of the total outstanding capital stock
of Essex Electric. Superior’s Warrant to purchase 199 shares of the capital
stock of Essex Electric together with Superior’s current ownership of 614 shares
of common stock of Essex Electric represents 19.9% of fully diluted capital
stock of Essex Electric.
 
 Prior to
December 11, 2002, Alpine's financial statements include the consolidated
results of Superior as a result of Alpine’s controlling interest in Superior. In
connection with the Electrical Acquisition (see Note 5), certain changes
were made with respect to Alpine's indirect voting interests in Superior’s
equity such that Alpine no longer controlled Superior. Effective for periods
after December 11, 2002, Superior Cables Ltd., and Superior (for periods through
November 10, 2003) are accounted for under the equity method and were no longer
consolidated with Alpine.
 
 As a
result of the accumulated net losses incurred by Superior, Alpine's consolidated
financial statements included a negative investment in Superior of $865.9
million at December 31, 2002. Under accounting principles generally accepted in
the United States of America, this negative investment was required to be
reflected in Alpine's consolidated balance sheet, notwithstanding the fact that
Alpine was not obligated to fund any operating losses or deficits of Superior.
Upon consummation of the Plan of Reorganization of Superior, Alpine eliminated
its negative investment in Superior and recognized a corresponding gain of
$865.9 million in the fourth quarter of 2003. This gain was offset by the
reversal of $11.6 million of other comprehensive loss related to Superior,
resulting in a net gain of $854.3 million.
  Alpine
was incorporated in New Jersey on May 7, 1957 and reincorporated in Delaware on
February 3, 1987.
 
 Alpine's
principal executive office is located at One Meadowlands Plaza, East Rutherford,
New Jersey 07073, and its telephone number is (201) 549-4400.
 
 Alpine's
annual report on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, are made available free of charge.
Requests should be directed to the Corporate Secretary at the principal
executive office listed herein.
 
 
 **The
Alpine Group, Inc.**
 
 The
following information addresses the current operating businesses of Alpine
consisting of Essex Electric and an equity method investment in Superior Cables
Ltd., which were acquired in the Electrical Acquisition effective
December 11, 2002. For additional information regarding the Company's
business segments, see Note 20, "Business Segments and Foreign Operations"
to the consolidated financial statements.
 
 2
 ***Essex
Electric***
 
 Essex
Electric manufactures, sells and/or distributes a complete line of building wire
products. Building wire products include a wide variety of thermoplastic and
thermoset insulated wires for the commercial and industrial construction markets
and service entrance cable, underground feeder wire and nonmetallic jacketed
wire and cable for the residential construction market. These products are
generally installed behind walls, in ceilings and underground.
 
 Essex
Electric sells its electrical wire and cable products through manufacturers'
representatives, as well as a small internal sales group. Its customer base is
large and diverse, consisting of consumer product retailers, hardware
wholesalers and wholesale electrical and specialty distributors. One customer
(Home Depot) accounted for 23% and 18% of Essex Electric's net sales in 2004 and
2003, respectively. Essex Electric serves its customers through strategically
located regional distribution centers ("RDCs"). These RDCs provide for
centralized stocking of "off-the-shelf" building wire products. Essex Electric
currently operates three leased RDCs located in Georgia, California and
Indiana.
 
 Demand
for building wire is correlated with the level of renovation activity, as well
as new construction. The demand for building wire in both new construction and
renovation is affected by the increased number of circuits and amperage handling
capacity needed to support the increasing demand for electrical services. In
addition, greater wiring density is required in new construction and renovation
projects to provide for the electrical needs of appliances such as trash
compactors, microwave ovens, air conditioners, entertainment centers, lighting
and climate controls, specialty lighting and outdoor lighting systems. New home
automation and computer systems contribute to the increased cable and wire
density requirements in new and renovation construction as well. The average new
home is increasing in size and thus influencing demand in this industry.
 
 The
building wire industry has experienced significant consolidation in recent
years, declining since the early 1980’s from approximately 30 manufacturers to
seven primary manufacturers currently. During the past several years the Company
believes there has been excess manufacturing capacity compared to customer
demand in the building wire sector. The Company further believes that this
misalignment between capacity and demand has been a key factor in declining
market pricing in the industry, which reached five year lows in late 2002 and
early 2003. Essex Electric responded to these conditions during 2003 and 2004 by
effecting a series of restructuring and rationalization initiatives, including
reducing its finished goods manufacturing plants from six to two, one of which
has been significantly expanded, and reducing its regional distribution centers
from four to three. In addition, in 2003 Essex Electric sold inventories,
equipment and a building related to industrial wire products and cord products
in order to reduce debt and focus on its core building wire products business.
Pricing during 2004, while higher than that achieved during the preceding two
years, particularly in the first half of the year, was subject to great
volatility, as material costs substantially increased. The above described
restructuring initiatives, which are being continued into 2005, have
repositioned Essex Electric with significantly reduced manufacturing capacity
while resulting in a lower manufacturing cost structure focused on core
competency building wire products with an improved total cost
structure.
 
 *Raw
Materials*
 
 The
principal raw material used by Essex Electric in the manufacture of its wire
products is copper rod and, to a lesser extent, plastics such as polyethylene
and polyvinyl chloride. Essex Electric purchases copper rod from various copper
producers and metal merchants. Although certain wire and cable manufacturers, to
a limited extent, experienced copper rod shortages over the past five years,
Essex Electric believes that it will be able to obtain sufficient supplies of
copper rod to meet its manufacturing needs for the foreseeable
future.
 
 In
connection with the Electrical Acquisition, Alpine Holdco, Essex Electric and
Superior entered into a supply and transitional services agreement and on
November 7, 2003 the agreement was replaced by a new supply and services
agreement between Superior Essex Inc. (the successor company to Superior
pursuant to the Plan of Reorganization) and Essex Electric, (collectively, the
“Supply Agreements”). The Supply Agreements provided for the purchase from
Superior of certain specified quantities
of copper rod and certain transitional administrative services to Alpine Holdco
and Essex Electric. The Supply Agreements expired on December 31, 2004. The
total cost of copper rod purchased under the Supply Agreements in 2004, 2003 and
2002 was $89.2, $99.6 and $10.8 million, respectively and the cost for
administrative services for 2004, 2003 and 2002 was $1.4, $4.4 and $.3 million,
respectively.
 
 3
 Copper is
a commodity and is therefore subject to price volatility. Fluctuations in the
cost of copper have not had a material impact on profitability due to the
ability in most cases to adjust product pricing in order to properly match the
price of copper billed with the copper cost component of its inventory shipped.
Additionally, COMEX fixed price futures contracts are used, to a limited extent,
to manage commodity price risk.
 
 *Competition*
 
 The
market for electrical wire products is highly competitive. The building wire
industry has experienced significant consolidation over the past twenty years.
Notwithstanding this consolidation, the Company believes there still exists
excess industry manufacturing capacity which, in part as a result of the
Company’s restructuring activities, has been somewhat reduced over the past two
years. Four companies, including Essex Electric, currently manufacture
approximately 75% to 80% of the total domestic U.S. building wire production.
Many of Essex Electric's products are made to industry specifications and,
therefore, may be interchangeable with competitors' products. Essex Electric is
subject to strong competition in many markets on the basis of price, delivery
time, customer service and ability to meet specialty needs. The Company believes
that Essex Electric enjoys and benefits from strong customer relations which
result from Essex Electric’s and its predecessors' long participation in the
industry, its commitment to quality customer service and its on time delivery.
 
 *Backlog;
Returns*
 
 Essex
Electric has no significant backlog, as finished goods are generally stocked to
meet customer demand on a just-in-time basis. Essex Electric believes that the
ability to supply orders in a timely fashion is a competitive factor in the
markets in which it operates. Historically, sales returns have not had a
material adverse effect on the results of operations.
 
 *Research
and Development*
 
 Essex
Electric conducts limited research and development activities. These activities
are focused on the development of improved compounds that are used as insulation
and jacketing materials. Total research and development expenses related to the
electrical wire business were less than 1% of sales.
 
 ***Superior
Cables Ltd.***
 
 Since
December 2002, the Company, through its wholly owned subsidiaries, has a 47%
equity method investment in Superior Cables Ltd. Superior Cables Ltd. is the
largest Israeli wire and cable manufacturer and its shares are traded on the Tel
Aviv Stock Exchange.
 
 **Export
Sales**
 
 The
Company had no export sales in 2004 and $0.5 and $77.0 million in 2003 and 2002,
respectively.
 
 **Employees**
 
 As of
December 31, 2004, the Company employed approximately 540 employees,
substantially all of which are employees of Essex Electric. Approximately 130
persons employed by the Company at December 31, 2004 are represented by
unions. Collective bargaining agreements expire at various times through August
2007. The Company considers relations with its employees to be
satisfactory.
 ****
 **Environmental
Matters**
 
 The
manufacturing operations of the Company's subsidiaries are subject to extensive
and evolving federal, state and local environmental laws and regulations
relating to, among other things, the storage, handling, disposal, emission,
transportation and discharge of hazardous substances, materials and waste
products, as well as the imposition of stringent permitting requirements. The
Company does not believe that compliance with environmental laws and regulations
will have a material effect on the level of capital expenditures of Alpine or
its business, financial condition, liquidity or results of operations. However,
violation of, or non-compliance with, such laws, regulations or permit
requirements, even if inadvertent, could result in an adverse impact on the
operations, business, financial condition, liquidity or results of operations of
Alpine. No material expenditures for environmental matters relating to Alpine's
current businesses were made in 2004, 2003 and 2002.
 
 4
 
 **Item
2. Properties**
 
 The
following table sets forth the properties utilized by Alpine as of
December 31, 2004.
  **OPERATION**
    
    **LOCATION**
    
    **SQUARE**
      **FOOTAGE**
    
    **LEASED/**
      **OWNED**Essex
      Electric****Manufacturing
    
    Anaheim,
      California
    
    143,000
    
    Leased
      (expires 2005)Florence,
      Alabama
    
    263,000
    
    OwnedFlorence,
      Alabama
    
    20,000
    
    Leased
      (expires 2005)Florence,
      Alabama
    
    30,500
    
    Leased
      (expires 2005)****
    
    Jonesboro,
      Indiana
    
    56,000
    
    OwnedMarion,
      Indiana
    
    50,000
    
    OwnedRegional
      Distribution Centers
    
    Columbia
      City, Indiana
    
    228,800
    
    Leased
      (expires 2006)McDonough,
      Georgia
    
    232,000
    
    Leased
      (expires 2009)Ontario,
      California
    
    99,430
    
    Leased
      (expires 2007)****Offices
    
    Fort
      Wayne, Indiana
    
    15,000
    
    Leased
      (expires 2007)Alpine
    
    East
      Rutherford, New Jersey
    
    5,900
    
    Leased
      (expires 2014)
  During
2003 and 2002, Essex Electric experienced a decline in pricing for its products
due to the general economic environment, a decline in the industrial and
commercial demand and significant manufacturing over-capacity in the electrical
wire industry. Following the Electrical Acquisition, Essex Electric implemented
a plan to consolidate and eliminate facilities to more closely align the
productive capacity to anticipated market demand. In the first quarter of 2003,
Essex Electric sold its Lafayette, Indiana facility and leased its Orleans,
Indiana facility, in connection with the sale of its industrial wire products
operations. The purchaser in this transaction leased the Orleans, Indiana
facility through November 2004. The Orleans, IN facility is classified as an
asset held for sale, included in other current assets, as of December 31, 2004.
In the third quarter of 2003, the Sikeston, Missouri facility was idled, certain
equipment formerly utilized at this site was relocated to remaining Essex
Electric facilities and the facility was donated to the City of Sikeston in the
fourth quarter of 2004. The Florence, Alabama facility was expanded in 2003 and
two nearby facilities were leased through 2005 to accommodate increased
production at this site resulting from consolidation activities. Essex
Electric’s manufacturing plant in Anaheim, California was sold in 2003 and
leased back from the buyer through 2004. The lease was extended through June
2005 and may be extended on a month to month arrangement.
 
 During
2004, the Essex Electric distribution network was further contracted to reflect
the Company’s reduced manufacturing capacity and primary geographic targeted
markets. An amended lease agreement was executed by Essex Electric for the
Ontario, California facility during 2004, providing for a reduction in
distribution, rental and other operating costs. Additionally, during 2004
sublease agreements were entered into at the Columbia City, Indiana and Ontario,
California distribution centers covering excess floor space and resulting in
reduced operating costs for these facilities.
 
 The
Company believes its facilities are generally suitable and adequate for its
business operations and administration and serving customers’ requirements. In
2004 and 2003 the utilization of the Company’s facilities was consistent with
industry demand and, in the view of management, was satisfactory. Manufacturing
facilities were operated on a 24 hours per day schedule on either a five or
seven day per week basis.
 
 
 **Item
3. Legal Proceedings**
 
 The
Company is engaged in certain litigations and administrative proceedings arising
in the ordinary course of business, including those matters described below.
While the outcome of these can never be predicted with certainty, the Company
does not believe that any of the existing litigations, administrative
proceedings or threatened proceedings either individually or in the aggregate,
will have a material adverse effect upon its business, financial condition,
liquidity or results of operations.
 
 5
 Alpine's
operations are subject to environmental laws and regulations in each of the
jurisdictions in which it owns or operates facilities or for which it has
assumed or retained liabilities governing, among other things, emissions into
the air, discharges to water, the use, handling and disposal of hazardous
substances and the investigation and remediation of soil and groundwater
contamination both on-site at past and current facilities and at off-site
disposal locations. On-site contamination at certain of these facilities is the
result of historic activities and past operations. Alpine has two sites and
Essex Electric has one site which are currently involved in separate
environmental investigations that may result in certain remedial activities
being required under the oversight of two state environmental regulatory
agencies. Off-site liabilities may include clean-up responsibilities and
response costs incurred by others at various sites, under federal or state
statutes, for which the Company may be liable to the United States Environmental
Protection Agency, or to state environmental agencies, or others as a
Potentially Responsible Party or the equivalent.
 
 Alpine
currently does not believe that any of the environmental proceedings in which it
is involved, and for which it may be liable, will individually, or in the
aggregate, have a material adverse effect upon its business, financial
condition, liquidity or results of operations. There can be no assurance that
future developments will not alter this conclusion.
 
 In
December 2003, a former employee of Essex Electric commenced an action against
Essex Electric, that is now pending in the United States District Court for the
Western District of Missouri. Plaintiff alleges that Essex Electric engaged in
discrimination against her based upon gender and engaging in a course of
impermissible retaliatory conduct against the plaintiff in violation of the
Missouri Human Rights Act. The plaintiff seeks recovery for lost wages and
compensatory and punitive damages. Essex Electric has answered the complaint
denying these allegations and asserting several affirmative defenses. Discovery
proceedings are ongoing at this time.
 
 **Item
4. Submission Of Matters To A Vote Of Security Holders**
 
 On
December 15, 2004, at the Annual Meeting of Stockholders of the Company,
shareholders entitled to vote, which included holders of Alpine’s common stock,
par value $0.10 per share (the “Common Stock”) who were entitled to one vote per
share, and holders of Alpine’s Series A Cumulative Convertible Preferred Stock
(the “Series A Preferred Stock”), who were entitled to 743.01 votes per share,
voting as a single class, voted upon the following matters with the following
results:
 
 ·
    Six
      (6) current directors nominated for reelection were reelected with terms
      to expire as follows: John C. Jansing and Bragi F. Schut - 2005; Kenneth
      G. Byers, Jr. and Randolph Harrison - 2006; and Steven S. Elbaum and James
      R. Kanely - 2007.
 
 **Director**
    
    **Votes
      For**
    
    **Votes
      Withheld**John
      C. Jansing
    
    21,978,645
    
    76,099Bragi
      F. Schut
    
    21,980,324
    
    74,420Kenneth
      G. Byers, Jr.
    
    21,981,344
    
    73,400Randolph
      Harrison
    
    21,981,145
    
    73,599Steven
      S. Elbaum
    
    21,975,150
    
    79,594James
      R. Kanely
    
    21,981,345
    
    73,399
   6
 
 ·
    The
      appointment of Deloitte & Touche LLP as Alpine’s independent auditors
      for fiscal year ended December 31, 2004 was
ratified.
 
 **Votes
      For**
    
    **Votes
      Against**
    
    **Votes****Abstained**
    
    **Broker
      Unvoted****Appointment
      of Deloitte and Touche, LLP**
    
    22,002,959
    
    35,485
    
    16,300
    
    0
 
 ·
    The
      amendment of the Certificate of Incorporation of Alpine to increase the
      number of authorized shares of Common Stock from 25 million to 50 million
      was approved.
 
 **Votes
      For**
    
    **Votes
      Against**
    
    **Votes
      Abstained**
    
    **Broker
      Unvoted****Increase
      of Shares from 25 million to 50 million**
    
    21,813,688
    
    180,909
    
    60,147
    
    0
 
 ·
    The
      amendment of the Certificate of Incorporation of Alpine to effect a
      “reverse/forward split” of Common Stock by which holders of less than 100
      shares should have such shares cancelled and converted to the right to
      receive the fair market value of such shares in cash was
      approved.
 
 **Votes
      For**
    
    **Votes
      Against**
    
    **Votes
      Abstained**
    
    **Broker
      Unvoted****Reverse/forward
      split**
    
    21,918,831
    
    130,550
    
    5,363
    
    0
 
 
 7
 **PART
II**
 
 **Item
5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities**
 
 (a)
    Market
      Price of and Dividends on the Registrant's Common Equity and Related
      Stockholder Matters
  Alpine's
Common Stock traded on the OTC Bulletin Board under the symbol ALPG during 2003
and 2004. In conjunction with the reverse/forward split of the Common Stock (see
note (d) below), as of January 10, 2005 the NASDAQ assigned the Common Stock the
new trading symbol of APNI.OB. The following table sets forth the range of high
and low daily closing sales prices for the Common Stock for the years ended
December 31, 2004 and 2003.
 
 **High**
    
    **Low**Year
      Ended December 31, 2004:First
      Quarter ended March 31, 2004
    
    $
    1.85
    
    $
    0.90Second
      Quarter ended June 30, 2004
    
    
    3.59
    
    
    1.80Third
      Quarter ended September 30, 2004
    
    
    3.15
    
    
    2.65Fourth
      Quarter ended December 31, 2004
    
    
    2.76
    
    
    2.00Year
      Ended December 31, 2003:First
      Quarter ended March 31, 2003
    
    $
    0.77
    
    $
    0.48Second
      Quarter ended June 30, 2003
    
    
    0.82
    
    
    0.52Third
      Quarter ended September 30, 2003
    
    
    1.15
    
    
    0.76Fourth
      Quarter ended December 31, 2003
    
    
    1.15
    
    
    0.85
 
 (b)
    Holders
  At March
22, 2005, there were 15,775,615 **** shares of
Common Stock issued and outstanding, and approximately 400 record holders
thereof (exclusive of beneficial owners of shares held in street name or other
nominee form).
 
 The
Company's transfer agent is American Stock Transfer & Trust Company,
59 Maiden Lane, New York, NY.
 
 
 (c)
    Dividends
 
 The
Company paid dividends of $0.5 million and $0.2 million in 2004 and 2003,
respectively on the Series A Preferred Stock. On August 24, 2004, Alpine
declared a special dividend of up to $0.40 per share of Common Stock and a
special dividend of $103.65 per share on the Series A Preferred Stock to
shareholders of record on September 14, 2004 (the “Record Date”). The amount of
the special dividend in respect of the Common Stock was reduced to $0.36 per
share, to adjust for additional shares of Common Stock issued by the Company
between August 24, 2004 and the Record Date. This resulted in special dividend
payments of $4.9 million in respect of the Common Stock and $1.5 million in
respect of the Series A Preferred Stock. Any payment of future cash dividends
and the amounts thereof will be dependent upon the Company's earnings, financial
requirements and other factors.
 
 (d)
    Common
      Stock Reverse/Forward Spit
 
 On
December 30, 2004 the Company effected a reverse 1-for-100 stock split followed
immediately by a forward 100-for-1 stock split of the Common Stock. As permitted
under the Delaware General Corporation Law, stockholders whose shares of Common
Stock were converted into less than 1 share as a result of the reverse split had
these shares canceled and received cash payments equal to the fair value of the
shares cancelled.
 
 (e)
    Increase
      in Authorized Common Stock
 
 At a
meeting of stockholders on December 15, 2004, the stockholders approved an
amendment to the Company’s Certificate of Incorporation to increase the number
of authorized shares of Common Stock from 25,000,000 to 50,000,000. Such
amendment was filed with the State of Delaware on December 29,
2004.
 
 8
 **Item
6. Selected Financial Data**
 
 **HISTORICAL
FINANCIAL DATA**
 
 Set forth
below are certain selected historical consolidated financial data of Alpine.
This information should be read in conjunction with the consolidated financial
statements of Alpine and related notes thereto appearing elsewhere herein and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations." The selected historical consolidated financial data for, and as
of the end of, each of the years in the five-year period ended December 31,
2004, are derived from the audited consolidated financial statements of Alpine.
 
 **Year
      Ended December 31,****2004(5)**
    
    **2003(5)**
    
    **2002(1)(5)**
    
    **2001(5)**
    
    **2000(5)****(in
      millions, except per share data)****Statement
      Of Operations Data:**Net
      sales
    
    $
    315.9
    
    $
    302.1
    
    $
    1,364.0
    
    $
    1,716.3
    
    $
    2,019.0Cost
      of goods sold
    
    
    296.3
    
    
    286.9
    
    
    1,208.8
    
    
    1,454.2
    
    
    1,691.8Gross
      profit
    
    
    19.6
    
    
    15.2
    
    
    155.2
    
    
    262.1
    
    
    327.2Selling,
      general and administrative expenses
    
    
    25.0
    
    
    31.6
    
    
    132.9
    
    
    149.5
    
    
    156.6Restructuring
      and other charges
    
    
    3.9
    
    
    13.6
    
    
    36.5
    
    
    10.7
    
    
    15.0Loss
      on asset sale and impairments
    
    
    0.3
    
    
    0.6
    
    
    463.7
    
    
    —
    
    
    —Amortization
      of goodwill (2)
    
    
    —
    
    
    —
    
    
    —
    
    
    21.2
    
    
    21.1Operating
      income (loss)
    
    
    (9.6
    )
    
    (30.6
    )
    
    (477.9
    )
    
    80.7
    
    
    134.5Interest
      expense
    
    
    (3.0
    )
    
    (3.7
    )
    
    (104.8
    )
    
    (119.2
    )
    
    (137.7
    )Gain
      on Cancellation of Investment in
      Superior
      (3)
    
    
    —
    
    
    854.3
    
    
    —
    
    
    —
    
    
    —Loss
      on investments in securities
    
    
    —
    
    
    —
    
    
    (4.1
    )
    
    (33.8
    )
    
    (10.5
    )Other
      income (expense) net (4)
    
    
    (0.3
    )
    
    0.1
    
    
    0.6
    
    
    6.8
    
    
    6.9Income
      (loss) from continuing operations before income taxes, distributions on
      preferred securities of subsidiary trust, minority interest, equity in
      earnings of affiliate, income from discontinued operations extraordinary
      item, and cumulative effect of accounting change
    
    
    (12.9
    )
    
    820.1
    
    
    (586.2
    )
    
    (65.5
    )
    
    (6.8
    )Benefit
      for income taxes (4)
    
    
    5.3
    
    
    10.7
    
    
    95.3
    
    
    23.1
    
    
    0.5Income
      (loss) from continuing operations before distributions on preferred
      securities of subsidiary trust, minority interest, equity in earnings of
      affiliate, income from discontinued operations, extraordinary item and
      cumulative effect of accounting change
    
    
    (7.6
    )
    
    830.8
    
    
    (490.9
    )
    
    (42.4
    )
    
    (6.3
    )Distributions
      on preferred securities of subsidiary trust
    
    
    —
    
    
    —
    
    
    (15.2
    )
    
    (15.4
    )
    
    (15.1
    )
 
 (Continued)
 9
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002(1)**
    
    **2001**
    
    **2000**Income
      (loss) from continuing operations before minority interest, equity in
      earnings of affiliate, income from discontinued operations, extraordinary
      item and cumulative effect of accounting change
    
    $
    (7.6
    )
    $
    830.8
    
    $
    (506.1
    )
    $
    (57.8
    )
    $
    (21.4
    )Minority
      interest in losses of subsidiaries, net
    
    
    0.4
    
    
    0.5
    
    
    3.5
    
    
    17.1
    
    
    6.1Equity
      in (earnings) losses of affiliate
    
    
    —
    
    
    (0.1
    )
    
    (0.1
    )
    
    1.3
    
    
    1.7Income
      (loss) from continuing operations before extraordinary item and cumulative
      effect of accounting change
    
    
    (7.2
    )
    
    831.2
    
    
    (502.7
    )
    
    (39.4
    )
    
    (13.6
    )Gain
      on sale of DNE, net of tax
    
    
    19.1
    
    
    —
    
    
    —
    
    
    —
    
    
    —Income
      from discontinuedoperations
      (5)
    
    
    1.5
    
    
    3.6
    
    
    3.6
    
    
    8.4
    
    
    2.4Income
      (loss) before extraordinary item and cumulative effect of accounting
      change
    
    
    13.4
    
    
    834.8
    
    
    (499.1
    )
    
    (31.0
    )
    
    (11.2
    )Extraordinary
      item
    
    
    —
    
    
    —
    
    
    12.6
    
    
    —
    
    
    —Cumulative
      effect of accounting change
    
    
    —
    
    
    —
    
    
    (388.1
    )
    
    —
    
    
    —Preferred
      stock dividends
    
    
    (2.0
    )
    
    (0.2
    )
    
    —
    
    
    —
    
    
    —Preferred
      stock dividends beneficial conversionfeature
    
    
    (1.2
    )
    
    (2.6
    )
    
    —
    
    
    —
    
    
    —Net
      income (loss) applicable to common stock
    
    $
    10.2
    
    $
    832.0
    
    $
    (874.6
    )
    
    ($31.0
    )
    $
    (11.2
    )Income
      (loss) per share of common stock:*Basic*Income
      (loss) from continuing operations before extraordinary item and cumulative
      effect of accounting change
    
    $
    (0.53
    )
    $
    60.33
    
    $
    (33.86
    )
    $
    (2.69
    )
    $
    (0.93
    )Income
      from discontinued operations
    
    
    0.11
    
    
    0.26
    
    
    0.25
    
    
    0.57
    
    
    0.16Gain
      on sale of DNE, net of tax
    
    
    1.42
    
    
    —
    
    
    —
    
    
    —
    
    
    —Preferred
      stock dividends
    
    
    (0.15
    )
    
    (0.01
    )
    
    —
    
    
    —
    
    
    —Preferred
      stock dividends beneficial conversion feature
    
    
    (0.09
    )
    
    (0.19
    )
    
    —
    
    
    —
    
    
    —Extraordinary
      item
    
    
    —
    
    
    —
    
    
    0.85
    
    
    —
    
    
    —Cumulative
      effect of accounting change
    
    
    —
    
    
    —
    
    
    (26.13
    )
    
    —
    
    
    —Net
      income (loss) per share of common stock
    
    $
    0.76
    
    $
    60.39
    
    $
    (58.89
    )
    $
    (2.12
    )
    $
    (0.77
    )
   10
  **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002(1)**
    
    **2001**
    
    **2000***Diluted*Income
      (loss) from continuing operations before extraordinary item and cumulative
      effect of accounting change
    
    $
    (0.53
    )
    $
    51.01
    
    $
    (33.86
    )
    $
    (2.69
    )
    $
    (0.93
    )Income
      (loss) from discontinued operations
    
    
    0.11
    
    
    0.22
    
    
    0.25
    
    
    0.57
    
    
    0.16Gain
      on sale of DNE, net of tax
    
    
    1.42
    
    
    —
    
    
    —
    
    
    —
    
    
    —Preferred
      stock dividends
    
    
    (0.15
    )
    
    —
    
    
    —
    
    
    —
    
    
    —Preferred
      stock dividends beneficial conversion feature
    
    
    (0.09
    )
    
    —
    
    
    —
    
    
    —
    
    
    —Extraordinary
      item
    
    
    —
    
    
    —
    
    
    0.85
    
    
    —
    
    
    —Cumulative
      effect of accounting change
    
    
    —
    
    
    —
    
    
    (26.13
    )
    
    —
    
    
    —Net
      income (loss) per share of common stock
    
    $
    0.76
    
    $
    51.23
    
    $
    (58.89
    )
    $
    (2.12
    )
    $
    (0.77
    )
 
 
 **Balance
      Sheet Data (At End Of Period):**Working
      capital (6)
    
    $
    33.8
    
    $
    28.3
    
    $
    40.6
    
    $
    113.3
    
    $
    40.6Total
      assets
    
    
    132.8
    
    
    107.8
    
    
    183.1
    
    
    1,952.2
    
    
    2,094.4Total
      long-term debt (6)
    
    
    3.1
    
    
    3.8
    
    
    0.9
    
    
    1,269.0
    
    
    1,284.4Mandatorily
      redeemable preferred stock
    
    
    5.5
    
    
    5.7
    
    
    —
    
    
    136.0
    
    
    134.9Preferred
      stock
    
    
    0.2
    
    
    0.4
    
    
    0.4
    
    
    0.4
    
    
    0.4Total
      stockholders' equity (deficit)
    
    
    24.0
    
    
    15.8
    
    
    (829.1
    )
    
    46.1
    
    
    64.6Cash
      dividends – common stock
    
    
    4.9
    
    
    —
    
    
    —
    
    
    —
    
    
    —Cash
      dividends – preferred stock
    
    
    2.0
    
    
    0.2
    
    
    —
    
    
    —
    
    
    —
 
 
 
 (1)
    On
      December 11, 2002**,**Alpine acquired substantially all of the assets, subject to related
      accounts payable and accrued liabilities, of Superior's electrical wire
      business. Additionally, in connection with this acquisition certain
      changes were made with respect to Alpine's indirect voting interests in
      Superior such that Alpine no longer controlled Superior. Accordingly,
      effective for periods after December 11, 2002 Alpine's investment in
      Superior (which was previously consolidated) is accounted for using the
      equity method. (See Notes 1 and 5 to Alpine's consolidated financial
      statements.)(2)
    Effective
      January 1, 2002, the Company adopted SFAS No. 142 Goodwill and Other
      Intangible Assets, which resulted in a change in the accounting treatment
      for goodwill, effectively eliminating any goodwill
      amortization.(3)
    Alpine
      recognized a gain in 2003 as a result of eliminating its negative
      investment in Superior upon consummation of the Plan of Reorganization for
      Superior. (See Note 1 to Alpine's consolidated financial
      statements.)(4)
    Includes
      reclassification of the historical gains (losses) on extinguishment of
      debt (and related tax effects) from extraordinary item to other income
      (expense). (See Note 1 to Alpine's consolidated financial
      statements.)(5)
    On
      July 29, 2004, the Company completed the disposition of DNE, its
      wholly-owned subsidiary. The statement of operations data include DNE as a
      discontinued operation.(6)
    Working
      capital is defined as total current assets less total current liabilities.
      Amounts included in total current liabilities with respect to the
      Revolving Credit Facility for 2004, 2003 and 2002 are $40.2, $17.2 and
      $69.0 million, respectively.
 
 11
 **Item
7. Management's Discussion And Analysis Of Financial Condition And Results Of
Operations**
 
 **General**
 
 Alpine is
a holding company which over the past several years has owned controlling equity
interests in industrial businesses which have been operated as subsidiaries.
Alpine currently owns approximately 84% of Essex Electric, which is engaged in
the manufacture and sale of electrical wire and 47% of Superior Cables Ltd., the
largest Israeli based producer of wire and cable products. These businesses were
acquired as part of the Electrical Acquisition.
 
 Over the
past several years Alpine has also owned substantial equity interests in
PolyVision, Premier, Superior and DNE Systems. In August 1999 Alpine sold its
common equity interest in Premier and in November 2001 Alpine sold its equity
interest in PolyVision. The equity interest of all of Superior's stockholders,
including Alpine, was cancelled following the bankruptcy of Superior in March
2003, as a result of the consummation of the Plan of Reorganization for Superior
and its emergence from bankruptcy in November 2003.
 
 In July
2004, Alpine sold DNE Systems, its wholly-owned defense electronics subsidiary,
to ULTRA Electronics Defense, Inc., a wholly-owned subsidiary of Ultra
Electronics Holdings plc, a United Kingdom-based company that is listed on the
London Stock Exchange (the “DNE Sale”). The purchase price was $40 million in
cash at closing plus the Company is entitled to receive an additional cash
payment of up to $3 million in 2005 if a certain performance based measure is
achieved, however, based upon the measure of such performance to date, Alpine’s
receipt of any such additional payment appears unlikely. The sale was
consummated on July 29, 2004 and a pretax book gain of approximately $29.4
million, net of expenses, was recorded in the third quarter of 2004. The assets
and liabilities of DNE Systems were reclassified to discontinued operations in
the December 31, 2003 balance sheet. Likewise, DNE Systems results of operations
for the one month period ended December 31, 2002 and twelve month periods ended
December 31, 2004 and 2003 were reclassified to income from discontinued
operations.
 
 Prior to
December 11, 2002, Alpine's financial statements include the consolidated
results of Superior as a result of Alpine’s controlling interest in Superior. In
connection with the Electrical Acquisition (see Note 5), certain changes
were made with respect to Alpine's indirect voting interests in Superior’s
equity such that Alpine no longer controlled Superior. Effective for periods
after December 11, 2002, Superior Cables Ltd., and Superior (for periods through
November 10, 2003) are accounted for under the equity method and were no longer
consolidated with Alpine.
 
 Alpine's
consolidated net income (loss) has historically reflected its share of
Superior's net income (loss), after giving effect to the impact of minority
interest. However, in the case of net losses incurred by a consolidated
subsidiary, the amount of such losses allocable to minority interest in the
consolidated statement of operations is limited under accounting principles
generally accepted in the United States of America to the carrying value of
minority interest in the consolidated balance sheet. As a result of the loss
incurred by Superior upon adoption of SFAS 142, effective January 1,
2002, the minority interest was completely eliminated and therefore Alpine's
consolidated statement of operations reflects 100% of the net losses incurred by
Superior after January 1, 2002 and through December 11, 2002. Due to
Superior's net losses, Alpine had a negative investment in Superior of
$865.9 million at December 31, 2002. This negative investment was
required under accounting principles generally accepted in the United States of
America to be reflected in Alpine's consolidated balance sheet, notwithstanding
the fact that Alpine was not obligated to fund any operating losses or deficits
of Superior. As discussed above, upon consummation of the Plan of Reorganization
of Superior, Alpine's entire investment in Superior was eliminated. Upon
consummation of the Plan of Reorganization of Superior, Alpine eliminated its
negative investment in Superior and recognized a corresponding gain of $865.9
million in the fourth quarter of 2003. This gain was offset by the reversal of
$11.6 million of accumulated other comprehensive loss related to Superior,
resulting in a net gain of $854.3 million.
 
 Following
the Electrical Acquisition, the Company's principal operations consisted of the
electrical wire business previously constituting Superior's Electrical Group,
which is owned and operated by Alpine’s subsidiary Essex Electric, the
operations of DNE Systems, and the Company's equity method investments in
Superior (through November 10, 2003) and Superior Cables Ltd.; however DNE
Systems was sold in July 2004, as described above. The Company's operations for
2002 include the consolidated operations of Superior through December 11,
2002 and the continuing operations of Essex Electric subsequent to
December 11, 2002. As a result of the sale of DNE Systems on July 29, 2004
and the deconsolidation of Superior effective December 11, 2002, the
Company's consolidated operations no longer include the results of DNE Systems
or Superior's Communications Group and OEM Group segments. Segment financial
data (including sales and operating income by segment) is included in
Note 20 to the accompanying consolidated financial statements.
 
 12
 **Results
Of Continuing Operations** **—** **Twelve
Months Ended December 31, 2004 ("2004") Compared To The Twelve Months Ended
December 31, 2003 ("2003")**
 
 Consolidated
sales for the year ended December 31, 2004 were $315.9 million, an increase of
4.6% compared to sales of $302.1 million for 2003. The increase was due to the
net effect of higher selling prices and lower sales volume. The higher selling
prices were primarily due to a significant increase (54%) in the cost of copper,
Essex Electric’s principal product cost item, in 2004 versus 2003. In addition,
sales improved due to an improved pricing environment for electrical products,
particularly in the first half of 2004. The increase in sales prices was offset
by a decline in volume of copper pounds shipped of 27% from 2003 to 2004. The
lower sales volume in 2004 was due to a decrease in shipments of electrical wire
by Essex Electric resulting from consolidation of production facilities and
reduction of manufacturing capacity to reposition itself to more cost
effectively service its reduced customer base in certain geographic markets,
distribution channels and product lines as part of its restructuring and
repositioning initiatives.
 
 Gross
profit for 2004 was $19.6 million, an increase of $4.4 million as compared to
the $15.2 gross profit for 2003. The gross profit margin in 2004 was 6.2%, which
compares to gross profit margin of 5.0% for 2003. The improvement was the net
result of the aforementioned improved electrical wire pricing, partially offset
by increased raw material costs that could not be fully passed-along to
customers and some added manufacturing costs that the Florence plant incurred in
the process of expanding its operation. Gross profit was negatively impacted in
the fourth quarter of 2004 by the combined effect of lower selling margins,
increased manufacturing costs because of reduced plant volumes due to reduced
demand and escalating copper costs. Since the Company uses the LIFO method, it
recorded higher cost of sales in the fourth quarter relating to the
replenishment of copper inventories purchased at higher prices than earlier in
the year when the inventories were depleted relative to December 31,
2003.
 
 Selling,
general and administrative expense ("SG&A expense") for 2004 was $25.0
million, a decrease of 20.8%, as compared to SG&A expense of $31.6 million
for 2003. The decrease was due primarily to reduced costs at Essex Electric
resulting from the implementation of its restructuring plan.
 
 The 2004
restructuring and other charges incurred were $3.9 million, all of which were
associated with the restructuring of Essex Electric. These restructuring charges
consisted of (i) equipment relocation ($2.0 million), (ii) inventory relocation
($0.9 million) and (iii) facility exit costs ($1.0 million). This compares to
$13.6 million of restructuring and other charges recorded in 2003, which
consisted of (i) equipment relocation ($2.9 million), (ii) inventory relocation
($1.9 million), (iii) severance ($3.6 million), (iv) facility exit costs ($2.4
million) and (v) other costs associated with restructuring of the business ($2.7
million).
 
 
 The
Company incurred an operating loss of $9.6 million for 2004 compared to an
operating loss of $30.6 million for 2003. The $21.0 million improvement was due
to improved gross profits, reduced selling, general and administrative costs and
reduced restructuring and other charges.
 
 Interest
expense for 2004 was $3.0 million, representing a decrease of $.7 million from
2003. The decrease was due primarily to lower debt levels throughout the year,
which resulted primarily from reductions in working capital at Essex Electric,
and lower debt issue cost amortization.
 
 The
effective tax rate for 2004 was 41.1% as compared to negative 1.31% for 2003.
The increase in the effective rate is due primarily to the permanent difference
related to the investment in Superior in 2003. Excluding the aforementioned
permanent item, the effective rate for 2003 was 35.3%.
 
 **Discontinued
Operations**
 
 The
Company sold its DNE operations effective July 29, 2004 and recorded an
after-tax gain of approximately $19.1 million in the third quarter of 2004. The
income from discontinued operations related to DNE was $1.5 million,
representing seven months of operation during 2004, compared with $3.6 million
of income for the full twelve months of 2003. The lower earnings are the result
of the partial year in 2004 and slightly lower sales levels on a pro-rata basis
in 2004 compared to 2003.
  13
 **Results
Of Continuing Operations** **—** **Twelve
Months Ended December 31, 2003 ("2003") Compared To The Twelve Months Ended
December 31, 2002 ("2002")**
 
 Consolidated
sales from continuing operations for the year ended December 31, 2003 were
$302.1 million, a decrease of 78% as compared to sales of $1,364.0 million for
the comparable prior year period. The decrease is due primarily to the effects
of the deconsolidation of Superior. Revenues for Superior's Communications Group
and OEM Group included in the year ended December 31, 2002 results were $433.6
million and $464.5 million, respectively. Excluding the Communications Group and
OEM Group, sales decreased $163.8 million or 35% due principally to (i) the
Company's decision to reduce volume in response to weak industry-wide pricing
conditions caused by severe competitive pressures in the building wire market,
(ii) reduced demand in the non-residential building wire market segment, and
(iii) the February 2003 sale of the automotive and industrial wire business.
Automotive and industrial wire product sales accounted for approximately $8.3
million and $34.0 million of Essex Electric's sales for the year ended December
31, 2003 and 2002, respectively.
 
 Gross
profit from continuing operations for 2003 was $15.2 million, a decline of
$140.0 million as compared to gross profit for 2002, due to the deconsolidation
of Superior. The gross profit margin in 2003 was 5.0% compared to gross profit
margin of 5.8% for 2002 after excluding the Communications Group and OEM Group.
The decreased margin percentage was due to higher copper prices that increased
Essex Electric sales without a proportionate increase in margins.
 
 Selling,
general and administrative expense ("SG&A expense") for 2003 was $31.6
million, a decrease of 76%, as compared to SG&A expense of $132.9 million
for 2002. The comparative decrease for 2003 was due primarily to the effects of
the deconsolidation of Superior as well as a decrease of $8.7 million at Essex
Electric resulting from implementation of its restructuring plan.
 
 The 2003
restructuring and other charges incurred was $13.6 million associated with the
restructuring of Essex Electric's business model. These restructuring charges
consisted of (i) equipment relocation ($2.9 million), (ii) inventory relocation
($1.9 million), (iii) severance ($3.6 million), (iv) facility exit costs ($2.4
million) and (v) other costs associated with restructuring of the business ($2.7
million). This compares to $36.5 million of restructuring and other charges
recorded in 2002. Of this amount, Superior recorded $33.3 million related to the
closure of four facilities to more closely align productive capacity with
current market demands and to reduce overall manufacturing costs. The remaining
$3.2 million was incurred by Alpine in connection with the restructuring after
the Electrical Acquisition.
  The
Company incurred an operating loss of $30.6 million for 2003 compared to an
operating loss of $477.9 million for 2002. The operating loss in 2002 included
restructuring and other charges and asset impairment charges of $500.2 million
as compared to $14.1 million of such charges for 2003. The comparative decline
in operating loss was due to the decrease in restructuring and other charges
offset by the effects of the deconsolidation of Superior's operating income for
the Communications Group and the OEM Group which amounted to $57.2 million for
the period ended December 31, 2002. Additionally, the operating loss for Essex
Electric increased by $3.5 million for 2003 as compared to 2002 as a result of
the decreased sales and restructuring costs.
 
 Interest
expense for 2003 was $3.7 million, representing a decrease of $101.1 million
from the comparable prior period. The decrease was due to the deconsolidation of
Superior. Excluding interest expense related to borrowings of Superior, interest
expense for 2002 was $0.8 million. The increase in 2003 was due to an increase
in the Company's indebtedness resulting from borrowings incurred to finance the
Electrical Acquisition.
 
 The
effective tax rate for 2003 was negative 1.31% as compared to 16.3% in 2002. The
decrease in effective rate is due to a permanent adjustment for nondeductible
goodwill amortization and impairment in 2002 as well as a permanent difference
related to the write-off of the investment in Superior in 2003. Excluding the
aforementioned permanent adjustments, the effective rates were 35.3% and 35.6%
for the years ended December 31, 2004 and 2003, respectively.
 
 The
Company reported a loss of $0.1 million for 2003 representing its equity in the
net loss of its equity-method investee, Superior Cables Ltd. The Company's
investment in Superior Cables Ltd. has been reduced to zero and accordingly,
Alpine will not record it's equity in any future net losses of Superior Cables
Ltd. unless it has a positive investment in Superior Cables Ltd..
 
 As a
result of the net losses incurred by Superior in 2002 and prior years, Alpine
had a negative investment in Superior of $865.9 million at December 31, 2002.
Under accounting principles generally accepted in the United States of America,
this negative investment was required to be reflected in Alpine's consolidated
balance sheet, notwithstanding the fact that Alpine was not obligated to fund
any operating losses or deficits of Superior. Upon consummation of the Plan of
Reorganization of Superior, Alpine eliminated its negative investment in
Superior and recognized a corresponding gain of $865.9 million in the fourth
quarter of 2003. This gain was offset by the reversal of $11.6 million of
accumulated other comprehensive loss related to Superior, resulting in a net
gain of $854.3 million.
 
 14
 
 **Discontinued
Operations**
 
 Income
from discontinued operations (DNE Systems) for 2003 of $3.6 million was
comparable to $3.6 million for 2002. DNE sales were $28.4 million for the year
ended December 31, 2003, a decrease of 26% as compared to sales of $38.4 million
for the comparable prior year period. The sales decrease during this period was
primarily due to a decline in contract manufacturing sales of $9.3 million as a
result of DNE's decision to de-emphasize this business.
 
 **Liquidity
and Capital Resources**
 
 ***Alpine
Holdco***
 
 As
previously discussed, in December 2002, Alpine, through its newly formed,
wholly-owned subsidiary, Alpine Holdco, acquired the following assets and
securities from Superior: (1) substantially all of the assets, subject to
related accounts payable and accrued liabilities, of Superior's electrical wire
business, which is currently owned and operated by Essex Electric, a newly
formed, then wholly-owned subsidiary of Alpine Holdco; (2) all of the
outstanding shares of capital stock of DNE Systems, and (3) and
approximately 47% of Superior Cables Ltd. for a total purchase price of
approximately $85 million in cash and the issuance of a warrant to Superior
to purchase 199 shares of common stock of Essex Electric.
 
 The
acquisition was financed by approximately $10 million of Alpine's cash and
cash equivalents and borrowings by Alpine Holdco under a Loan and Security
Agreement (the "Revolving Credit Facility"), dated as of December 11, 2002,
by and among Alpine Holdco, Essex Electric, DNE Manufacturing and DNE
Technologies as borrowers and DNE Systems as credit party (such parties
sometimes collectively are called the "Companies"), certain financial
institutions party thereto as lenders, Congress Financial Corporation, as
documentation agent, and Foothill Capital Corporation, as arranger and
administrative agent. Upon consummation of the acquisition, approximately
$78 million was outstanding under the Revolving Credit Facility. The
Revolving Credit Facility was amended on November 10, 2004 and was last amended
on February 28, 2005.
 
 The terms
of the Revolving Credit Facility provided for a maximum committed amount of
$100 million at its inception which, at the request of the Companies, was
reduced to $70 million on December 8, 2003. Borrowing availability is determined
by reference to a borrowing base which permits advances to be made at various
net valuation rates against various assets of the Companies. Interest is payable
monthly in cash in arrears and is based on, at Alpine Holdco's option, LIBOR or
prime rates plus a fixed margin. The weighted average interest rate at
December 31, 2004 and 2003 was 6.05% and 4.46%, respectively. The Revolving
Credit Facility also provides for maintenance of financial covenants and ratios
relating to minimum EBITDA and tangible net worth, and includes restrictions on
capital expenditures, payment of cash dividends and incurrence of indebtedness.
Outstanding obligations under the Revolving Credit Facility are secured by a
lien on all of the Companies' tangible and intangible assets, other than the
investment in Superior Cables Ltd. The obligations under the Revolving Credit
Facility are without recourse to Alpine. Unless previously accelerated as a
result of default, the Revolving Credit Facility matures in five years. However,
in accordance with Emerging Issues Task Force Issue 95-22, *Balance
Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements
That Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement,* borrowings
under the Revolving Credit Facility have been classified as a current liability.
The Companies may terminate the Revolving Credit Facility at any time upon
45 days' prior written notice and payment of all outstanding borrowings,
together with unpaid interest, and a termination fee equal to 0.75% of the
maximum committed amount. The Companies may, upon 30 days' prior written
notice, permanently reduce the maximum committed amount without penalty or
premium. At December 31, 2004 and 2003, outstanding borrowings under the
Revolving Credit Facility were $40.2 million and $17.2 million,
respectively. At December 31, 2004 the Companies had $14.6 million of borrowing
availability. No dividends may be paid by Alpine Holdco without prior consent of
the lenders.
 
 Effective
concurrently with the consummation of the DNE Sale (see note 4) on July 29,
2004, the lenders, released each of DNE Systems, DNE Technologies, and DNE
Manufacturing from all of their obligations under the Revolving Credit Facility
(the "DNE Parties"), released all property of the DNE Parties from the liens
granted for the benefit of the lenders under the Revolving Credit Facility and
all of the outstanding and issued capital stock of the DNE Parties from the
pledge thereof delivered in connection with the Revolving Credit Facility, and
the DNE Parties no longer are "Borrowers" or a "Credit Party", as the case may
be, under the Revolving Credit Facility. Accordingly, from and after July 29,
2004, the DNE Parties are not included in the term "Companies". The Revolving
Credit Facility was amended on November 10, 2004 to reflect modifications
approved by the parties as a result of the DNE Sale and to establish revised
financial and other covenant levels.
  15
 Alpine
believes that existing cash and cash equivalents, cash provided by operations
and working capital management of its Essex Electric subsidiary together with
borrowings available under the Revolving Credit Facility will be sufficient to
meet the capital needs of the Companies through 2005. Alpine estimates that
Alpine Holdco capital expenditures for 2005 will be approximately $5 million.
Alpine Holdco has implemented restructuring initiatives at its Essex Electric
subsidiary to rationalize manufacturing capacity, lower expenditures and reduce
working capital, which are expected to result in nonrecurring cash expenses of
approximately $2.5 to $3.0 million during 2005. Alpine believes that Alpine
Holdco will be in compliance with the financial covenants provided in the
Revolving Credit Facility. However, the persistence of negative market pricing
conditions experienced to date in 2005 may require Alpine Holdco to seek
additional amendments in or waivers of certain financial covenants to remain in
compliance under the Revolving Credit Facility.
 
 ***Alpine
Corporate***
 
 On August
4, 2003, the Company completed an exchange offer whereby holders of its common
stock, $0.10 par value per share (the “Common Stock”) exchanged
3,479,656 shares for $4.3 million principal amount of 6% Junior
Subordinated Notes (the "Subordinated Notes") issued by the Company plus a
nominal amount of cash in lieu of fractional notes. The Subordinated Notes were
initially recorded at an amount equal to the fair market value of the Common
Stock exchanged resulting in an initial discount of $1.4 million. The discount
is being accreted over the term of the Subordinated Notes using a level interest
method. The Subordinated Notes accrue interest at 6% per annum payable in cash
semiannually each December 31 and June 30. The Subordinated Notes are
the Company's general unsecured obligations, subordinated and subject in right
of payment to all of the Company's existing and future senior indebtedness,
which excludes trade payables incurred in the ordinary course of business. The
Company will be required to repay one-eighth  of the
outstanding principal amount of the Subordinated Notes commencing on
June 30, 2007 and semiannually thereafter, so that all of the Subordinated
Notes will be repaid by December 31, 2010. Accordingly, there are no
principal payments due in 2005. The Company must offer to redeem all of the
Subordinated Notes at the redemption price then in effect in the event of a
change of control. The Subordinated Notes were issued under an indenture that
does not subject the Company to any financial covenants. During the twelve month
period ended December 31, 2004, the Company retired $0.2 million of the
Subordinated Notes.
 
 On June
23, 2003, Alpine completed a private placement of 8,287 shares of a new issue of
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock")
to its directors and certain officers for a purchase price of $380 per share, or
an aggregate of approximately $3.1 million. Holders of the Series A
Preferred Stock are entitled to receive, when, as and if declared by the board
of directors out of funds legally available for payment, cash dividends at an
annual rate of $30.40 per share. The Series A Preferred Stock, originally
was convertible into Common Stock, at the option of the holder, at the rate of
691 shares of Common Stock per share of Series A Preferred. As a result of a
special dividend declared by the Company discussed below, the conversion rate
increased to 743.01 shares of Common Stock per share of Series A Preferred.
Since the market price of the Common Stock on the subscription date (June 23,
2003) was $0.76 per share and the original conversion price was $0.55 per share,
a beneficial conversion feature of $1.2 million was recorded as a reduction to
the mandatorily redeemable series A cumulative preferred stock line of the
balance sheet with the offset to capital in excess of par. The beneficial
conversion feature was recorded as a dividend as of December 29, 2004 when the
privately placed Series A Preferred Stock became convertible following the
increase in authorized but unissued shares of Common Stock from 25 million to 50
million shares.
  The
Company may cause conversion of the Series A Preferred Stock into Common Stock
if the Common Stock is then listed on the New York Stock Exchange (NYSE) or the
American Stock Exchange or is traded on the Nasdaq National Market System and
the average closing price per share of the Common Stock for any 20 consecutive
trading days equals or exceeds 300% of the conversion price then in effect. The
Series A Preferred Stock is subject to mandatory redemption by the Company
ratably on the last day of each quarter during the three-year period commencing
on December 31, 2009 at the liquidation value of $380 per share, plus accrued
and unpaid dividends. Additionally, if the Company experiences a change in
control it will, subject to certain limitations, offer to redeem the Series A
Preferred Stock at a cash price of $380 per share plus (i) accrued and
unpaid dividends and (ii) if the change of control occurs prior to
December 31, 2007, all dividends that would be payable from the redemption
date through December 31, 2007.
 
 On
November 10, 2003, the Company completed the sale of 9,977 shares of Series A
Preferred Stock pursuant to a rights offering to holders of the Common Stock.
Common Stock holders were offered a right to purchase one share of Series A
Preferred Stock at a price of $380 per share for each 500 shares of common stock
held on September 29, 2003. The terms of the Series A Preferred Stock are the
same as that purchased by the officers and directors in the private placement
discussed above. Total proceeds received from the sale were $3.8 million. The
recording of dividends, if any, on the Series A Preferred Stock will reduce the
Company's earnings per share in the period recorded. Since the market price of
the Common Stock on the date of issuance (November 10, 2003) was $0.92 per share
and the original conversion price was $0.55 per share, a beneficial conversion
feature of $2.6 million was recorded. This was recorded as a dividend during
2003 since the shares were immediately convertible, offset with a credit to
capital in excess of par.
 
 16
 Holders
of the Series A Preferred Stock are entitled to vote their shares on an
as-converted basis together with the Company's common stockholders. In addition,
the Company may not (a) enter into a merger, sale of all or substantially
all of its assets or similar transaction without the approval of holders of at
least a majority of the shares of Series A Preferred Stock, or
(b) alter or change the powers, preferences or special rights (including,
without limitation, those relating to dividends, redemption, conversion,
liquidation preference or voting) of the shares of Series A Preferred Stock
so as to affect them materially and adversely, or issue any senior stock,
without the approval of holders of at least a majority of the shares of
Series A Preferred Stock. In the event of any liquidation, dissolution or
winding up of Alpine, after the payment of the liquidation preference in respect
of any senior stock, holders of the Series A Preferred Stock will be
entitled to receive the liquidation price of $380 per share plus an amount equal
to (a) if the liquidation, dissolution or winding up occurs prior to
December 31, 2007, all dividends that would be payable on a share of
Series A Preferred Stock from the date of liquidation, dissolution or
winding up through December 31, 2007 and (b) any accrued and unpaid
dividends to the payment date, before any payment is made to the holders of
common stock or any other junior securities, subject to certain exceptions.
Proceeds from the sale of the Series A Preferred Stock were used to reduce
existing indebtedness and for general corporate purposes.
 
 During
the third quarter of 2004, Alpine Holdco distributed to Alpine the proceeds from
the DNE Sale, net of expenses, of approximately $38 million in accordance with a
consent from the lenders under the Revolving Credit Facility. Federal taxes
payable on this transaction were paid on March 15, 2005 out of the
proceeds.
 
 On August
24, 2004, Alpine declared a special dividend of up to $0.40 per share of Common
Stock and a special dividend of $103.65 per share on its Series A Preferred
Stock to shareholders of record on September 14, 2004 (the “Record Date”). The
amount of the special dividend in respect of the Common Stock was reduced to
$0.36 per share, to adjust for additional shares of Common Stock issued by the
Company between August 24, 2004 and the Record Date. This resulted in special
dividend payments of $4.9 million in respect of the Common Stock and $1.5
million in respect of the Series A Preferred Stock. Under the respective terms
of the stock based compensation plans of the Company, the Company is required to
allocate a deemed dividend in respect of shares of restricted Common Stock
granted and unvested and/or deposited and credited to participant accounts under
the Alpine Deferred Stock Account Plan in an amount equal to any cash dividend
paid in respect of the Common Stock. Accordingly, on September 30, 2004, the
Company declared, but did not yet pay, a total deemed dividend of $0.9 million,
$0.6 million of which was recorded to compensation expense during 2004. The
remainder will be amortized over the vesting period of such unvested or deferred
shares of Common Stock. Any payment of future cash dividends and the amounts
thereof will be dependent upon the Company's earnings, financial requirements
and other factors, including contractual obligations.
 
 During
2004, 3,477 shares of Series A Preferred Stock were converted into approximately
2.4 million shares of Common Stock.
 
 As of
December 31, 2004 Alpine had unrestricted cash, cash equivalents and marketable
securities of approximately $36.4 million. Alpine's current and anticipated
sources of liquidity include existing cash and cash equivalents, and management
fees from Alpine Holdco. Pursuant to a management agreement with Alpine Holdco
dated December 11, 2002, so long as no event of default exists or is created by
such payment under the Revolving Credit Facility, Alpine is entitled to receive
from Alpine Holdco an annual management fee (together with any unpaid management
fees from prior years), which (effective January 1, 2004) was increased from
$1.0 million to $1.8 million, and is reimbursed for all direct costs incurred by
it related to the business of Alpine Holdco. Alpine's ability to receive
distributions from Alpine Holdco is restricted under the terms of the Revolving
Credit Facility to a maximum of $1.8 million of the aforementioned
management fee, amounts representing Alpine's tax liability in respect of the
operations of Alpine Holdco plus $250,000 per year. Alpine is also entitled to
be reimbursed for all direct costs incurred by it related to the business of
Holdco.
 
 During
2001 and 2002, the Company entered into commercial transactions intended to
offset the potential impact of interest rate changes on the Company’s
investments, including the investment of the net cash proceeds from the sale of
an equity investment and established a tax contingency reserve on its balance
sheet corresponding to the realized benefits. At December 31, 2004, the Company
has reserved $16.4 of the related benefit and interest and the amount has been
recorded under other long-term liabilities. The Company does not anticipate that
any portion of the tax contingency reserve will become payable in the next
twelve months.
  Since
1993, Alpine has been a party to a guaranty of Superior's lease obligations
relating to Superior's manufacturing facility in Brownwood, Texas. The lease
currently provides for monthly payments of $56,000 subject to adjustments for
changes in the consumer price index. The lease term expires in 2018 but may be
extended through 2033. As such, the maximum potential amount of future payments
under the guaranty through 2018 would be approximately $9 million. Any further
extensions would amount to a guarantee of approximately $0.7 million per year.
While Alpine's continuing obligations, if any, under the guaranty are not free
from doubt, the Company believes the facility and underlying lease are valuable
assets of Superior and expects that Superior will perform as tenant thereunder
and continue to pay its obligations. In addition, Alpine would have a claim for
indemnification and reimbursement from Superior in respect of any amounts paid
by Alpine as guarantor. The
operations of Superior Cables Ltd. are funded and financed separately, with
recourse to Superior Cables Ltd. but otherwise on a non-recourse basis to
Alpine.
 
 17
 ***Contractual
Obligations***
 
 Alpine
has the following minimum commitments under contractual obligations, including
purchase obligations, as defined by the U.S. Securities and Exchange Commission.
A "purchase obligation" is defined as an agreement to purchase goods or services
that is enforceable and legally binding and that specifies all significant
terms. Operating leases are long-term obligations relating primarily to the
Company’s leased facilities. The Revolving Credit Facility is classified as
short-term in the balance sheet (See Note 7 to the consolidated financial
statements) but included in this table based on the maturity date. As of
December 31, 2004, the Company’s contractual obligations were as follows (in
thousands):
  
 **2005**
    
    **2006-**
      **2007**
    
    **2008-**
      **2009**
    
    **2010
      and**
      **after**
    
    **Total**Revolving
      Credit Facility (a)
    
    $
    2,435
    
    $
    44,976
    
    $
    —
    
    $
    —
    
    $
    47,4116%
      Junior Subordinated Notes (b)
    
    
    —
    
    
    1,046
    
    
    2,092
    
    
    1,046
    
    
    4,184Other
      Debt
    
    
    386
    
    
    —
    
    
    —
    
    
    —
    
    
    386Series
      A Preferred Stock (c)
    
    
    —
    
    
    —
    
    
    462
    
    
    5,083
    
    
    5,545Operating
      leases
    
    
    2,216
    
    
    3,176
    
    
    1,221
    
    
    899
    
    
    7,512Purchase
      obligations (d)
    
    
    17,122
    
    
    —
    
    
    —
    
    
    —
    
    
    17,122Total
    
    $
    22,159
    
    $
    49,198
    
    $
    3,775
    
    $
    7,028
    
    $
    82,160
  
 (a)
    The
      stated maturity of the Revolving Credit Facility is December 11, 2007. The
      total maximum commitment is for $70 million. The interest rates on this
      facility are variable based upon LIBOR or Prime Rates plus certain fixed
      margins. The average rate, including margin, as of December 31, 2004 was
      6.05%. See Note 7 to the consolidated financial statements for a
      description of the classification of the Revolving Credit Facility as an
      obligation due in less than one year as required under accounting
      principles generally accepted in the United States of America. An estimate
      of the interest expense obligation is included for each period as
      presented up until the December 11, 2007 stated maturity date. The
      interest was computed using the December 31, 2004 balance in the Revolving
      Credit Facility ($40,250) and the interest rate in effect as of December
      31, 2004 (6.05%).
 (b)
    The
      6% Junior Subordinated Notes are presented on a gross basis (before
      discount). The $3,122 included the long term debt in the December 31, 2004
      balance sheet and in Note 8 of the consolidated financial statements is
      net of a $1,062 unamortized discount, which represents the difference
      between the exchange offer rate of $1.25 per share and the $.85 per share
      closing price of the Common Stock upon consummation of the exchange offer
      on August 4, 2003. The discount is being amortized through the date of
      maturity of the notes, including $0.2 million for the year ended December
      31, 2004. These notes are payable in semi-annual installments of
      approximately $0.5 million beginning June
2007.
  (c)
    The
      Series A Preferred Stock is subject to mandatory redemptionby
      the Company ratably on the last day of each quarter during the three-year
      period commencing on December 31, 2009 at the liquidation value of $380
      per share. The Series A Preferred Stock may be converted into Common Stock
      at the option of the holder any time or by the Company upon the occurrence
      of certain specified events.
  (d)
    AtDecember 31, 2004 the Company had committed approximately $17.1 million to
      outside vendors for the purchase of goods and services, of which
      approximately $1.1 million was related to certain capital projects. The
      remainder was primarily for inventory and other supply
items.
  ***Off-Balance
Sheet Arrangements***
 
 The
Company has no off-balance sheet arrangements or financing arrangements
involving variable interest entities.
 
 18
 Since
1993, Alpine has been a party to a guaranty of Superior's lease obligations
relating to Superior's manufacturing facility in Brownwood, Texas. The lease
currently provides for monthly payments of $56,000 subject to adjustments for
changes in the consumer price index. The lease term expires in 2018 but may be
extended through 2033. As such, the maximum potential amount of future payments
under the guaranty through 2018 would be approximately $9 million. Any further
extensions would amount to a guarantee of approximately $0.7 million per year. Since the
guarantee was issued prior to and has not been modified after December 31, 2002,
a liability for the fair value of the obligation is not recorded in the
consolidated financial statements. While
Alpine's continuing obligations, if any, under the guaranty are not free from
doubt, the Company believes the facility and underlying lease are valuable
assets of Superior and expects that Superior will perform as tenant and continue
to pay its obligations. In addition, Alpine would have a claim for
indemnification and reimbursement from Superior in respect of any amounts paid
by Alpine as guarantor.
 
 The
Company is not a party to any other guarantees. (See Note 1 to the consolidated
financial statements for further discussion).
 
 ***Other***
 
 Trading
in Alpine's Common Stock was suspended by the NYSE on July 10, 2002 and the
Common Stock was subsequently delisted. The Common Stock is currently traded on
the OTC bulletin board under the symbol APNI.OB. The delisting of the Common
Stock could impact Alpine's ability to raise funds in the equity markets in the
future.
 
 **Derivative
Financial Instruments**
 
 The
market prices of copper, the Company's most significant raw material, experience
marked fluctuations, thereby subjecting the Company to commodity price risk. The
Company, to a limited extent, uses or has used forward fixed price contracts to
manage such commodity price risks. The Company does not hold or issue financial
instruments for investment or trading purposes. The Company is exposed to credit
risk in the event of nonperformance by counter parties; however, the Company
does not anticipate such nonperformance.
 
 **Critical
Accounting Policies**
 
 The
Company's consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America. In the
preparation of these financial statements, management makes judgments, estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported consolidated amounts of
revenues and expenses during the reporting period. The significant accounting
policies followed in the preparation of the consolidated financial statements
are detailed in Note 1 to the consolidated financial statements. Management
believes that the application of policies regarding the establishment of
allowances for discounts and sales incentives, reserves for inventories,
potential impairment of long-lived assets, valuation allowances for deferred tax
assets, tax contingencies and certain accrued expenses involve significant
levels of judgments, estimates and complexity.
 
 Allowances
for discounts and sales incentives are made at the time of sale based on
incentive programs available to the customer. The cost of these programs is
dependent on various factors including the timing of the sale and the volume of
sales achieved by the customer. The Company monitors these factors and records
estimated obligations based on current sales levels as a reduction of revenue
over the periods earned.
 
 The
Company's allowances for surplus and obsolete inventory are based on estimates
of future sales and production. Changes in demand and product design can have an
impact on these estimates. The Company periodically evaluates and updates
assumptions when assessing the adequacy of inventory allowances.
 
 The
Company reviews long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of long-lived assets to be held and used is measured
by a comparison of the carrying amount of the asset to the undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows an impairment charge is recognized
in the amount by which the carrying amount exceeds the fair value of the asset.
Assumptions and estimates with respect to estimated future cash flows used in
the evaluation of long-lived asset are subject to a high degree of judgment and
complexity.
 
 The
Company has undergone several restructuring activities during the past few
years. Since January 1, 2003, costs associated with the restructuring are
recorded in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 146 "Accounting for Cost Associated with Exit or Disposal Activities",
whereby costs associated with an exit or disposal activity are recognized when
the liability is incurred. The costs associated with such activities, to the
extent that they are of a non-recurring nature due to the restructuring
activity, are recorded in a separate line in the income statement labeled
"Restructuring and other charges". This line is included in operating
income.
 
 Valuation
allowances for deferred tax assets are established when it is estimated it is
more likely than not that the tax assets will not be realized. These estimates
are based on projections of future income in certain tax jurisdictions. Changes
in industry conditions and the competitive environment may have an impact on the
accuracy of the Company's projections.
 
 19
 Significant
judgment is required in determining consolidated income tax provision and
evaluating the U.S. tax position. It is the Company’s policy to maintain tax
contingency reserves for potential tax audit issues. The Company reviews the
reserves as circumstances warrant and adjusts the reserves as events occur that
affect its potential liability for additional taxes, such as lapsing of
applicable statues of limitations, conclusion of tax audits, additional exposure
based on current calculations, identification of new issues or rendering of
court decisions affecting a particular tax issue. Tax reserve contingencies and
changes to the reserves are evaluated and recorded in the Company’s tax
provision in the period in which the above noted events occur.
 
 The
Company is involved in various legal proceedings and contingencies. Liabilities
for these matters are recorded in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 5, "Accounting for Contingencies". SFAS 5
requires a liability to be recorded based on management's estimate of the
probable cost of the resolution of a contingency. The actual resolution of these
contingencies may differ from such estimates. If a contingency is settled for an
amount greater than the Company's estimate, a future charge to income would
result. Likewise if a contingency is settled for an amount that is less than
they Company's estimate, a future credit to income would result.
 
 Due to
the level of judgment, complexity and period of time over which many of these
items are resolved, actual results could differ from those estimated at the time
of preparation of the consolidated financial statements. Adjustments to these
estimates would have an impact on the Company's financial position and future
results of operations.
 
 ***New
accounting standards***
 
 In
November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
151, “Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No.
43, Chapter 4 Inventory Pricing”, to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs and wasted material
(spoilage). This statement is effective October 1, 2005. The Company is
assessing the potential impacts of this pronouncement, but does not believe that
SFAS No. 151 will have a material effect on its financial position, results of
operations or cash flows.
 
 In
December 2004, the FASB issued SFAS No. 123R, ** “Share-Based
Payment *”* , that
requires companies to expense the value of employee stock options and similar
awards. SFAS No. 123R is effective for public companies in interim and annual
periods beginning after June 15, 2005, and applies to all outstanding and
unvested share-based payment awards at the adoption date. The Company is in the
process of evaluating the impact that the adoption of SFAS No. 123R will have to
its financial position and results of operations and cash flows.
 
 In March
of 2004, the EITF reached consensus on the disclosure guidance provided in EITF
Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments”. ** Under
EITF 03-1, an investment is impaired if the fair value of the investment is less
than its cost including adjustments for amortization, accretion, foreign
exchange, and hedging. An impairment would be considered other-than-temporary
unless a) the investor has the ability and intent to hold an investment for a
reasonable period of time sufficient for the recovery of the fair value up to
(or beyond) the cost of the investment and b) evidence indicating that the cost
of the investment is recoverable within a reasonable period of time outweighs
evidence to the contrary. This new guidance for determining whether the decline
in fair value of investment is other-than-temporary was to be effective for
reporting periods beginning after June 15, 2004. In September of 2004, the FASB
issued FSP EITF Issue 03-1-1, which suspended the effective date for the
measurement and recognition guidance included in EITF 03-1 related to
other-than-temporary impairment pending additional implementation guidance. The
Company will evaluate the impact of the accounting provisions of EITF 03-01 once
final guidance is issued.
 
 In
December of 2004, the FASB issued SFAS No. 153, “Exchanges of Non-Monetary
Assets an amendment of APB Opinion No. 29.” SFAS No. 153 amends the definition
of “exchange” or “exchange transaction” and expands the list of transactions
that would not meet the definition of non-monetary transfer. SFAS No. 153 is not
expected to have a significant impact on the results of operations or equity of
the Company.
 
 **Item
7a. Quantitative And Qualitative Disclosures About Market
Risk**
 
 The
Company's exposure to market risk primarily relates to interest rates payable in
respect of indebtedness outstanding from time to time under the Revolving Credit
Facility (see preceding table on Contractual Obligations) and copper futures
used to minimize the price risk associated with copper prices (see Derivative
Financial Instruments). A potential change in annual interest expense resulting
from a hypothetical one percent change in interest rates would have had an
impact on the Company’s results in 2004 of approximately $0.3 million. The cost
of copper, the Company's most significant raw material has been subject to
significant volatility over the past several years. In anticipation of a
significant reduction in inventory levels in 2003, the Company entered into
copper futures sales contracts to minimize the price risk associated with
declining copper costs. These contracts were liquidated throughout the year in
step with the decreases in inventory **.** In
December 2004, the Company purchased approximately $9 million of copper
inventory for use in the production process in the first quarter of 2005. In
connection with these purchases, the Company entered into copper futures
contracts to match the copper price to the consumption period. These contracts
were marked to market at December 31, 2004, resulting in a charge to earnings of
$0.4 million. These contracts were subsequently liquidated in the first quarter
of 2005.
 
 20
 **Item
8. Financial Statements And Supplementary Data**
 
 Alpine's
consolidated financial statements as of December 31, 2004 and 2003 and
financial statement schedules for each of the years in the three-year period
ended December 31, 2004 and the report of the independent registered public
accounting firm thereon required under Regulation S-X are submitted herein
as a separate section following Item 15 of this report.
 
 **Item
9. Changes In And Disagreements With Accountants On Accounting And Financial
Disclosure**
 
 None.
 
 **Item
9A. Controls and Procedures**
 
 *Evaluation
of Controls and Procedures*
 
 As of the
end of the period covered by this Annual Report on Form 10-K, an evaluation
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures was carried out by the Company under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and Chief Financial Officer. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective at a reasonable assurance
level as of the end of the period covered by this Annual Report on form 10-K. A
system of controls, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the system of controls are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected. There have
been no changes in the Company's internal control over financial reporting that
occurred during the most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
 
 *Except
for the historical information herein, the matters discussed in this annual
report on form 10-K include forward-looking statements that may involve a
number of risks and uncertainties. Actual results may vary significantly based
on a number of factors, including, but not limited to, risks in product and
technology development, market acceptance of new products and continuing product
demand, prediction and timing of customer orders, the impact of competitive
products and pricing, changing economic conditions, including changes in short
term interest rates and other risk factors detailed in the Company's most recent
filings with the Securities and Exchange Commission.*
 
 21
 
  **PART
III**
 
 **Item
10. Directors And Executive Officers Of Registrant**
 
 The
information required by this item will be filed by amendment to this
Form 10-K.
 
 **Item
11. Executive Compensation**
 
 The
information required by this item will be filed by amendment to this
Form 10-K.
 
 **Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters**
 
 The
      information required by this item will be filed by amendment to this
      Form 10-K.
 
 **Item
13. Certain Relationships and Related Transactions**
 
 The
information required by this item will be filed by amendment to this
Form 10-K.
 
 **Item
14. Principal Accounting Fees and Services**
 
 The
information required by this item will be filed by amendment to this
Form 10-K.
  22
 
 ****
 ****
 **PART
IV**
 
 **Item
15. Exhibits, Financial Statement Schedules, And Reports On
Form 8-K**
 
 (a)(1),
      (a)(2) See the separate section of this report following Item 15 for a
      list of financial statements and schedules filed herewith.
 
 (a)(3)
      Exhibits as required by Item 601 of Regulation S-K are listed in Item
      15(b) below.
 
 (b)
      Exhibits
 
 **Exhibit**
      **Number**
    
    **Description**2(a)
    
    Purchase
      Agreement, dated October 31, 2002, by and among Superior TeleCom Inc.,
      Superior Telecommunications Inc., Essex International Inc., Essex Group,
      Inc., The Alpine Group, Inc. and Alpine Holdco Inc. (incorporated herein
      by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of
      Alpine for the quarter ended September 30, 2002).3(a)
    
    Certificate
      of Incorporation of Alpine (incorporated herein by reference to Exhibit
      3(a) to the Annual Report on Form 10-K of Alpine for the year ended April
      30, 1995 (the "1995 10-K")).3(b)
    
    Amendment
      to the Certificate of Incorporation of Alpine (incorporated herein by
      reference to Exhibit 3(aa) of Post-Effective Amendment No. 1 to the
      Registration Statement on Form S-3 (Registration No. 33-53434) of Alpine,
      as filed with the Commission on May 12, 1993).3(c)
    
    Certificate
      of the Powers, Designations, Preferences and Rights of the 9% Cumulative
      Convertible Preferred Stock of Alpine (incorporated herein by reference to
      Exhibit 1 to the Quarterly Report on Form 10-Q of Alpine for the quarter
      ended January 31, 1989).3(d)
    
    By-laws
      of Alpine (incorporated herein by reference to Exhibit 3(g)to the 1995
      10-K).3(e)
    
    Certificate of the Powers, Designations,
      Preferences and Rights of the Series A Cumulative Convertible Preferred
      Stock of Alpine (incorporated herein by reference to Exhibit 3.1 to the
      Quarterly Report on Form 10Q of Alpine for the quarter ended June 30, 2003
      (the "June 30, 2003 10-Q”))3(f)*
    
    Certificate
      of Amendment of Certificate of Incorporation of Alpine dated December 29,
      2004.4(a)
    
    Rights
      Agreement, dated as of February 17, 1999, between Alpine and American
      Stock Transfer & Trust Company, as Rights Agent (incorporated herein
      by reference to Exhibit 4.1 to the Form 8-A of Alpine, as filed with the
      Commission on February 18, 1999).4(b)
    
    Amendment
      No. 1, dated March 10, 2003, to the Rights Agreement, dated as of February
      17, 1999, between The Alpine Group, Inc. and American Stock Transfer &
      Trust Company, as rights agent (incorporated herein by reference to
      Exhibit 4.1 to the Current Report on Form 8-K of Alpine filed on March 11,
      2003).4(c)
    
    Indenture
      dated as of August 4, 2003 between Alpine and American Stock Transfer
      & Trust Company, as Trustee, relating to Alpine 6% junior subordinated
      notes (incorporated herein by reference to Exhibit 4.1 to the June 30,
      2003 10-Q).10(a)
    
    Amended
      and Restated 1984 Restricted Stock Plan of Alpine (incorporated herein by
      reference to Exhibit 10.5 to the Registration Statement on Form S-4
      (Registration No. 33-9978)of Alpine, as filed with the Commission on
      October 5, 1993 (the "S-4 Registration Statement")).10(b)
    
    Amended
      and Restated 1987 Long-Term Equity Incentive Plan of Alpine (incorporated
      herein by reference to Exhibit 10.4 to the S-4 Registration
      Statement).10(c)
    
    Employee
      Stock Purchase Plan of Alpine (incorporated herein by reference to Exhibit
      B to the proxy statement of Alpine dated August 22,
  1997).10(d)
    
    1997
      Stock Option Plan (incorporated herein by reference to Exhibit 10(tt)to
      the 1997 10-K).10(e)
    
    Stock
      Compensation Plan for Non-Employee Directors of Alpine (incorporated
      herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
      of Alpine for the quarter ended January 30, 1999).10(f)
    
    Lease
      Agreement by and between ALP(TX)QRS 11-28, Inc., and Superior TeleTec
      Transmission Products, Inc., dated as of December 16, 1993 (incorporated
      herein by reference to Exhibit (i)to the Quarterly Report on Form 10-Q of
      Alpine for the quarter ended January 31, 1994).10(g)
    
    First
      Amendment to Lease Agreement, dated as of May 10, 1995, by and between ALP
      (TX)QRS 11-28, Inc. and Superior TeleTec Inc. (incorporated herein by
      reference to Exhibit 10(o)to the 1995 10-K).10(h)
    
    Second
      Amendment to Lease Agreement, dated as of July 21, 1995, by and between
      ALP(TX)QRS 11-28, Inc. and Superior Telecommunications Inc. (incorporated
      herein by reference to Exhibit 10(x)to the 1995
10-K).
  23
  10(i)
    
    Third
      Amendment to Lease Agreement, dated as of October 2, 1996, by and between
      ALP(TX)QRS 11-28, Inc. and Superior Telecommunications Inc. (incorporated
      herein by reference to Exhibit 10.8 to the Registration Statement on Form
      S-1 (Registration No. 333-09933)of Superior TeleCom, as filed with the
      Commission on August 9, 1996, as amended (the "TeleCom
    S-1")).10(j)
    
    First
      Amendment to Guaranty and Surety Agreement, dated as of October 2, 1996,
      among the Company, Superior TeleCom and ALP (TX)QRS 11-28, Inc.
      (incorporated herein by reference to Exhibit 10.12 to the TeleCom
      S-1).10(k)
    
    Employment
      Agreement, dated as of April 26, 1996, by and between Alpine and Steven S.
      Elbaum (incorporated herein by reference to Exhibit 10(q) Annual Report on
      Form 10-K of Alpine for the year ended April 30, 1996 (the "1996
      10-K").10(l)
    
    Second
      Amendment, dated May 14, 2003, to the Loan and Security Agreement by and
      among the lenders identified on the signature pages thereof (together with
      their respective successors and assigns), Congress Financial Corporation,
      as documentation agent, Foothill Capital Corporation, as arranger and
      administrative agent, Alpine Holdco Inc., DNE Manufacturing and Service
      Company, DNE Technologies, Inc., Essex Electric Inc. as borrowers, and DNE
      Systems, Inc. as a credit party (incorporated herein by reference to the
      Quarterly Report on Form 10-Q of Alpine for the quarter ended March 31,
      2003).10(m)
    
    Third
      Amendment, dated May 31, 2003, to the Loan and Security Agreement by and
      among the lenders identified on the signature pages thereof (together with
      their respective successors and assigns), Congress Financial Corporation,
      as documentation agent, Foothill Capital Corporation, as arranger and
      administrative agent, Alpine Holdco Inc., DNE Manufacturing and Service
      Company, DNE Technologies, Inc., Essex Electric Inc. as borrowers, and DNE
      Systems, Inc. as a credit party (incorporated herein by reference to the
      June 30, 2003 10-Q).10(n)
    
    Amendment
      No. 1, dated as of March 15, 1999, to The Alpine Group, Inc. 1997 Stock
      Option Plan (incorporated herein by reference to Exhibit 10(ll)to the 1999
      10-K).10(o)
    
    Amendment
      No. 2, dated as of April 1, 1999, to The Alpine Group, Inc. 1997 Stock
      Option Plan (incorporated herein by reference to Exhibit 10(mm)to the 1999
      10-K).10(p)
    
    Amendment
      No. 3, dated as of May 14, 1999, to The Alpine Group, Inc. 1997 Stock
      Option Plan (incorporated herein by reference to Exhibit 10(nn)to the 1999
      10-K).10(q)
    
    Fourth
      Amendment to Lease Agreement, dated as of November 27, 1998, between ALP
      (TX)QRS 11-28, Inc. and Superior Telecommunications Inc. (incorporated
      herein by reference to Exhibit 10(x)to the Annual Report on Form 10-K of
      Superior TeleCom Inc. for the year ended December 31, 1999 (the "Superior
      1999 10-K").10(r)
    
    Second
      Amendment to Guaranty and Suretyship Agreement, dated as of November 27,
      1998, among ALP (TX)QRS 11-28, Inc., Superior TeleCom and Alpine
      (incorporated herein by reference to Exhibit 10(y)to the Superior 1999
      10-K).10(s)
    
    The
      Alpine Group, Inc. Deferred Stock Account Plan (incorporated herein by
      reference to Exhibit 10(ss) to the Annual Report on Form 10-K of the
      Company for the year ended December 31, 2000 (the "2000
      10-K").10(t)
    
    Amendment
      Number One to The Alpine Group, Inc. Senior Executive Retirement Plan
      (Amended and Restated as of January 1, 2001) (incorporated herein by
      reference to Exhibit 10(ggg) to the Annual Report on Form 10-K of Alpine
      for the year ended December 31, 2001 (the "2001
10-K")).10(u)
    
    Fifth
      Amendment to Lease Agreement and Waiver, dated as of December 27, 2001,
      between ALP (TX) QRS 11-28, Inc. and Superior Telecommunications Inc.
      (incorporated herein by reference to Exhibit 10(yy) to the Annual Report
      on Form 10-K of Superior TeleCom Inc. for the year ended December 31, 2001
      ("the Superior 2001 10-K")).10(v)
    
    Loan
      and Security Agreement, dated as of December 11, 2002, by and among the
      lenders identified on the signature pages thereof (together with their
      respective successors and assigns), Congress Financial Corporation
      (Southern), as documentation agent, Foothill Capital Corporation, as
      arranger and administrative agent, Alpine Holdco Inc., DNE Manufacturing
      and Service Company, DNE Technologies, Inc. and Essex Electric Inc., as
      borrowers, and DNE Systems, Inc., as a credit party (incorporated herein
      by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpine
      filed on December 26, 2002).10(w)
    
    Amendment,
      dated January 3, 2003, to the Employment Agreement, dated as of April 26,
      1996, by and between Alpine and Steven S. Elbaum (incorporated herein by
      reference to Exhibit 10(ll) to the Annual Report on Form 10-K of Alpine
      for the year ended December 31, 2002 (the "2002
10-K")).10(x)
    
    Amended
      and Restated Employment Agreement, dated as of December 11, 2002,
      between Essex Electric Inc. and Harold M. Karp (incorporated herein
      by reference to Exhibit 10(mm) to the 2002 10-K).10(y)
    
    Management
      agreement dated December 11, 2002, between Alpine and Alpine Holdco
      Inc. (incorporated by reference to Exhibit 10(nn) to the 2002
      10-K).10(z)
    
    Consent,
      Amendment and Waiver to Lease Agreement, dated as of December 11,
      2002, between ST (TX) LP and Superior Telecommunications Inc.
      (incorporated herein by reference to Exhibit 10(oo) to the 2002
      10-K).
  24
  10(aa)
    
    Warrant
      dated December 11, 2002 from Essex Electric Inc. ("Essex") issued to
      Superior Telecom Inc. ("Superior") (incorporated by reference to Exhibit
      10(aa) to the Annual Report on Form 10-K of Alpine for the year ended
      December 31, 2003 (the “2003 10-K”)).10(bb)
    
    Securityholders
      Agreement dated as of December 11, 2002 by and among Essex, Alpine Holdco
      ("Holdco") and Superior (incorporated by reference to Exhibit 10(bb) of
      the 2003 10-K).10(cc)
    
    Amendment
      No. 1 to Securityholders Agreement dated September 23, 2002 by and among
      Essex, Holdco and Superior (incorporated by reference to Exhibit 10(cc) of
      the 2003 10-K).10(dd)
    
    Employment
      Arrangement between The Alpine Group, Inc. and K. Mitchell Posner, dated
      March 24, 2003 (incorporated reference to Exhibit 10(dd) of the 2003
      10-K).10(ee)
    
    Employment
      Agreement between the Essex Electric Inc. and David A. Owen dated May 13,
      2003 (incorporated by reference to Exhibit 10(ee) of the 2003
      10-K).10(ff)
    
    Fourth
      Amendment, dated December 8, 2003, to Loan and Security Agreement by and
      among the lenders identified on the signature pages thereof (together with
      their respective successors and assigns), Wells Fargo Foothill, Inc., as
      agent and Congress Financial Corporation, as documentation agent, Alpine
      Holdco Inc., DNE Manufacturing and Services Company, DNE Technologies,
      Inc. and Essex Electric Inc., as borrowers, and DNE Systems, Inc., as
      credit party (incorporated herein by reference to Exhibit 10(ff) of the
      2003 10-K).10(gg)
    
    Employment
      Agreement, dated as of April 26, 1996, by and between Alpine and Bragi F.
      Schut (incorporated herein by reference to Exhibit 10(s) to the 1996
      10-K).10(hh)
    
    Employment
      Agreement, dated as of November 10, 1993, by and between Alpine and James
      R. Kanely (incorporated herein by reference to Exhibit 10(v) to the 1995
      10-K).10(ii)
    
    Form
      of subscription agreement entered into on June 23, 2003 by certain
      officers and directors of Alpine in connection with the private placement
      of the Series A Preferred Stock (incorporated herein by reference to
      Exhibit 10(ii) of the 2003 10-K).10(jj)
    
    Stock
      Purchase Agreement between Alpine Holdco Inc. and Ultra Electronics
      Defense, Inc., dated as of June 18, 2004 (incorporated herein by reference
      to Exhibit 10(gg) to the Quarterly Report on Form 10-Q of Alpine for the
      period ended June 30, 2004).10(kk)
    
    Amendment
      Number One to The Alpine Group, Inc. Stock Compensation Plan for
      Non-Employee Directors, dated July 1, 2004 (incorporated herein by
      reference to Exhibit 10(jj) to the Quarterly Report on Form 10-Q of Alpine
      for the period ended September 30, 2004 (the “September 30, 2004
      10-Q”).10(ll)
    
    Amendment
      Number One to The Alpine Group, Inc. Deferred Stock Account Plan, dated
      July 30, 2004 (incorporated herein by reference to Exhibit 10(kk) to the
      September 30, 2004 10-Q).10(mm)
    
    Fifth
      Amendment to Loan and Security Agreement, dated November 10, 2004 by and
      among Alpine Holdco Inc. and Essex Electric Inc. as borrowers and Wells
      Fargo, Foothill, Inc. as agent for the lenders and as a lender, Congress
      Financial Corporation (Central), and the lenders from time to time party
      thereto (incorporated by reference to Exhibit 10(ll) to the September 30,
      2004 10-Q).10(nn)*
    
    Sixth
      Amendment to Loan and Security Agreement, dated February 28, 2005 by and
      among Alpine Holdco Inc. and Essex Electric Inc. as borrower and Wells
      Fargo, Foothill, Inc. as agent for the lenders and as a lender, Congress
      Financial Corporation (Central), as documentation agent and as a lender,
      and the lenders from time to time party thereto.21*
    
    List
      of Subsidiaries23(a)*
    
    Consent
      of Deloitte & Touche LLP31.1*
    
    Certification
      of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2*
    
    Certification
      of the Company's Chief Financial Officer pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32*
    
    Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      Sarbanes-Oxley Act of 2002


*
    Filed
      herewith.
  25
 **SIGNATURES**
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
  Date: March 31,
      2005THE ALPINE GROUP,
      INC.By:
    /s/ STEVEN
      S. ELBAUMSteven S. Elbaum*Chairman of the Board and
      Chief Executive Officer*
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
   Name
    
    Title
    
    Date/s/
      STEVEN
      S. ELBAUM
    
    Chairman
      of the Board and ChiefSteven S. Elbaum
    
    Executive Officer (principal executive
      officer)
    
    March 31, 2005/s/
      DAVID
      A. OWEN
    
    Chief
      Financial Officer (principal financial and
    
    March
      31, 2005David A. Owen
    
    and accounting officer)/s/
      KENNETH
      G. BYERS,
      JR.
    
    Director
    
    March
      31, 2005Kenneth G. Byers, Jr/s/ RANDOLPH
      HARRISON
    
    Director
    
    March
      31, 2005Randolph Harrison/s/
      JOHN
      C. JANSING
    
    Director
    
    March
      31, 2005John C. Jansing/s/
      JAMES
      R. KANELY
    
    Director
    
    March
      31, 2005James R. Kanely/s/
      BRAGI
      F. SCHUT
    
    Director
    
    March
      31, 2005Bragi F. Schut
 
 26
 
 **INDEX
TO FINANCIAL STATEMENTS**
 
 **PAGE****AUDITED
      CONSOLIDATED FINANCIAL STATEMENTS:**Report
      of independent registered public accounting firm
    F-2Consolidated
      balance sheets at December 31, 2004 and 2003
    F-3Consolidated
      statements of operations for each of the years in the three-year period
      ended December 31, 2004
    F-4Consolidated
      statements of stockholders’ equity (deficit) for each of the years in the
      three-year period ended December 31, 2004
    F-6Consolidated
      statements of cash flows for each of the years in the three-year period
      ended December 31, 2004
    F-8Notes
      to consolidated financial statements
    F-10**SCHEDULES:**Schedule
      I—Condensed
      financial information of registrant (Parent Company)
    F-45Schedule
      II—Valuation
      and qualifying accounts
    F-49
 
  F-1
 **REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
  To the
Board of Directors and stockholders of
 The
Alpine Group, Inc.
 Ft.
Wayne, Indiana
  We have
audited the accompanying consolidated balance sheets of The Alpine Group, Inc.
and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the
related consolidated statements of operations, stockholders’ equity (deficit),
and cash flows for each of the three years in the period ended December 31,
2004. Our audits also included the financial statement schedules listed in the
Index at Item 15. These consolidated financial statements and financial
statement schedules are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the consolidated financial statements
and financial statement schedules based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of The Alpine Group, Inc. and subsidiaries as
of December 31, 2004 and 2003, and the results of their operations and
their cash flows for the each of the three years in the period ended December
31, 2004, in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
  As
discussed in Note 1 to the consolidated financial statements: (1) the Company
reclassified a 2002 gain on early extinguishment of debt, previously recorded as
extraordinary items, to other income (expense) to conform to Statement of
Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections”; and (2)
the Company changed its method of accounting for costs associated with exit or
disposal activities in 2003 to conform to Statement of Financial Accounting
Standards No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities.”
  DELOITTE & TOUCHE LLP
 
 Indianapolis,
Indiana
 March 31,
2005
  F-2
 
  **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
BALANCE SHEETS**
 **(in
thousands, except share data)**
 
 **December
      31,**
    
    **December
      31,****ASSETS**
    
    **2004**
    
    **2003**Current
      assets:Cash
      and cash equivalents
    
    $
    611
    
    $
    465Marketable
      securities, at fair value (Note 1)
    
    
    35,827
    
    
    6,761Accounts
      receivable (less allowance for doubtful accounts of $387 and $263 atDecember
      31, 2004 and 2003, respectively)
    
    
    41,091
    
    
    32,328Inventories,
      net (Note 2)
    
    
    30,417
    
    
    37,169Current
      assets of discontinued operations (Note
    4)
    
    
    —
    
    
    7,534Other
      current assets
    
    
    4,992
    
    
    3,577Total
      current assets
    
    
    112,938
    
    
    87,834Property,
      plant and equipment, net (Note 3)
    
    
    16,927
    
    
    15,241Assets
      of discontinued operations (Note 4)
    
    
    —
    
    
    1,766Deferred
      income taxes (Note 13)
    
    
    264
    
    
    —Other
      assets
    
    
    2,658
    
    
    2,947Total
      assets
    
    $
    132,787
    
    $
    107,788**LIABILITIES
      AND STOCKHOLDERS’ EQUITY**Current
      liabilities:Revolving
      credit facility (Note 7)
    
    $
    40,250
    
    $
    17,189Current
      portion of long-term debt (Note 8)
    
    
    386
    
    
    137Accounts
      payable
    
    
    14,010
    
    
    21,088Accrued
      expenses (Note 6)
    
    
    11,054
    
    
    11,247Current
      liabilities of discontinued operations (Note
      4)
    
    
    —
    
    
    2,223Accrued
      income taxes
    
    
    5,247
    
    
    47Deferred
      income taxes (Note 13)
    
    
    8,182
    
    
    7,644Total
      current liabilities
    
    
    79,129
    
    
    59,575Long-term
      debt, less current portion (Note 8)
    
    
    3,122
    
    
    3,777Deferred
      income taxes (Note 13)
    
    
    —
    
    
    1,419Other
      long-term liabilities (Note 9)
    
    
    17,842
    
    
    17,651Warrant
      (Note 5)
    
    
    936
    
    
    1,000Minority
      interest in subsidiary
    
    
    2,218
    
    
    2,686Liabilities
      of discontinued operations (Note 4)
    
    
    —
    
    
    157Mandatorily
      redeemable series A convertible preferred stock (18,264 shares issued and
      14,697 and 18,174 shares outstanding at December 31, 2004 and 2003,
      respectively) (Note 18)
    
    
    5,545
    
    
    5,665Commitments
      and contingencies (Notes 8, 13 and 16)Stockholders’
      equity:9%
      cumulative convertible preferred stock at liquidation
      value
    
    
    177
    
    
    427Common
      stock, $.10 par value; (50,000,000 and 25,000,000 authorized; and
      24,670,054 and 22,146,884 shares issued at December 31, 2004 and 2003,
      respectively)
    
    
    2,467
    
    
    2,214Capital
      in excess of par value
    
    
    168,446
    
    
    165,706Accumulated
      other comprehensive income (loss)
    
    
    (20
    )
    
    57Accumulated
      deficit
    
    
    (52,955
    )
    
    (58,201
    )Treasury
      stock, at cost (10,929,985 and 11,109,872 shares at December 31, 2004and
      2003, respectively)
    
    
    (93,705
    )
    
    (93,861
    )Receivable
      from stockholders
    
    
    (415
    )
    
    (484
    )Total
      stockholders’ equity
    
    
    23,995
    
    
    15,858Total
      liabilities and stockholders’ equity
    
    $
    132,787
    
    $
    107,788
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
  **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS**
 **(in
thousands, except per share data)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Net
      sales
    
    $
    315,894
    
    $
    302,112
    
    $
    1,364,007Cost
      of goods sold
    
    
    296,338
    
    
    286,947
    
    
    1,208,774Gross
      profit
    
    
    19,556
    
    
    15,165
    
    
    155,233Selling,
      general and administrative expenses
    
    
    24,945
    
    
    31,601
    
    
    132,942Restructuring
      and other charges
    
    
    3,896
    
    
    13,552
    
    
    36,485Loss
      on asset sale and impairments (Notes 1 and 14)
    
    
    335
    
    
    592
    
    
    463,716Operating
      loss
    
    
    (9,620
    )
    
    (30,580
    )
    
    (477,910
    )Interest
      expense (Note 1)
    
    
    (3,039
    )
    
    (3,676
    )
    
    (104,819
    )Gain
      on cancellation of equity investment in Superior (Note 1)
    
    
    —
    
    
    854,262
    
    
    —Loss
      on investments in securities
    
    
    —
    
    
    —
    
    
    (4,085
    )Other
      income (expense), net (Note 1)
    
    
    (264
    )
    
    70
    
    
    598Income
      (loss) from continuing operations before income taxes, distributions on
      preferred securities of subsidiary trust, minority interest, equity in net
      loss of affiliate, extraordinary item and cumulative effect of accounting
      change
    
    
    (12,923
    )
    
    820,076
    
    
    (586,216
    )Benefit
      for income taxes
    
    
    5,312
    
    
    10,709
    
    
    95,323Income
      (loss) from continuing operations before distributions on preferred
      securities of subsidiary trust, minority interest, equity in earnings of
      affiliate, extraordinary item and cumulative effect of accounting
      change
    
    
    (7,611
    )
    
    830,785
    
    
    (490,893
    )Distributions
      on preferred securities of subsidiary trust
    
    
    —
    
    
    —
    
    
    (15,223
    )Income
      (loss) from continuing operations before minority interest, equity in
      earnings of affiliate, extraordinary item and cumulative effect of
      accounting change
    
    
    (7,611
    )
    
    830,785
    
    
    (506,116
    )Minority
      interest in losses of subsidiary
    
    
    468
    
    
    526
    
    
    3,462Equity
      in net loss of affiliate
    
    
    —
    
    
    (86
    )
    
    (136
    )Income
      (loss) from continuing operations before extraordinary item and cumulative
      effect of accounting change
    
    
    (7,143
    )
    
    831,225
    
    
    (502,790
    )Discontinued
      operations (Note 4):Income
      from discontinued operations, net of tax of $1,115, $1,897 and $642
      respectively
    
    
    1,502
    
    
    3,551
    
    
    3,721Gain
      on sale of DNE, net of taxes of $10,275
    
    
    19,081
    
    
    —
    
    
    —Income
      (loss) before extraordinary item and cumulative effect of accounting
      change
    
    
    13,440
    
    
    834,776
    
    
    (499,069
    )
 
 (continued)
 The
accompanying notes are an integral part of these consolidated financial
statements
 
 
 F-4
  **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS**
 **(in
thousands, except per share data)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Extraordinary
      gain from unallocated negative goodwill
    
    
    —
    
    
    —
    
    
    12,554Cumulative
      effect of accounting change for goodwill impairment net of minority
      interest
    
    
    —
    
    
    —
    
    
    (388,086
    )Net
      income (loss)
    
    
    13,440
    
    
    834,776
    
    
    (874,601
    )Preferred
      stock dividends
    
    
    (2,044
    )
    
    (206
    )
    
    (38
    )Preferred
      stock dividends beneficial conversion feature
    
    
    (1,203
    )
    
    (2,550
    )
    
    —Net
      income (loss) applicable to common stock
    
    $
    10,193
    
    $
    832,020
    
    $
    (874,639
    )Net
      income (loss) per share of common stock:Basic:Income
      (loss) attributable to common stock from continuing operations before
      extraordinary item and cumulative effect of accounting
    change
    
    $
    (0.77
    )
    $
    60.13
    
    $
    (33.86
    )Income
      from discontinued operations
    
    
    0.11
    
    
    0.26
    
    
    0.25Gain
      on sale of DNE
    
    
    1.42
    
    
    —
    
    
    —Extraordinary
      items
    
    
    —
    
    
    —
    
    
    0.85Cumulative
      effect of accounting change
    
    
    —
    
    
    —
    
    
    (26.13
    )Net
      income (loss) per basic share of common stock
    
    $
    0.76
    
    $
    60.39
    
    $
    (58.89
    )Diluted:Income
      (loss) from continuing operations before extraordinary item and cumulative
      effect of accounting change
    
    $
    (0.77
    )
    $
    51.01
    
    $
    (33.86
    )Income
      from discontinued operations
    
    
    0.11
    
    
    0.22
    
    
    0.25Gain
      on sale of DNE
    
    
    1.42
    
    
    —
    
    
    —Extraordinary
      items
    
    
    —
    
    
    —
    
    
    0.85Cumulative
      effect of accounting change
    
    
    —
    
    
    —
    
    
    (26.13
    )Net
      income (loss) per diluted share of common stock
    
    $
    0.76
    
    $
    51.23
    
    $
    (58.89
    )Weighted
      average shares outstanding:Basic
    
    
    13,440
    
    
    13,778
    
    
    14,851Diluted
    
    
    13,440
    
    
    16,240
    
    
    14,851
  The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-5
 
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)**
 **(in
thousands, except share data)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****Shares**
    
    **Amount**
    
    **Shares**
    
    **Amount**
    
    **Shares**
    
    **Amount**Common
      stock:Balance
      at beginning of period
    
    
    22,146,884
    
    $
    2,214
    
    
    22,084,694
    
    $
    2,208
    
    
    21,923,705
    
    $
    2,192Employee
      stock purchase plan
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    153,053
    
    
    15Compensation
      expense related to stock options and grants
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    7,936
    
    
    1Shares
      issued pursuant to the Series A Preferred Stock conversion
    
    
    2,403,543
    
    
    241
    
    
    62,190
    
    
    6
    
    
    —
    
    
    —Exercise
      of stock options
    
    
    119,627
    
    
    12
    
    
    —
    
    
    —
    
    
    —
    
    
    —Balance
      at end of period
    
    
    24,670,054
    
    $
    2,467
    
    
    22,146,884
    
    $
    2,214
    
    
    22,084,694
    
    $
    2,208Capital
      in excess of par value:Balance
      at beginning of period
    
    
    
    
    $
    165,706
    
    
    
    
    $
    165,195
    
    
    
    
    $
    163,425Effect
      of subsidiaries' equity transactions
    
    
    
    
    
    —
    
    
    
    
    
    —
    
    
    
    
    
    1,410Employee
      stock purchase plan
    
    
    
    
    
    —
    
    
    
    
    
    —
    
    
    
    
    
    124Compensation
      expense related to restricted stock and certain stock options, less vested
      shares released from Treasury
    
    
    
    
    
    1,580
    
    
    
    
    
    (3,270
    )
    
    
    
    
    236Beneficial
      conversion feature on preferred stock recorded at issuance
    
    
    
    
    
    —
    
    
    
    
    
    3,753
    
    
    
    
    
    —Shares
      issued pursuant to the Series A Preferred Stock Conversion
    
    
    
    
    
    1,081
    
    
    
    
    
    28
    
    
    
    
    
    —Exercise
      of stock options
    
    
    
    
    
    79
    
    
    
    
    
    —
    
    
    
    
    
    —Balance
      at end of period
    
    
    
    
    
    168,446
    
    
    
    
    
    165,706
    
    
    
    
    
    165,1959%
      cumulative convertible preferred stock:Balance
      at beginning of period
    
    
    427
    
    
    427
    
    
    427
    
    
    427
    
    
    427
    
    
    427Redemption
      of 9% Preferred Stock
    
    
    (250
    )
    
    (250
    )
    
    —
    
    
    —
    
    
    —
    
    
    —Balance
      at end of period
    
    
    177
    
    
    177
    
    
    427
    
    
    427
    
    
    427
    
    
    427Accumulated
      other comprehensive income (loss):Balance
      at beginning of period
    
    
    
    
    
    57
    
    
    
    
    
    (11,597
    )
    
    
    
    
    (7,929
    )Reversal
      of other comprehensive loss associated with Superior (Note
    1)
    
    
    
    
    
    —
    
    
    
    
    
    11,624
    
    
    
    
    
    —Foreign
      currency translation adjustment
    
    
    
    
    
    —
    
    
    
    
    
    —
    
    
    
    
    
    1,104
 
 (Continued)
 The
accompanying notes are an integral part of these consolidated financial
statements.
 F-6
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)**
 **(in
thousands, except share data)**
 
  **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****Shares**
    
    **Amount**
    
    **Shares**
    
    **Amount**
    
    **Shares**
    
    **Amount**Additional
      minimum pension liability (net of tax benefit of $3,554)
    
    
    
    
    
    —
    
    
    
    
    
    —
    
    
    
    
    
    (6,316
    )Realized
      net losses in value of securities (net of tax benefit of $6 and $2,851for
      2004 and 2002, respectively)
    
    
    
    
    
    9
    
    
    
    
    
    —
    
    
    
    
    
    4,277Change
      in unrealized gains (losses) on securities, (net of tax benefit of $35,
      $32, and $2,011, respectively)
    
    
    
    
    
    (62
    )
    
    
    
    
    30
    
    
    
    
    
    (4,258
    )Change
      in minimum pension liability (net of tax benefitof
      $17)
    
    
    
    
    
    (24
    )
    
    
    
    
    —
    
    
    
    
    
    —Change
      in unrealized gain on derivatives
    
    
    
    
    
    —
    
    
    
    
    
    —
    
    
    
    
    
    1,525Balance
      at end of period
    
    
    
    
    
    (20
    )
    
    
    
    
    57
    
    
    
    
    
    (11,597
    )Accumulated
      deficit:Balance
      at beginning of period
    
    
    
    
    
    (58,201
    )
    
    
    
    
    (890,221
    )
    
    
    
    
    (15,582
    )Net
      income (loss)
    
    
    
    
    
    13,440
    
    
    
    
    
    834,776
    
    
    
    
    
    (874,601
    )Dividends
      on preferred stock
    
    
    
    
    
    (2,044
    )
    
    
    
    
    (206
    )
    
    
    
    
    (38
    )Dividends
      on common stock
    
    
    
    
    
    (4,947
    )
    
    
    
    
    —
    
    
    
    
    
    —Preferred
      stock dividends, beneficial conversion feature
    
    
    
    
    
    (1,203
    )
    
    
    
    
    (2,550
    )
    
    
    
    
    —Balance
      at end of period
    
    
    
    
    
    (52,955
    )
    
    
    
    
    (58,201
    )
    
    
    
    
    (890,221
    )Treasury
      stock:Balance
      at beginning of period
    
    
    (11,109,872
    )
    
    (93,861
    )
    
    (7,963,203
    )
    
    (94,574
    )
    
    (8,018,495
    )
    
    (95,592
    )Purchase
      of treasury stock
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (37,712
    )
    
    (76
    )Conversion
      of common stock to junior subordinated notes
    
    
    —
    
    
    —
    
    
    (3,479,656
    )
    
    (2,959
    )
    
    —
    
    
    —Stock
      options and grants
    
    
    199,481
    
    
    196
    
    
    332,987
    
    
    3,672
    
    
    93,004
    
    
    1,094Reverse
      / forward split redemptions (Note 22)
    
    
    (19,594
    )
    
    (40
    )
    
    —
    
    
    —
    
    
    —
    
    
    —Balance
      at end of period
    
    
    (10,929,985
    )
    
    (93,705
    )
    
    (11,109,872
    )
    $
    (93,861
    )
    
    (7,963,203
    )
    $
    (94,574
    )Receivable
      from stockholders:Balance
      at beginning of period
    
    
    
    
    
    (484
    )
    
    
    
    
    (553
    )
    
    
    
    
    (872
    )Forgiveness
      of Officers' loans
    
    
    
    
    
    69
    
    
    
    
    
    69
    
    
    
    
    
    319Balance
      at end of period
    
    
    
    
    
    (415
    )
    
    
    
    
    (484
    )
    
    
    
    
    (553
    )Total
      stockholders’ equity (deficit)
    
    
    
    
    $
    23,995
    
    
    
    
    $
    15,858
    
    
    
    
    $
    (829,115
    )Comprehensive
      income (loss)
    
    
    
    
    $
    13,363
    
    
    
    
    $
    846,430
    
    
    
    
    $
    (878,269
    )
  
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-7
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 **(in
thousands)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Cash
      flows from operating activities:Income
      (loss) before extraordinary item and cumulative effect of accounting
      change
    
    $
    13,440
    
    $
    834,776
    
    $
    (499,069
    )Adjustments
      to reconcile income (loss) from continuing operations to net cash (used
      for) provided by operating activities:Gain
      on sale of DNE
    
    
    (29,356
    )
    
    —
    
    
    —Depreciation
    
    
    1,146
    
    
    1,105
    
    
    41,270Loss
      on asset sales and subsidiary stock, net of
      impairments
    
    
    496
    
    
    663
    
    
    481,766Gain
      on early extinguishment of debt, net of
    tax
    
    
    —
    
    
    —
    
    
    (1,389
    )Deferred
      distributions on subsidiary Trust Convertible Preferred
      Securities
    
    
    —
    
    
    —
    
    
    15,424Gain
      on cancellation of investment in
Superior
    
    
    —
    
    
    (854,262
    )
    
    —Gain
      loss on investments in securities
    
    
    (16
    )
    
    (106
    )
    
    4,085Amortization
      of deferred debt issuance costs and accretion of debt
      discount
    
    
    613
    
    
    1,294
    
    
    14,622Interest
      costs satisfied by payment-in-kind notes
    
    
    —
    
    
    —
    
    
    14,170Compensation
      expense related to stock options and
    grants
    
    
    1,632
    
    
    470
    
    
    1,650Deferred
      income taxes
    
    
    (1,117
    )
    
    (11,948
    )
    
    (52,248
    )Minority
      interest in losses of subsidiary
    
    
    (468
    )
    
    (526
    )
    
    (3,462
    )Decrease
      in fair value of warrants
    
    
    (64
    )
    
    —
    
    
    —Equity
      in loss of affiliate
    
    
    —
    
    
    86
    
    
    136Change
      in assets and liabilities, net of effects from businesses
      acquired:Accounts
      receivable
    
    
    (9,629
    )
    
    28,304
    
    
    9,665Inventories
    
    
    6,332
    
    
    38,911
    
    
    55,325Other
      current assets
    
    
    (988
    )
    
    7,312
    
    
    (33,426
    )Other
      assets
    
    
    (201
    )
    
    5
    
    
    1,897Accounts
      payable and accrued expenses
    
    
    (1,330
    )
    
    (1,528
    )
    
    (48,669
    )Other,
      net
    
    
    219
    
    
    946
    
    
    6,768Cash
      flows (used for) provided by operating
      activities
    
    
    (19,291
    )
    
    45,502
    
    
    8,515Cash
      flows from investing activities:Acquisitions,
      net of cash acquired
    
    
    —
    
    
    —
    
    
    (87,412
    )Capital
      expenditures
    
    
    (5,578
    )
    
    (8,561
    )
    
    (10,016
    )Purchase
      of marketable securities
    
    
    (39,344
    )
    
    (6,672
    )
    
    —Proceeds
      from sale of assets
    
    
    683
    
    
    7,978
    
    
    84,036Proceeds
      from sale of investments
    
    
    10,213
    
    
    1,296
    
    
    23,530Proceeds
      from sale of DNE, net of transaction
    costs
    
    
    38,150
    
    
    —
    
    
    —Superior
      Cables Ltd. customer loans, net
    
    
    —
    
    
    —
    
    
    6,157Restricted
      cash
    
    
    —
    
    
    —
    
    
    87Other
    
    
    —
    
    
    —
    
    
    783Cash
      flows provided by (used for) investing
      activities
    
    
    4,124
    
    
    (5,959
    )
    
    17,165
 
 (Continued)
 The
accompanying notes are an integral part of these consolidated financial
statements.
  ****
 F-8
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 **(in
thousands)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Cash
      flows from financing activities:Short-term
      borrowings, net (excluding revolving credit
      facility)
    
    
    —
    
    
    —
    
    
    894Borrowings
      (repayments) under revolving credit facilities,
      net
    
    
    23,061
    
    
    (51,782
    )
    
    18,079Long-term
      borrowings
    
    
    —
    
    
    —
    
    
    1,4796%
      Junior Subordinated Notes redemption
    
    
    (161
    )
    
    —
    
    
    —Repayments
      of long-term borrowings
    
    
    (469
    )
    
    (2,247
    )
    
    (72,012
    )Proceeds
      from exercise of stock options
    
    
    236
    
    
    —
    
    
    139Debt
      and equity issuance and amendment costs
    
    
    —
    
    
    (389
    )
    
    (5,891
    )Dividends
      on preferred stock
    
    
    (2,044
    )
    
    (206
    )
    
    (38
    )Dividends
      on common stock
    
    
    (4,947
    )
    
    —
    
    
    —Issuance
      of preferred stock, net
    
    
    —
    
    
    6,940
    
    
    —Proceeds
      from minority investment in subsidiary
    
    
    —
    
    
    471
    
    
    —Preferred
      stock redemptions
    
    
    (250
    )
    
    —
    
    
    —Purchase
      of treasury stock
    
    
    —
    
    
    —
    
    
    (76
    )Other
    
    
    (113
    )
    
    (4
    )
    
    —Cash
      flows provided by (used for) financing
      activities
    
    
    15,313
    
    
    (47,217
    )
    
    (57,426
    )Net
      increase (decrease) in cash and cash
      equivalents
    
    
    146
    
    
    (7,674
    )
    
    (31,746
    )Effect
      of deconsolidation of subsidiary
    
    
    —
    
    
    —
    
    
    (12,710
    )Effect
      of exchange rate changes on cash
    
    
    —
    
    
    —
    
    
    61Cash
      and cash equivalents at beginning of
year
    
    
    465
    
    
    8,139
    
    
    52,534Cash
      and cash equivalents at end of year
    
    $
    611
    
    $
    465
    
    $
    8,139Supplemental
      disclosures:Cash
      paid for interest, net of amount
    capitalized
    
    $
    2,450
    
    $
    2,952
    
    $
    87,736Cash
      paid (refunded) for income taxes, net
    
    $
    1,758
    
    $
    (1,383
    )
    $
    (21,537
    )Noncash
      investing and financing activities:Deconsolidation
      of subsidiary:Current
      assets
    
    $
    —
    
    $
    —
    
    $
    287,389Other
      assets
    
    
    —
    
    
    —
    
    
    338,904Current
      liabilities
    
    
    —
    
    
    —
    
    
    (1,271,594
    )Other
      liabilities
    
    
    —
    
    
    —
    
    
    (83,424
    )Redeemable
      preferred stock
    
    
    —
    
    
    —
    
    
    (137,162
    )Net
      investment
    
    
    —
    
    
    —
    
    $
    (865,887
    )
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-9
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **1.
Summary of significant accounting policies**
 
 ***Basis
of presentation and description of business***
 
 The
accompanying consolidated financial statements represent the accounts of The
Alpine Group, Inc. and the consolidation of all of its majority-controlled
subsidiaries (collectively "Alpine" or the "Company", unless the context
otherwise requires). The Company accounts for all affiliate companies with
ownership greater than 20%, but not majority-controlled, using the equity method
of accounting.
 
 Alpine
was incorporated in New Jersey in 1957 and reincorporated in Delaware in 1987.
Alpine is a holding company which over the recent past has held major
investments in industrial manufacturing companies. Currently, Alpine's principal
operations consist of Essex Electric Inc. (“Essex Electric”), engaged in the
manufacture and sale of electrical wire and cable, and a 47% equity interest in
Superior Cables Ltd..
 
 Prior to
December 11, 2002, Alpine's financial statements include the consolidated
results of its then majority-controlled subsidiary Superior TeleCom Inc.
("Superior") and Superior's then majority-owned subsidiary Superior
Cables Ltd.. As a result of the vesting of certain Superior restricted
stock arrangements in 2002, Alpine's common equity ownership in Superior
declined from 50.2% at December 31, 2001 to 48.9%. Notwithstanding the
decline in Alpine's direct equity ownership in Superior through
December 11, 2002, Alpine had a controlling interest in Superior based on
its additional indirect equity ownership position (including certain common
share voting interests deemed to be controlled by Alpine). In connection with
Alpine's acquisition of Superior's electrical wire business and DNE
Systems, Inc. (“DNE Systems”) (see Note 5), certain changes were made
with respect to Alpine's indirect voting interests in Superior’s equity such
that Alpine no longer controlled Superior. Additionally, Alpine acquired
approximately 47% of Superior Cables Ltd. from Superior as part of the
Electrical Acquisition. Accordingly, effective for periods after
December 11, 2002, Superior and Superior Cables Ltd. are accounted for
under the equity method and are no longer consolidated with Alpine. At times
hereinafter we refer to the foregoing acquisition of the electrical wire
business of Superior, DNE Systems and the 47% equity interest in Superior Cables
Ltd. as the ("Electrical Acquisition") - see Note 5.
 
 On
March 3, 2003, Superior and its U.S. subsidiaries filed voluntary petitions
for relief under Chapter 11 of the United States Bankruptcy Code. On October 22,
2003, Superior’s Joint Plan of Reorganization, as amended and related disclosure
statement was confirmed by order of the United States Bankruptcy Court for the
District of Delaware and became effective on November 10, 2003 (the "Plan of
Reorganization"). The Plan of Reorganization provided for the cancellation of
all equity and debt interests held in Superior by the Company.
 
 As a
result of the accumulated net losses incurred by Superior, Alpine had recorded
losses in excess of its investment in Superior of $865.9 million at
December 11, 2002. This negative investment was required under accounting
principles generally accepted in the United States of America to be reflected in
Alpine's consolidated balance sheet, notwithstanding the fact that Alpine was
not obligated to fund any operating losses or deficits of Superior. Upon
implementation of the Plan of Reorganization, Alpine eliminated its negative
investment in Superior and recognized a corresponding gain of $865.9 million in
the fourth quarter of 2003. This gain was partially offset by the reversal of
$11.6 million of accumulated other comprehensive loss related to Superior
resulting in a net gain of $854.3 million.
 
 On June
21, 2004 the Company entered into an agreement to sell DNE Systems, its
wholly-owned defense electronics subsidiary, to ULTRA Electronics Defense, Inc.,
a wholly-owned subsidiary of Ultra Electronics Holdings plc, a United
Kingdom-based company that is listed on the London Stock Exchange (the “DNE
Sale”). The purchase price was $40 million in cash at closing plus the Company
is entitled to receive an additional cash payment of up to $3 million in 2005 if
a certain performance based measure is achieved, however, based upon the measure
of such performance to date, Alpine’s receipt of any such additional payment
appears unlikely. The sale was consummated on July 29, 2004 and a pretax book
gain of approximately $29.4 million, net of expenses, was recorded in the third
quarter of 2004. The assets and liabilities of DNE Systems have been
reclassified to discontinued operations in the December 31, 2003 balance sheet
presented herein. Likewise, DNE Systems results of operations for the twelve
month periods ended December 31, 2004, 2003 and 2002 have been presented as
discontinued operations.
 
 F-10
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1.
Summary of significant accounting policies (Continued)**
 
 ***Cash
and cash equivalents***
 
 All
highly liquid investments purchased with a maturity at acquisition of
90 days or less are considered to be cash equivalents.
 
 ***Marketable
securities***
 
 Statement
of Financial Accounting Standards (“SFAS”) No. 115, *Accounting
for Certain Investments in Debt and Equity Securities* ,
requires securities to be classified as held to maturity, available for sale or
trading. Only those securities classified as held to maturity, which the
Corporation intends and has the ability to hold until maturity, are reported at
amortized cost. Available for sale and trading securities are reported at fair
value with unrealized gains and losses included in shareholders’ equity or
income net of related income taxes, respectively. All of the Company’s
investment securities are classified as available for sale at December 31, 2004
and 2003.
 
 The
following table shows the unrealized gains (losses) and fair value of the
Company’s investments aggregated by investment category as of December 31,
2004:
 
 Description
      of Securities
    
    Cost
      Basis
    
    Unrealized
      Gains
    
    Unrealized
      Losses*
    
    Fair
      ValueCorporate
      bonds
    
    $
    540
    
    
    
    
    $
    (24
    )
    $
    516Marketable
      equity securities
    
    
    1,371
    
    $
    21
    
    
    (24
    )
    
    1,368Municipal
      bonds and notes
    
    
    23,000
    
    
    
    
    
    
    
    
    23,000Mutual
      funds
    
    
    10,658
    
    
    40
    
    
    (5
    )
    
    10,693Preferred
      securities
    
    
    250
    
    
    
    
    
    
    
    
    250Total
    
    $
    35,819
    
    $
    61
    
    $
    (53
    )
    $
    35,827
 
 * none of
the gross unrealized losses have exceeded 12 months.
 
 The gross
unrealized losses related to short-term investments are primarily due to a
decrease in the fair value of debt securities as a result of an increase in
interest rates during fiscal 2004 and a decrease in the fair value of equity
securities due to fluctuations in the stock market. Alpine has determined that
the gross unrealized losses on its short-term investments at December 31, 2004
are temporary in nature. Alpine reviews its investment portfolio to identify and
evaluate investments that have indications of possible impairment. Factors
considered in determining whether a loss is temporary include the length of time
and extent to which fair value has been less than the cost basis, the financial
condition and near-term prospects of the investee, credit quality and Alpine’s
ability to hold the investment for a period of time sufficient to allow for any
anticipated recovery in market value.
 
 ***Inventories***
 
 Inventories
are stated at the lower of cost or market. At December 31, 2004 and 2003,
cost for the Essex Electric inventory is determined using the last-in, first-out
("LIFO") method. The Company determines whether a lower of cost or market
provision is required on a quarterly basis by analyzing whether inventory on
hand can be sold at a profit based upon current selling prices less variable
selling costs. No provision was required in 2004 or 2003. Inventories include
costs of materials, labor and manufacturing overhead. See Note 2.
 
 ***Property,
plant and equipment***
 
 Property,
plant and equipment are stated at cost, less accumulated depreciation and
amortization. Leasehold improvements are amortized over the lesser of the
estimated useful lives of the assets or the lease term. Depreciation and
amortization are provided over the estimated useful lives of the assets using
the straight-line method. The estimated lives are as follows:
 F-11
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1.
Summary of significant accounting policies (Continued)**
 
 Buildings
      and improvements
    5
      to 40 yearsMachinery
      and equipment
    3
      to 15 years
 
 Maintenance
and repairs are charged to expense as incurred. Long-term improvements are
capitalized as additions to property, plant and equipment. Upon retirement or
other disposal, the asset cost and related accumulated depreciation are removed
from the accounts and the net amount, less any proceeds, is charged or credited
to income. Interest is capitalized during the active construction period of
major capital projects. During the year ended December 31, 2002,
$0.2 million of interest was capitalized in connection with various capital
projects.
 
 ***Goodwill***
 
 The
Company adopted Statements of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets" effective January 1,
2002. As of December 31, 2001, $754 million in goodwill was included
as an asset in Alpine's consolidated balance sheet, substantially all of which
related to recorded goodwill of Superior. SFAS No. 142 requires that the
amortization of goodwill and certain other intangible assets cease as of
January 1, 2002 and that the related recorded value of goodwill be
allocated to the identified reporting units of the Company and its consolidated
subsidiaries (in this case, Superior) and be reviewed annually for impairment.
If the carrying value (including goodwill) of any reporting unit exceeds the
fair value (determined on a discounted cash flow basis or other fair value
method), impairment of goodwill exists resulting in a charge to earnings to the
extent of goodwill impairment.
 
 Superior
completed its determination of initial goodwill impairment in August 2002.
The application of this new standard and the impact of economic conditions at
that time and industry specific conditions affecting Superior's business
segments resulted in a non-cash goodwill impairment charge at Superior of
$424 million including $166 million related to Superior's Electrical
segment and $258 million related to Superior's OEM segment. The goodwill
impairment charge at Superior was recorded retroactively to January 1, 2002
as a cumulative effect of accounting change for goodwill impairment in
accordance with SFAS No. 142. Additionally, as a result of initial
implementation, Alpine recorded a further goodwill impairment charge of
$3 million relating to additional goodwill associated with its investment
in Superior. The cumulative effect of the accounting change as presented in the
accompanying consolidated statement of operations for the year ended December
31, 2002 is summarized as follows (millions):
 
 Superior's
      goodwill impairment loss
    
    $
    424Additional
      goodwill impairment recorded by Alpine
    
    
    3Less:
      Impairment allocable to Superior's minority interest
    
    
    (39
    )$
    388
  
 As
required by SFAS No. 142, the Company performed its annual assessment of
goodwill impairment in the fourth quarter of 2002. As a result of generally
depressed economic conditions and specific industry conditions in the
telecommunications industry Superior's operating income and results of
operations continued to decline during 2002. Based on that trend, the earnings
forecast for the next five years was revised and in the fourth quarter of 2002,
Superior recognized an additional goodwill impairment loss of
$324.7 million in its OEM ($73.4 million) and Communications
($251.3 million) reporting units since the carrying amount of the reporting
unit was greater than the fair value of the reporting unit (as determined using
the expected present value of expected future cash flows) and the carrying
amount of the reporting unit goodwill exceeded the implied fair value of that
goodwill. Superior's impairment charge was fully recognized (without allocating
any of the loss proportionately to minority interest) in Alpine's consolidated
statement of operations. The impairment charge resulted in the write-off of all
remaining goodwill.
 
 ***Deferred
financing costs***
 
 Origination
costs incurred in connection with outstanding debt financings are included in
the consolidated balance sheet in long-term investments and other assets. These
deferred financing costs are being amortized over the lives of the related debt
on an effective interest rate basis and are charged to operations as additional
interest expense. During the fourth quarter of 2003 the
 
 F-12
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1.
Summary of significant accounting policies (Continued)**
 
 Company
amended the Revolving Credit Facility to reduce the maximum amount of lender
commitments available thereunder by 30% and therefore 30% ($0.6 million) of
remaining deferred financing costs were written off. Total deferred financing
fees at December 31, 2004 and 2003 were approximately $1.2 million and
$1.6 million, respectively.
 
 ***Amounts
due customers***
 
 Included
in accrued expenses at December 31, 2004 and 2003 are certain amounts due
customers totaling $4.3 million and $4.1 million, respectively,
representing cash discount liabilities to customers who meet certain contractual
sales volume criteria. Such discounts are paid periodically to those qualifying
customers. These liabilities are recorded as reductions to revenue, as customers
purchase toward required volume levels.
 
 ***Income
taxes***
 
 The
Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for both the
expected future tax impact of temporary differences arising from assets and
liabilities whose tax bases are different from financial statement amounts and
for the expected future tax benefit to be derived from tax loss carryforwards. A
valuation allowance is established if it is more likely than not that all or a
portion of deferred tax assets will not be realized. Realization of the future
tax benefits of deferred tax assets (including tax loss carryforwards) is
dependent on Alpine's ability to generate taxable income within the carryforward
period and the periods in which net temporary differences reverse.
 
 Although
no assurance can be given that sufficient taxable income will be generated for
utilization of certain of the Company's consolidated net operating loss
carryforwards or for reversal of certain temporary differences, the Company
believes it is more likely than not that all of the deferred tax assets, after
valuation allowance, will be realized.
 
 Significant
judgment is required in determining our consolidated income tax provision and
evaluating our U.S. tax position. It is our policy to maintain tax contingency
reserves for potential tax audit issues. The Company reviews the reserves as
circumstances warrant and adjusts the reserves as events occur that affect our
potential liability for additional taxes, such as lapsing of applicable statutes
of limitations, conclusion of tax audits, additional exposure based on current
calculations, identification of new issues or rendering of court decisions
affecting a particular tax issue. Tax reserve contingencies and changes to the
reserves are evaluated and recorded in our tax provision in the period in which
the above noted events occur.
 
 ***Derivative
financial instruments***
 
 The
Company applies SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" as amended by SFAS No. 137 and SFAS No. 138 for
its derivative financial instruments. These statements establish accounting and
reporting standards for derivative instruments and require recognition of all
derivatives as either assets or liabilities in the statements of financial
position and measurement of those instruments at fair value.
 
 All
derivatives are recognized on the balance sheet at fair value. On the date the
derivative contract is entered, the Company designates the derivative as either
(i) a fair value hedge of a recognized asset or liability, (ii) a cash
flow hedge of a forecasted transaction, (iii) a hedge of a net investment
in a foreign operation, or (iv) a non-designated derivative instrument. The
Company has in the past engaged in certain derivatives that are classified as
fair value hedges, cash flow hedges and non-designated derivative instruments.
Changes in the fair value of derivatives that are designated as fair value
hedges and the underlying exposure being hedged are adjusted to fair value and
are recorded in the consolidated statements of operations in the same line item.
Changes in the fair value of cash flow hedges are recorded in accumulated other
comprehensive income with any ineffective portion immediately recognized in
earnings. Changes in the fair value of non-designated derivative contracts are
reported in current earnings. At December 31, 2004, the Company had
approximately $8 million of copper futures contracts representing 6 million
copper pounds outstanding as non-designated derivative instruments. These
contracts were recorded at fair value at December 31, 2004. There were $13
million of copper futures contracts representing 12 million copper pounds
outstanding at December 31, 2003.
 
 The
Company does not currently utilize any hedging instruments that would qualify
for hedge accounting treatment. If such transactions were to arise, the Company
would formally document all relationships between hedging instruments and hedged
items, as well as the risk management objectives and strategy for undertaking
various hedge transactions. Derivative financial instruments and derivative
transactions reflected in the consolidated financial statements are discussed in
Note 15.
  F-13
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1. Summary
of significant accounting policies (Continued)**  ******
 ***Revenue
recognition***
 
 Revenue
is recognized when the product is shipped to the customer, which is when title
and risk of loss pass. Alpine's price to the buyer is fixed and determinable
based upon the price set forth in a written order from the customer. Allowances
for discounts and sales incentives are made at the time of sale based on
incentive programs available to the customer. The cost of these programs is
dependent on various factors including the timing of the sale and the volume of
sales achieved by the customer. The Company monitors these factors and records
estimated obligations based on current sales levels as a reduction of revenue
over the periods earned.
 
 ***Subsidiary
stock transactions***
 
 The
Company's ownership percentage in subsidiary stock is impacted by the Company's
purchase of additional subsidiary stock, as well as subsidiary stock
transactions, including the subsidiary's purchase of its own stock and the
subsidiary's issuance of its own stock. The Company accounts for subsidiary
stock transactions in accordance with Staff Accounting Bulletin No. 51,
"Accounting for sales of stock by a subsidiary" and records all gains and losses
related to subsidiary stock transactions through other income and expense. In
September 2003, Alpine Holdco subscribed for and purchased 681 newly issued
shares of common stock of Essex Electric. In October 2003, Superior exercised
its rights under a securityholders agreement and subscribed for and purchased
169 newly issued shares of common stock of Essex Electric. This securityholders
agreement was executed at the time of and in conjunction with the Electrical
Acquisition. As a result of the sales and issuance of common stock by Essex
Electric, Alpine Holdco and Superior own approximately 90% and 10%,
respectively, of the total outstanding stock of Essex Electric as of December
31, 2004. In accordance with Staff Accounting Bulletin No. 51, the reduction in
Alpine Holdco's ownership of Essex Electric from 100% to 90% was accounted for
by the Company as a non-cash loss of $2.7 million, and recorded in the 2003
consolidated statement of operations as other income (expense).
 
 In
January 2005, Holdco purchased 1,792 shares of Essex Common Stock for a cash
purchase price of $5.0 million and Superior purchased 445 shares of Essex
Electric common stock for an aggregate cash purchase price of $1.2 million.
Following the aforementioned investments, Holdco and Superior owned 84.2% and
15.8% of Essex Electric, respectively. The Company recorded a loss on sale of
subsidiary stock of approximately $0.3 million in January 2005 related to this
transaction. In addition, the Company decreased the value of
the warrant by $0.3 million due to the dilution of the additional 2,237 shares
during January 2005.
 
 ***Stock-Based
Compensation Plans***
 
 The
Company applies the intrinsic-value based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, *Accounting
for Stock Issued to Employees* , and
related interpretations including FASB Interpretation No. 44, *Accounting
for Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25* , issued
in March 2000, to account for its stock-based compensation plans. Under
this method, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. SFAS
No. 123, *Accounting
for Stock-Based Compensation* ,
established accounting and disclosure requirements using a fair-value based
method of accounting for stock-based employee compensation plans. As allowed by
SFAS No. 123, the Company has elected to continue to apply the
intrinsic-value based method of accounting described above, and has adopted only
the disclosure requirements of SFAS No. 123. The following table
illustrates the effect on net income (loss) if the fair value based method had
been applied to all outstanding and unvested awards in each period.
 
 F-14
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1. Summary
of significant accounting policies (Continued)**
  **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****(in
      thousands, except per share amounts)**Net
      income (loss), as reported
    
    $
    13,440
    
    $
    834,776
    
    $
    (874,601
    )Add
      stock-based employee compensation expense included in reported net income
      (loss), net of tax of $577
    
    
    1,055
    
    
    255
    
    
    1,688Deduct
      total stock-based employee compensation expense determined under fair
      value based method for all awards, net of related tax
    effects
    
    
    (1,315
    )
    
    (494
    )
    
    (2,975
    )Pro
      forma net income (loss)
    
    $
    13,180
    
    $
    834,537
    
    $
    (875,888
    )Preferred
      stock dividends
    
    
    (2,044
    )
    
    (206
    )
    
    (38
    )Dividend
      on beneficial conversion feature of preferred stock rights
      offering
    
    
    (1,203
    )
    
    (2,550
    )
    
    —Proforma
      net income (loss) - applicable to common stock
    
    $
    9,933
    
    $
    831,781
    
    $
    (875,926
    )Net
      income (loss) per share:Basic—as
      reported
    
    $
    0.76
    
    $
    60.39
    
    $
    (58.89
    )Basic—pro
      forma
    
    $
    0.74
    
    $
    60.37
    
    $
    (58.98
    )Diluted—as
      reported
    
    $
    0.76
    
    $
    51.23
    
    $
    (58.89
    )Diluted—pro
      forma
    
    $
    0.74
    
    $
    51.22
    
    $
    (58.98
    )
 
 The
effects of applying SFAS No. 123 in the pro forma disclosure are not
necessarily indicative of future amounts, since the estimated fair value of
stock options is amortized to expense over the vesting period and additional
options may be granted in future years and outstanding options may be exercised
or cancelled. The weighted average per share fair value of options granted
(using the Black-Scholes option-pricing model) for the years ended
December 31, 2004, 2003 and 2002, was $0.91, $0.52 and $0.71, respectively.
The fair value for these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for the years ended December 31, 2004, 2003 and 2002,
respectively: dividend yield of 0% for each year; expected volatility of 191%,
99% and 99%, risk-free interest rate of 3.53%, 2.99% and 2.64%, and expected
life of two years for all periods.
 
 The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee and consultant stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimates, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
 The
Company amortizes the value of the restricted stock grants evenly over the
vesting periods, based upon the market value of the stock as of the date of the
grant.
 
 ***Research
and development costs***
 
 Research
and development costs are expensed as incurred, however with the divestiture of
the DNE operations, research and development costs for continuing operations
were less than $0.1 million for the years 2004 and 2003. The research and
development costs for the year ended December 31, 2002, which included Superior,
was $8.5 million.
 
 ***Advertising
costs***
 
 Advertising
costs are expensed as incurred. Advertising costs during the years ended
December 31, 2004, 2003 and 2002 were approximately $0.2, $0.3 and
$2.4 million, respectively.
 
 F-15
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1. Summary
of significant accounting policies (Continued)**
 ***Shipping
and handling***
 
 All
shipping and handling costs are included in costs of sales and all billings
associated with these costs are included in revenues.
 
 ***Earnings
(loss) per share***
 
 Basic
earnings (loss) per common share is computed by dividing net income (loss)
applicable to common stock by the weighted average number of shares of common
stock outstanding for the period. Diluted earnings per common share is
determined assuming (i) the conversion of outstanding stock options,
warrants and grants under the treasury stock method, (ii) the conversion of
convertible preferred stock and (iii) the dilution in subsidiary earnings
resulting from the assumed conversion of subsidiary stock options and grants, if
dilutive.
 
 ***Comprehensive
income***
 
 Comprehensive
income includes all changes in equity from non-owner sources such as net income,
foreign currency translation adjustments, unrealized gains and losses on
available-for-sale securities, changes in the fair value of derivatives and
minimum pension liability adjustments. Accumulated other comprehensive income
(loss) net of tax was less than $0.1 million as of December 31, 2004 and
2003.
 
 ***Concentration
of risk and allowance for doubtful accounts***
 
 The
Company determines the allowance based on its historical write-off experience
and a review of certain specific accounts. Account balances are charged off
against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. See Note 20 for concentrations
of risk within the Company's business segment.
 
 ***Impairment
of Long-Lived Assets***
 
 The
Company adopted SFAS No. 144, "Accounting for the Impairment for Disposal of
Long-lived Assets" on January 1, 2002. SFAS No. 144 provides a single accounting
model for long-lived assets to be disposed of or held and used. SFAS No. 144
also changes the criteria for classifying an asset as held for sale, broadens
the scope of businesses to be disposed of that qualify for reporting as
discontinued operations and changes the timing of recognizing losses on such
actions. In accordance with SFAS No. 144, long-lived assets, such as property,
plant, and equipment, and purchased intangibles subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset group may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset group to estimated undiscounted future cash flows
expected to be generated by the asset group. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by
the amount by which the carrying amount of the asset exceeds the fair value of
the asset group. Assets to be disposed of are included in other current assets
and reported at the lower of the carrying amount or fair value less costs to
sell, and are no longer depreciated. The assets and liabilities of a disposal
group classified as held for sale are presented separately in the appropriate
asset and liability sections of the balance sheet. The loss on asset sales and
impairment for 2004 and 2003 were $0.3 and $0.6 million, respectively. See Note
14 for details.
 ****
 ***Contingencies***
 
 The
Company is involved in various legal proceedings and contingencies. Liabilities
for these matters are recorded in accordance with SFAS No. 5, "Accounting for
Contingencies". SFAS 5 requires a liability to be recorded based on management's
estimate of the probable cost of the resolution of a contingency. The actual
resolution of these contingencies may differ from such estimates. If a
contingency is settled for an amount greater than the Company's estimate, a
future charge to income would result. Likewise, if a contingency is settled for
an amount that is less than they Company's estimate, a future credit to income
would result.
 
 ***Use
of estimates***
 
 The
Company's consolidated financial statements are prepared in accordance with
accounting principles generally accepted
 
 F-16
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1.
Summary of significant accounting policies (Continued)**
 
 in the
United States of America, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant items subject to such estimates and assumptions
include the carrying amount of property, plant and equipment and intangible
assets; valuation allowances for receivables, inventories, deferred income tax
assets and income tax contingencies; self-insurance reserves; valuation of
derivative instruments; and obligations related to employee benefits. Actual
results could differ from those estimates.
 
 ***Recent
accounting standards***
 
 The
Company adopted SFAS No. 145, *Rescission
of Financial Accounting Standards Board ("FASB") Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections* effective January 1, 2003. SFAS No. 145 amends existing guidance to
eliminate the requirement that gains and losses on early extinguishment of debt
must be classified as extraordinary items and
 permits
such classification only if the debt extinguishment meets the criteria for
classification as an extraordinary item under APB Opinion No. 30, *Reporting
the Results of Operations* *—* *Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions* . SFAS
No. 145 also amends SFAS No. 13 to require sale-leaseback accounting for certain
lease modifications that have economic effects similar to sale-leaseback
transactions. As a result of the adoption of SFAS No. 145, the Company
reclassified to other income (expense) a $2.2 million gain on the early
extinguishment of debt previously recognized as an extraordinary item in the
Company's consolidated statement of operations for the year ended December 31,
2002.
 
 The
Company adopted SFAS No. 146, *Accounting
for Costs Associated with Exit or Disposal Activities* effective January 1, 2003. SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue 94-3, *Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity* . The
provisions of this Statement are effective for exit or disposal activities that
are initiated after December 31, 2002. The restructuring costs incurred
during the years ended December 31, 2003 and 2004 have been accounted for
in accordance with SFAS No. 146.
 
 The
Company adopted FASB Interpretation No. 45, *Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others* , *an
interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34* effective January 1, 2003. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002. Since 1993,
Alpine has been a party to a guaranty of Superior's lease obligations relating
to Superior's manufacturing facility in Brownwood, Texas. The lease currently
provides for monthly payments of $56,000 subject to adjustments for changes in
the consumer price index. The lease term expires in 2018 but may be extended
through 2033. As such, the maximum potential amount of future payments under the
guaranty through 2018 would be approximately $9 million. Any further extensions
would amount to a guarantee of approximately $0.7 million per year. Since the
guaranty was issued prior to and has not been modified after December 31, 2002,
a liability for the fair value of the obligation is not recorded in the
consolidated financial statements. While Alpine's continuing obligations, if
any, under the guaranty are not free from doubt, the Company believes the
facility and underlying lease are valuable assets of Superior and expects that
Superior will perform as tenant thereunder and continue to pay its obligations.
In addition, Alpine would have a claim for indemnification and reimbursement
from Superior in respect of any amounts paid by Alpine as guarantor. The Company
is not a party to any other guarantees and implementation of Interpretation No.
45 did not have a material effect on the Company's financial
statements.
 
 In
November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of
ARB No. 43, Chapter 4”, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs and wasted material (spoilage). This
statement is effective October 1, 2005. The Company is assessing, but does not
believe that SFAS No. 151 will have a material effect on its financial position,
results of operations or cash flows.
 
 In
December 2004, the FASB issued FASB No. 123R, *Share-Based Payment* (“SFAS
123R”), that requires companies to expense the value of employee stock options
and similar awards. SFAS 123R is effective for public companies in interim and
annual periods beginning after June 15, 2005, and applies to all outstanding and
unvested share-based payment awards at the adoption date. The Company is in the
process of evaluating the impact that adoption of FAS 123R will have to its
financial position and results of operations and cash flows.
 
 F-17
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **1.
Summary of significant accounting policies (Continued)**
 
 In March
of 2004, the Emerging Issues Task Force (“EITF”) reached consensus on the
disclosure guidance provided in EITF Issue No. 03-1, “The Meaning of
Other-Than-Temporary Impairment and its Application to Certain
Investments” ** (“EITF
03-1”). Under EITF 03-1, an investment is impaired if the fair value of the
investment is less than its cost including adjustments for amortization,
accretion, foreign exchange, and hedging. An impairment would be considered
other-than-temporary unless a) the investor has the ability and intent to hold
an investment for a reasonable period of time sufficient for the recovery of the
fair value up to (or beyond) the cost of the investment and b) evidence
indicating that the cost of the investment is recoverable within a reasonable
period of time outweighs evidence to the contrary. This new guidance for
determining whether the decline in fair value of investment is
other-than-temporary was to be effective for reporting periods beginning after
June 15, 2004. In September of 2004, the FASB issued FSP EITF Issue 03-1-1,
which suspended the effective date for the measurement and recognition guidance
included in EITF 03-1 related to other-than-temporary impairment pending
additional implementation guidance. The Company will evaluate the impact of the
accounting provisions of EITF 03-01 once final guidance is issued..
 
 In
December of 2004, the FASB issued SFAS No. 153, “Exchanges of Non-Monetary
Assets an amendment of APB Opinion No. 29.” SFAS No. 153 amends the definition
of “exchange” or “exchange transaction” and expands the list of transactions
that would not meet the definition of non-monetary transfer. SFAS No. 153 is not
expected to have a significant impact on the results of operations or equity of
the Company.
 
 ***Reclassifications***
 
 The
Company reclassified $16.2 million of tax contingency reserve as of December 31,
2003 from long-term deferred tax liabilities to other long-term liabilities to
conform to the 2004 presentation.
 
 **2.
Inventories**
 
 At
December 31, 2004 and 2003, the components of inventories are as follows:
 
 **December
      31,**
    
    **December
      31,****2004**
    
    **2003****(in
      thousands)**Raw
      materials
    
    $
    15,169
    
    $
    15,358Work
      in process
    
    
    5,476
    
    
    4,417Finished
      goods
    
    
    31,981
    
    
    26,40152,626
    
    
    46,176LIFO
      reserve
    
    
    (22,209
    )
    
    (9,007
    )$
    30,417
    
    $
    37,169
 
 All
inventories at December 31, 2004 and 2003, are valued using the LIFO method
of accounting. Effective December 11, 2002, in connection with the Electrical
Acquisition, the Company established two LIFO pools for the Essex Electric
inventory consisting, respectively, of copper and all other inventory
components. During 2004, the Company recorded a decrement of $2.1 million on its
LIFO reserve in cost of goods sold.
 
 F-18
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **3.
Property, plant and equipment**
 
 At
December 31, 2004 and 2003, property, plant and equipment consisted of the
following:
  **December
      31,**
    
    **December
      31,****2004**
    
    **2003****(in****thousands****)**Land
    
    $
    160
    
    $
    517Buildings
      and improvements
    
    
    4,033
    
    
    4,969Machinery
      and equipment
    
    
    12,270
    
    
    7,275Construction
      in progress
    
    
    1,914
    
    
    4,15918,377
    
    
    16,920Less
      accumulated depreciation
    
    
    (1,450
    )
    
    (1,679
    )$
    16,927
    
    $
    15,241Included in the amounts above are the
      following:Assets
      held for future use (net of accumulated depreciation of $9 and $70,
      respectively)
    
    $
    31
    
    $
    582Assets
      not in service (net of accumulated depreciation of $14)
    
    $
    0
    
    $
    638
  
 Depreciation
expense for the years ended December 31, 2004, 2003 and 2002, was $0.9
million, $0.7 million and $39.5 million, respectively. Included in the
2002 depreciation totals was the expense associated with the Superior assets
prior to the December 11, 2002 deconsolidation.
 
 Assets
held for sale of $1.4 and $0.6 million as of December 31, 2004 and 2003,
respectively, are classified as other current assets.
 
 In
accordance with the provision of SFAS 116, “Accounting for Contributions
Received and Contribution Made” the Company recorded a $0.6 million loss for the
book value of land and building which was donated to the City of Sikeston during
December 2004. The Company recorded a tax benefit of $1.0 million for the tax
effect of the deduction for the donation.
 
 **4.
Discontinued operations**
 
 On June
21, 2004 the Company entered into an agreement to sell DNE Systems, its
wholly-owned defense electronics subsidiary, to ULTRA Electronics Defense, Inc.,
a wholly-owned subsidiary of Ultra Electronics Holdings plc, a United
Kingdom-based company that is listed on the London Stock Exchange (the “DNE
Sale”). The purchase price was $40 million in cash at closing plus the Company
may receive an additional cash payment of up to $3 million if a certain
performance based measure is achieved in 2005. The achievement of such measure
is unlikely. The sale was consummated on July 29, 2004 and a pretax book gain of
approximately $29.4 million, net of expenses, was recorded in the third quarter
of 2004. The assets and liabilities of DNE Systems have been reclassified to
discontinued operations in the December 31, 2003 balance sheet presented herein.
Likewise, DNE Systems results of operations for the twelve month periods ended
December 31, 2004, 2003 and 2002 have been reclassified to income from
discontinued operations. The only remaining obligation related to the
disposition of DNE is an environmental remediation of approximately $0.1 million
which is recorded in accrued expenses.
 
 The major
components of DNE System’s assets and liabilities classified as discontinued
operations in the December 31, 2003 balance sheet herein are presented
below:
 
 F-19
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **4.
Discontinued operations (Continued)**
 
 **December 31,**
      **2003****(in
      thousands****)**Accounts
      receivable
    
    $
    2,232Inventories
    
    
    5,118Other
      current assets
    
    
    184Total
      current assets
    
    
    7,534Property,
      plant and equipment, net
    
    
    1,766Total
      assets
    
    
    9,300Accounts
      payable
    
    
    765Accrued
      expenses
    
    
    1,458Total
      current liabilities
    
    
    2,223Other
      long term liabilities
    
    
    157Total
      liabilities
    
    
    2,380Total
      net assets
    
    $
    6,920
 
 The
revenue and income before taxes of DNE that is classified in discontinued
operations for the twelve month period ended December 31, 2004, 2003 and 2002
are presented below:
 
 **Twelve
      Months ended**
      **December
      31,****2004**
    
    **2003**
    
    **2002**Revenues
    
    $
    15,295
    
    $
    28,372
    
    $
    38,413Income
      before taxes
    
    $
    2,616
    
    $
    5,449
    
    $
    4,363
  
 **5.
Acquisitions**
 
 ***Electrical
Acquisition***
 
 On
December 11, 2002, in accordance with the terms of a definitive purchase
agreement dated October 31, 2002, as amended on December 11, 2002, Alpine's
wholly-owned subsidiary, Alpine Holdco Inc. acquired from Superior: (1)
substantially all of the assets, subject to related accounts payable and accrued
liabilities, of Superior's electrical wire business, which is currently owned
and operated by Essex Electric a newly formed, then wholly-owned subsidiary of
Alpine Holdco, (2) all of the outstanding shares of
capital stock of DNE Systems; and (3) all of the outstanding shares of capital
stock of Texas SUT Inc. and Superior Cable Holdings (1997) Ltd., which together
own approximately 47% of Superior Cables Ltd.. The aggregate purchase price was
approximately $85 million in cash plus the issuance of a warrant (the "Warrant")
to Superior to purchase 199 shares representing 19.9% of the common stock of
Essex Electric on a fully diluted basis. The warrant is only exercisable during
the 30 day period prior to its expiration on December 11, 2007 or upon
the earlier occurrence of certain specified transactions generally involving a
change in control of or a sale of the assets of Alpine Holdco or Essex Electric.
The warrant was valued at $1.0 million at the date of the Electrical
Acquisition. The warrant is recorded as a liability in the consolidated balance
sheet at its fair value at December 31, 2004 of $936,000. The change in the
value of the warrant of $64,000 for 2004 is recorded in other income
(expense).
  F-20
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **5.
Acquisitions (Continued)**
 
 As part
of the Electrical Acquisition, Alpine acquired 47% of the common stock of
Superior Cables Ltd., a public company traded on the Tel Aviv Stock Exchange.
Prior to the Electrical Acquisition Superior Cables Ltd. was a majority-owned
subsidiary of Superior and therefore included in the consolidated results of
Alpine. Effective December 11, 2002 the accounts of Superior Cables Ltd.
are no longer consolidated with Alpine and Alpine's investment in Superior
Cables Ltd. is accounted for under the equity method of accounting. During 2003,
Alpine’s equity in the losses of Superior Cables Ltd. reduced its investment to
zero and, accordingly, Alpine will not record its equity in any future losses of
Superior Cables Ltd. unless it has a positive investment. Alpine has no funding
obligations in respect of Superior Cables Ltd.. Based on closing prices on the
Tel Aviv Stock Exchange, the market value of Alpine's investment in Superior
Cables Ltd. was $2.2 million at December 31, 2004.
 
 Prior to
the Electrical Acquisition, Alpine's operations included the consolidated
results of Superior and its subsidiaries including the operations acquired in
the Electrical Acquisition. In connection with the Electrical Acquisition,
Alpine relinquished certain indirect common share voting interests in Superior
such that Alpine no longer controlled Superior. Accordingly, effective for
periods subsequent to December 11, 2002 (through November 10, 2003), Superior is
accounted for on the equity method and is no longer consolidated with Alpine. As
a result of the aforementioned consolidated loss attributable to Superior’s
goodwill impairment charge and additional net losses incurred by Superior in
2002 (including asset and additional goodwill impairment charges), Alpine had a
negative investment in Superior of $865.9 million at December 11, 2002. This
negative investment was required under accounting principles generally accepted
in the United States of America to be reflected in Alpine’s consolidated balance
sheet, notwithstanding the fact that Alpine is not obligated to fund any
operating losses or deficits of Superior. As a result of the consummation of
Superior’s Plan of Reorganization on November 10, 2003, Alpine eliminated its
negative investment in Superior and recognized a corresponding gain of $865.9 in
the fourth quarter of 2003, offset by the reversal of $11.6 million of
accumulated other comprehensive loss related to Superior, resulting in a net
gain of $854.3 million.
 
 Summarized
below is combined financial information for Superior Telecom and Superior Cables
Ltd. for the year ended December 31, 2002:
  **2002****(in
      thousands)****Results
      of Operations**Sales
    
    $
    1,439,958Operating
      loss
    
    
    (513,022
    )Loss
      before extraordinary items and cumulative effect of accounting
      change
    
    
    (536,788
    )Net
      loss
    
    
    (961,291
    )
 
 **6.
Accrued expenses**
 
 At
December 31, 2004 and 2003, accrued expenses consist of the following:
  **December
      31,**
    
    
    **December
      31****2004**
    
    
    **2003********(in
      thousands)**Accrued
      wages, salaries and employee benefits
    
    $
    2,270
    
    $
    1,885Allowance
      for restructuring activities
    
    
    —
    
    
    1,001Accrued
      customer discounts
    
    
    4,326
    
    
    4,142Other
      accrued expenses
    
    
    4,458
    
    
    4,219$
    11,054
    
    $
    11,247
   F-21
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **7.
Revolving Credit Facility**
 
 In
connection with the Electrical Acquisition, Alpine Holdco entered into a Loan
and Security Agreement (the "Loan Agreement"), dated as of December 11,
2002, by and among Alpine Holdco, Essex Electric, DNE Manufacturing and Service
Company ("DNE Manufacturing") and DNE Technologies, Inc. ("DNE
Technologies") as borrowers and DNE Systems as Credit party (such parties
sometimes collectively are called "Companies") certain financial institutions
party thereto as lenders, Congress Financial Corporation, as documentation
agent, and Foothill Capital Corporation, as arranger and administrative agent.
The Revolving Credit Facility was amended on November 10, 2004 and was amended
on February 28, 2005 to revise certain covenants for 2005.
 
 Effective
concurrently with the consummation of the DNE Sale (see note 4) on July 29,
2004, the lenders released each of DNE Systems, DNE Technologies, and DNE
Manufacturing from all of their obligations under the Revolving Credit Facility
(the "DNE Parties"), released all property of the DNE Parties from the liens
granted for the benefit of the lenders under the Revolving Credit Facility and
all of the outstanding and issued capital stock of the DNE Parties from the
pledge thereof delivered in connection with the Revolving Credit Facility, and
the DNE Parties no longer are "Borrowers" or a "Credit Party", as the case may
be, under the Revolving Credit Facility. Accordingly, from and after July 29,
2004, the DNE Parties are not included in the term "Companies". The Revolving
Credit Facility was amended on November 10, 2004 to reflect modifications agreed
to by the parties as a result of the DNE Sale and to establish revised financial
and other covenant provisions.
 
 The terms
of the Revolving Credit Facility provided for a maximum committed amount of
$100 million at its inception which, at the request of the Companies was
reduced to $70 million on December 8, 2003. Borrowing availability is determined
by reference to a borrowing base which permits advances to be made at various
net valuation rates against various assets of the Companies. Interest is payable
monthly in cash in arrears and is based on, at Alpine Holdco's option, LIBOR or
prime rates plus a fixed margin. The weighted average interest rate at
December 31, 2004 and 2003 was 6.05% and 4.46%, respectively. The Revolving
Credit Facility also provides for maintenance of financial covenants and ratios
relating to minimum EBITDA and tangible net worth, and includes restrictions on
capital expenditures, payment of cash dividends and incurrence of indebtedness.
Alpine Holdco was in compliance with all applicable covenants at December 31,
2004. Outstanding obligations under the Revolving Credit Facility are secured by
a lien on all of the Companies' tangible and intangible assets, other than the
investment in Superior Cable Ltd.. The obligations under the Revolving Credit
Facility are without recourse to Alpine.
 
 Unless
previously accelerated as a result of default, the Revolving Credit Facility
matures in December 2007. However, in accordance with Emerging Issues Task Force
Issue 95-22, *Balance
Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements
That Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement,* borrowings
under the Revolving Credit Facility have been classified as a current liability.
 
 The
Companies may terminate the Revolving Credit Facility at any time upon
45 days' prior written notice and payment of all outstanding borrowings,
together with unpaid interest, and a termination fee equal to 0.75% of the
maximum committed amount. At any time after December 11, 2004, the Companies
may, upon 30 days' prior written notice, permanently reduce the maximum
committed amount without penalty or premium. At December 31, 2004 and 2003,
outstanding borrowings under the Revolving Credit Facility
were $40.3 million and $17.2 million, respectively. At December 31, 2004
the Companies had $14.6 million of borrowing availability. No dividends may be
paid by Alpine Holdco without prior consent of the lenders. During
the third quarter of 2004, Alpine Holdco distributed to Alpine the proceeds from
the DNE Sale, net of expenses, of approximately $38 million in accordance with a
consent from the lenders under the Revolving Credit Facility. Federal taxes
payable on this transaction were paid on March 15, 2005 out of the proceeds
resulting in a net dividend of approximately $28 million.
 
 F-22
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  **8.
Long-term debt**
 
 At
December 31, 2004 and 2003, long-term debt consists of the following:
  **December
      31,**
    
    
    **December
    31,****2004**
    
    
    **2003****(in********thousands****)**6%
      Junior Subordinated Notes, net of $1.1 and $1.3 million discount,
      respectively
    
    $
    3,122
    
    $
    3,059Other
    
    
    386
    
    
    8553,508
    
    
    3,914Less
      current portion of long-term debt
    
    
    386
    
    
    137$
    3,122
    
    $
    3,777
 
 On August
4, 2003, the Company completed an exchange offer whereby holders of its common
stock exchanged 3,479,656 shares for $4.3 million principal amount of
6% Junior Subordinated Notes (the "Subordinated Notes") issued by the Company
plus a nominal amount of cash in lieu of fractional notes. The Subordinated
Notes were initially recorded at an amount equal to the fair value of the common
stock exchanged resulting in an initial discount of $1.4 million. The discount
is being accreted over the term of the Subordinated Notes using the effective
interest rate method. The Subordinated Notes accrue interest at 6% per annum
payable in cash semiannually each December 31 and June 30. The
Subordinated Notes are the Company's general unsecured obligations subordinated
and subject in right of payment to all of the Company's existing and future
senior indebtedness, which excludes trade payables incurred in the ordinary
course of business. The Company will be required to repay one-eighth of the
outstanding principal amount of the Subordinated Notes commencing on
June 30, 2007 and semiannually thereafter, so that all of the Subordinated
Notes will be repaid by December 31, 2010. The Subordinated Notes are
redeemable, at the Company's option, in whole at any time or in part from time
to time, at the principal amount to be redeemed plus accrued and unpaid interest
thereon to the redemption date, together with a premium if the Subordinated
Notes are redeemed prior to 2007. In addition, the Company must offer to redeem
all of the Subordinated Notes at the redemption price then in effect in the
event of a change of control. The Subordinated Notes were issued under an
indenture which does not subject the Company to any financial covenants. During
the twelve month period ended December 31, 2004, the Company retired $0.2
million of the Subordinated Notes.
 
 The
“Other” debt caption represents loans with Raytheon Aircraft Credit Corporation
to finance the purchase of 12.5% interest in each of two aircraft. The interest
in one aircraft was sold in 2004 and the related debt retired. An agreement was
signed in December 2004 to sell the interest in the other aircraft and the sale
was consummated in March 2005. Therefore, the debt has been classified as
current as of December 31, 2004.
 
 At
December 31, 2004 and 2003, the fair value of the Company's debt
approximates carrying value.
 
 The
aggregate principal maturities of long-term debt subsequent to December 31,
2004, were as follows:
  **Year Ending**
    
    **(in
      thousands)**2005
    
    $
    3862006
    
    
    02007
    
    
    1,0462008
    
    
    1,0462009
    
    
    1,046Thereafter
    
    
    1,046
 
 ***Early
extinguishment of debt***
 
 During
2002, Alpine redeemed $10.1 million aggregate face amount of its 12.25% Senior
Subordinated Notes for a cash payment of $7.6 million resulting in a credit of
$2.2 million to other income (expense).
  F-23
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **9.
Other long-term liabilities**
 
 At
December 31, 2004 and 2003, other long term liabilities consist of the
following:
  **December
    31,**
    
    
    **December
    31,****2004**
    
    
    **2003****(in
      thousands)**Tax
      contingency reserve (see Note 13)
    
    $
    16,364
    
    $
    16,176Other
      long-term liabilities
    
    
    1,478
    
    
    1,475$
    17,842
    
    $
    17,651
   F-24
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 ****
 ****
 **10.
Earnings (loss) per share**
 
 The
computation of basic and diluted earnings (loss) per share for the years ended
December 31, 2004, 2003 and 2002, is as follows:
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****Weighted**
    
    **Per**
    
    
    
    **Weighted**
    
    **Per**
    
    
    
    **Weighted**
    
    **Per****Net**
    
    **Average**
    
    **Share**
    
    **Net**
    
    **Average**
    
    **Share**
    
    **Net**
    
    **Average**
    
    **Share****Income**
    
    **Shares**
    
    **Amount**
    
    **Income**
    
    **Shares**
    
    **Amount**
    
    **Loss**
    
    **Shares**
    
    **Amount****(in
      thousands, except per share amounts)**Basic
      earnings (loss) per share
      Income
      (loss) from continuing operationsbefore
      extraordinary itemand
      cumulative effect ofaccounting
      change
    
    $
    (7,143
    )
    
    
    
    
    
    
    $
    831,225
    
    
    
    
    
    
    
    $
    (502,790
    )Adjustments:Preferred
      stock dividends
    
    
    (2,044
    )
    
    
    
    
    
    
    
    (206
    )
    
    
    
    
    
    
    
    (38
    )Preferred
      stock dividends
      on
      beneficial conversion feature
    
    
    (1,203
    )
    
    
    
    
    
    
    
    (2,550
    )
    
    
    
    
    
    
    
    —Income
      (loss) attributable to common stock from continuing operations before
      extraordinary item and cumulative effect of accounting
    change
    
    $
    (10,390
    )
    
    13,440
    
    $
    (0.77
    )
    $
    828,469
    
    
    13,778
    
    $
    60.13
    
    $
    (502,828
    )
    
    14,851
    
    $
    (33.86
    )Income
      from discontinued operations
    
    
    1,502
    
    
    13,440
    
    
    0.11
    
    
    3,551
    
    
    13,778
    
    
    0.26
    
    
    3,721
    
    
    14,851
    
    
    0.25Gain
      on sale of DNE
    
    
    19,081
    
    
    13,440
    
    
    1.42
    
    
    —
    
    
    
    
    
    
    
    
    —Basic
      income (loss) per common share before extraordinary item and cumulative
      effect of accounting change
    
    $
    10,193
    
    
    13,440
    
    $
    0.76
    
    $
    832,020
    
    
    13,778
    
    $
    60.39
    
    $
    (499,107
    )
    
    14,851
    
    $
    (33.61
    )Extraordinary
      gain from unallocated negative goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,554
    
    
    14,851
    
    $
    0.85Cumulative
      effect of accounting change for goodwill impairment net of minority
      interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (388,086
    )
    
    14,851
    
    $
    (26.13
    )Net
      income (loss) applicable to common stock
    
    $
    10,193
    
    
    13,440
    
    $
    0.76
    
    $
    832,020
    
    
    13,778
    
    $
    60.39
    
    $
    (874,639
    )
    
    14,851
    
    $
    (58.89
    )
 
 
 F-25
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **10.
Earnings (loss) per share (Continued)**
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****Weighted**
    
    **Per**
    
    
    
    **Weighted**
    
    **Per**
    
    
    
    **Weighted**
    
    **Per****Net**
    
    **Average**
    
    **Share**
    
    **Net**
    
    **Average**
    
    **Share**
    
    **Net**
    
    **Average**
    
    **Share****Income**
    
    **Shares**
    
    **Amount**
    
    **Income**
    
    **Shares**
    
    **Amount**
    
    **Loss**
    
    **Shares**
    
    **Amount****(in
      thousands, except per share amounts)****Diluted
      earnings (loss) per share**Basic
      shares outstanding
    
    
    
    
    
    13,440
    
    
    
    
    
    
    
    
    13,778
    
    
    
    
    
    
    
    
    14,851Effect
      of dilutive securitiesRestricted
      stock plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Stock
      option plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38Convertible
      preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,385Income
      (loss) attributable to common stock from continuing operations before
      extraordinary item and cumulative effect of accounting
    change
    
    $
    (10,390
    )
    
    13,440
    
    $
    (0.77
    )
    $
    828,469
    
    
    16,240
    
    $
    51.01
    
    $
    (502,828
    )
    
    14,851
    
    $
    (33.86
    )Income
      (loss) from discontinued operations
    
    
    1,502
    
    
    13,440
    
    
    0.11
    
    
    3,551
    
    
    16,240
    
    
    0.22
    
    
    3,721
    
    
    14,851
    
    
    0.25Gain
      on sale of DNE
    
    
    19,081
    
    
    13,440
    
    
    1.42
    
    
    —
    
    
    
    
    
    
    
    
    —Diluted
      income (loss) per common share before extraordinary item and cumulative
      effect of accounting change
    
    $
    10,193
    
    
    13,440
    
    $
    0.76
    
    $
    832,020
    
    
    16,240
    
    $
    51.23
    
    $
    499,107
    
    
    14,851
    
    $
    (33.61
    )Extraordinary
      gain from unallocated negative goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,554
    
    
    14,851
    
    
    0.85Cumulative
      effect of accounting change for goodwill impairment net of minority
      interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (388,086
    )
    
    14,851
    
    
    (26.13
    )Net
      income (loss) applicable to common stock
    
    $
    10,193
    
    
    13,440
    
    $
    0.76
    
    $
    832,020
    
    
    16,240
    
    $
    51.23
    
    $
    (874,639
    )
    
    14,851
    
    $
    (58.89
    )
 
 The
Company has excluded the assumed conversion of all stock options (1.5 and 2.8
million for 2004 and 2002, respectively) and restricted stock grants (0.9 and
0.4 million for 2004 and 2002 respectively) from the Company's earnings per
share calculation for the years ended December 31, 2004 and 2002, as the impact
would be anti-dilutive due to the loss from continuing operations for those
years. Diluted earnings per share for the year end December 31, 2003 excludes
the effect of 0.9 million stock options and 0.4 million restricted stock grants
that may be exercised in the future, because such effect would be antidilutive.
The warrant issued in connection with the Electrical Acquisition has not been
included in the computation of diluted income (loss) per share for the years
ended December 31, 2004, 2003 and 2002, respectively, as the impact would be
anti-dilutive.
 
 **11.
Stock based compensation plans**
 
 The
Company sponsored the Employee Stock Purchase Plan ("ESPP") which allowed
eligible employees the right to purchase common stock of the Company on a
quarterly basis at the lower of 85% of the common stock's fair market value on
the last day of the preceding calendar quarter or on the last day of the current
calendar quarter. There were 500,000 shares of common stock reserved under the
ESPP, of which 153,053 shares, were purchased by employees during the year ended
December 31, 2002. On July 16,
2002, eligible employees were notified that purchases under the ESPP were
suspended indefinitely.
 F-26
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **11.
Stock based compensation plans (Continued)**
 
 
 Alpine
has two long-term equity incentive plans: the 1987 Long-Term Equity Incentive
Plan (the "1987 Plan") and the 1997 Stock Option Plan (the "1997 Plan"). No
further options may be granted under the 1987 Plan. The 1997 Plan has 1,500,000
shares of common stock reserved for issuance. There were 36,767 shares of common
stock available under the 1997 Plan at December 31, 2004. Participation in
the 1997 Plan is generally limited to key employees and consultants of Alpine
and its subsidiaries. The 1997 Plan provides for the granting of incentive and
non-qualified stock options and stock appreciation rights. The options granted
under the 1997 Plan vest in equal annual installments over the three year period
commencing on the first anniversary date of the grant or, if earlier, upon the
occurrence of a change in control of the Company and options cannot be exercised
after ten years from the date of grant. During the year ended December 31,
2004 and pursuant to the 1997 Plan, the Executive Compensation and Organization
Committee of the Board of Directors of the Company (the “Compensation
Committee”) granted incentive stock options to purchase 107,000 shares of the
Company's common stock under individual option agreements to certain management
employees. The exercise price of all such options was at the fair market value
of the common stock on the date of grant. Any shares issued upon exercise of
these options may be either authorized and unissued common stock or common stock
held in or acquired for the treasury of the Company.
 
 The
Company adopted the Stock Compensation Plan for Non-Employee Directors (the
"Stock Plan") in January 1999. Under the Stock Plan, each non-employee
director of the Company automatically receives 50% of the annual retainer in
either restricted common stock or non-qualified stock options, as elected by the
director. In addition, each non-employee director may also elect to receive all
or a portion of the remaining amount of the annual retainer and any meeting fees
in the form of restricted stock or stock options in lieu of cash payment. In
2004, 58,743 non-qualified stock options and 35,608 shares of restricted stock
were granted to non-employee directors at the fair market value of the Common
Stock at the date of the grant. Each stock option granted under the Stock Plan
expires on the tenth anniversary of the date of the grant. Awards of restricted
stock and stock options under the stock plan vest upon the earliest of the
following to occur: (i) the third anniversary of the date of the grant; (ii) a
non-employee director’s death; and (iii) a change of control of the Company. Any
shares issued pursuant to the Stock Plan will be issued from the Company's
treasury stock.
 
 Alpine
also sponsors a 1984 Restricted Stock Plan under which a maximum of 600,000
shares of Alpine common stock have been reserved for issuance. At
December 31, 2004, there are 41,728 shares available for issuance. During
the year ended December 31, 2004, the Compensation Committee granted 5,000
shares of the Company’s Common Stock pursuant to such plan to one management
employee at the fair market value of the Common Stock at the date of the grant.
Shares of restricted Common Stock under this grant vest in equal installments
over a three year period commencing with the first anniversary of grant.
 
 In
addition to the above described grant under the 1984 Restricted Stock Plan, in
2004 the Compensation Committee also granted 40,000 shares of the restricted
Common Stock to a certain executive from its treasury shares at the fair market
value of the Common Stock on the date of the grant. The restricted common stock
vests in equal installments on each of the first three anniversaries of the date
of grant, subject to acceleration in the event a change in control of the
Company. On March 25, 2005, this executing elected to defer the receipt of all
shares of the restricted Common Stock for a period of five years pursuant to the
Company’s Deferred Stock Account Plan.
 
 Alpine
sponsors The Alpine Group, Inc. Deferred Stock Account Plan, an unfunded
deferred stock compensation plan whereby certain key management employees
participate are permitted to (i) defer the receipt of all, or a portion of,
their non-cash salary or bonus and shares issued upon stock option exercises, as
defined by the plan and (ii) reinvest deemed cash dividends allocable to Common
Stock credited to a participant’s account under the plan into additional
deferred Common Stock. The plan also provides for matching contributions by the
Company in various percentages applied to shares of Common Stock deferred
therein. The compensation expense associated with the matching contribution is
amortized over the vesting period of the deferral. Shares deferred into the
deferred stock plan are held in irrevocable grantor trusts. At December 31,
2004, 1,620,600 shares of the Common Stock have been deferred and are included
in the grantor trusts. These shares and the corresponding liability are
classified as components of treasury stock and additional paid-in capital,
respectively, in the consolidated balance sheets. On August 10, 2004, 112,000
shares of Common Stock were credited to one executive’s deferred stock account
upon his stock option exercise. On August 9, 2003, 401,239 shares of Common
Stock were deferred by the Company into the deferred stock plan for a period of
five years in accordance with the terms of an executive's amended employment
contract with the Company and in lieu of 40% of his base salary for 2003
otherwise payable to him in cash. In 2003, Alpine recognized income of $0.9
million as a result of the reversal of amounts
 
 F-27
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **11.
Stock based compensation plans (Continued)**
 
 previously
accrued for matching contribution of deferred Common Stock held by employees who
were either terminated or retired prior to the deferral period expiration date.
The total unamortized deferred compensation was $0.6 and $1.3 million as of
December 31, 2004 and 2003, respectively.
 
 Total
compensation expense related to all stock based compensation plans for the years
ended December 31, 2004, 2003 and 2002, was $1.6 million, $0.4 million
and $2.6 million, respectively.
 
 The
following table summarizes stock option activity for the years ended
December 31, 2002, 2003 and 2004.
 
 **Weighted-****Shares**
    
    
    **Average
      Exercise****Outstanding**
    
    
    **Price**Outstanding
      at December 31, 2001
    
    
    3,375,846
    
    $
    10.76Exercised
    
    
    —
    
    
    —Canceled
    
    
    (796,783
    )
    
    9.13Granted
    
    
    144,145
    
    
    1.00Outstanding
      at December 31, 2002
    
    
    2,723,208
    
    $
    10.72Exercised
    
    
    —
    
    
    —Canceled
    
    
    (2,402,584
    )
    
    11.81Granted
    
    
    1,527,371
    
    
    0.76Outstanding
      at December 31, 2003
    
    
    1,847,995
    
    $
    1.07Exercised
    
    
    (425,061
    )
    
    0.82Canceled
    
    
    (132,507
    )
    
    0.76Granted
    
    
    165,743
    
    
    1.22Outstanding
      at December 31, 2004
    
    
    1,456,170
    
    $
    1.19
 
 Information
with respect to stock-based compensation plan stock options outstanding and
exercisable at December 31, 2004 is as follows:
 
 
 
 
 **Options
      Outstanding**
    
    **Options
      Exercisable****Range
      Of**
      **Exercise
      Prices**
    
    **Number**
      **Of
      Options**
      **Outstanding**
    
    **Weighted**
      **Average**
      **Remaining**
      **Contractual**
      **Life
      (Years)**
    
    **Weighted**
      **Average**
      **Exercise**
      **Price**
    
    **Number**
      **Of
      Options**
      **Exercisable**
    
    **Weighted**
      **Average**
      **Exercise**
      **Price**$0.4500-$0.6500
    
    
    203,527
    
    
    8.15
    
    $
    0.5996
    
    
    —
    
    $
    —$0.76
    
    
    779,201
    
    
    8.47
    
    
    0.7600
    
    
    33,855
    
    
    0.7600$0.8750—$3.1000
    
    
    375,103
    
    
    8.33
    
    
    1.2484
    
    
    89,871
    
    
    1.3942$3.4380—$9.8130
    
    
    87,133
    
    
    2.08
    
    
    4.6018
    
    
    87,133
    
    
    4.6018$10.4380—$17.9380
    
    
    11,206
    
    
    4.55
    
    
    13.3286
    
    
    11,206
    
    
    13.32861,456,170
    
    
    7.98
    
    $
    1.1900
    
    
    222,065
    
    $
    3.1583
   F-28
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **12.
Employee benefits**
 
 Prior to
2002, Alpine sponsored an unfunded supplemental executive retirement plan
("SERP"). During 2001, the Company terminated or froze SERP benefits for certain
employees resulting in a curtailment loss of $2.5 million and a settlement
loss of $2.5 million. The benefits were paid out in 2002 or deposited in
Rabbi Trust accounts, effectively terminating Alpine's SERP. The terms of the
definitive purchase agreement with Superior with respect to the Electrical
Acquisition provide that Superior will retain the liabilities and obligations
with respect to certain pension benefits accrued by employees of the electrical
business prior to the date of acquisition.
 
 In
conjunction with the sale of DNE Systems, the Company entered into an agreement
with a certain former employee that entitles the former employee to a benefit
accrued under the former “SERP”, payable at normal retirement age (65). The
employee does not accrue any additional benefits, except for interest, under the
SERP and the Company has the right to pay the actuarial equivalent lump sum
value of the SERP to the former employee at its election with 30 days prior
notice to the employee. The Company has recorded the present value of the SERP
liability of $0.4 as an other long-term liability as of December 31,
2004.
 
 For
periods prior to December 11, 2002, certain employees of Essex Electric
participated in defined benefit plans sponsored by Superior. In connection with
the Electrical Acquisition, all benefit accruals under these Superior defined
benefit plans for former Superior employees that became employees of Essex
Electric ceased effective December 11, 2002. Essex Electric established a new
defined benefit plan for hourly union employees effective January 1,
2003.
  Superior
provided for postretirement employee health care and life insurance benefits for
a limited number of its employees. Superior established a maximum amount it will
pay per employee for such benefits; therefore, health care cost trends did not
affect the calculation of the postretirement benefit obligation or its net
periodic benefit cost. The Company currently does not provide for any
postretirement health care benefits. The change in the projected benefit
obligation, the change in plan assets and the funded status of the defined
benefit pension plans and the postretirement health care benefit plans for the
years ended December 31, 2004 and 2003, are presented below, along with
amounts recognized in the respective consolidated balance sheets.
 F-29
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **12.
Employee benefits (Continued)**
 
 **Defined
      Benefit**
      **Pension
      Plans****December
      31,**
    
    **December
      31,****2004**
    
    **2003****Change
      in benefit obligation:**Benefit
      obligation at beginning of year
    
    $
    131
    
    $
    —Service
      cost
    
    
    117
    
    
    139Interest
      cost
    
    
    8
    
    
    2Actuarial
      loss
    
    
    24
    
    
    10Curtailment
    
    
    —
    
    
    (20
    )Benefits
      paid
    
    
    (13
    )
    
    —Benefit
      obligation at end of year
    
    $
    267
    
    $
    131**Change
      in plan assets:**Fair
      value of plan assets at beginning of year
    
    $
    10
    
    $
    —Actual
      return on plan assets
    
    
    (2
    )
    
    —Employer
      contribution
    
    
    149
    
    
    10Benefits
      paid
    
    
    (13
    )
    
    —Fair
      value of plan assets at end of year
    
    $
    144
    
    $
    10Funded
      status
    
    $
    (124
    )
    $
    (121
    )Unrecognized
      net (gain) loss
    
    
    41
    
    
    10Net
      amount recognized
    
    $
    (83
    )
    $
    (111
    )
 **Amounts
      recognized in the consolidated balance sheets consist
      of:**Accrued
      benefit liability
    
    $
    (124
    )
    $
    (121
    )Accumulated
      other comprehensive income
    
    
    41
    
    
    10Net
      amount recognized
    
    $
    (83
    )
    $
    (111
    )
  
 The
components of net periodic benefit cost of the defined benefit pension plans and
the post retirement healthcare benefit plans during the years ended
December 31, 2004, 2003 and 2002 are presented below:
 
 F-30
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **12.
Employee benefits (Continued)**
 
 **Postretirement****Health
      Care Benefits****Defined
      Benefit Pension Plans**
    
    **Year
      Ended****Year
      Ended December 31,**
    
    **December
      31,****2004**
    
    **2003**
    
    **2002**
    
    **2002****Components
      of net periodic benefit cost:**Service
      cost
    
    $
    117
    
    $
    139
    
    $
    3,455
    
    $
    52Interest
      cost
    
    
    8
    
    
    2
    
    
    7,942
    
    
    167Expected
      return on plan assets
    
    
    (4
    )
    
    —
    
    
    (8,034
    )
    
    —Amortization
      of prior service cost
    
    
    —
    
    
    —
    
    
    79
    
    
    —Actuarial
      (gain) loss
    
    
    —
    
    
    —
    
    
    5
    
    $
    8Curtailment
      (gain) loss
    
    
    —
    
    
    (20
    )
    
    69
    
    
    —Net
      periodic benefit cost
    
    $
    121
    
    $
    121
    
    $
    3,516
    
    $
    227
 
 The
actuarial present value of the projected pension benefit obligation and the
postretirement health care benefits obligation at December 31, 2004, 2003
and 2002 were determined based upon the following assumptions:
 
  **Defined
      Benefit Pension Plans**
      **Year
      Ended December 31,****2004**
    **2003**
    **2002**Discount
      rate
    5.75%
    6.25%
    6.75%Expected
      return on plan assets
    8.0%
    8.0%
    9.0%Increase
      in future compensation
    n/a
    n/a
    3.0%
 Prior to
December 11, 2002, the Company and its subsidiaries sponsored several defined
contribution plans covering substantially all U.S. and Israeli employees. The
plans provided for limited employer matching of participants’ contributions. The
Company’s contributions, including contributions for plans sponsored by Superior
prior to December 11, 2002, during the year ended December 31, 2002 was $4.8
million. Following the Electrical Acquisition Essex Electric established a
defined contribution plan covering substantially all employees of Essex Electric
and Alpine. The plan provides for limited matching of employee contributions.
Company contributions to these plans for the years ended December 31, 2004 and
2003 were $0.5 and $0.7 million, respectively.
 
 The
Company elected not to adopt the disclosure requirements of SFAS No. 132R
“Employers’ Disclosures about Pensions and Other Postretirement Benefits”, due
to the immateriality of its pension plan.
 
 F-31
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)**
 
 **13.
Income taxes**
 
 The
provision (benefit) for income taxes for the years ended December 31, 2004,
2003 and 2002, is comprised of the following:
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****(in
      thousands)**Current:Federal
    
    $
    (4,547
    )
    $
    663
    
    $
    (51,135
    )State
    
    
    337
    
    
    (325
    )
    
    8,207Foreign
    
    
    —
    
    
    —
    
    
    (513
    )Total
      current from continuing operations
    
    
    (4,210
    )
    
    338
    
    
    (43,441
    )Deferred:Federal
    
    
    (831
    )
    
    (9,352
    )
    
    (40,637
    )State
    
    
    (271
    )
    
    (1,695
    )
    
    (7,084
    )Foreign
    
    
    —
    
    
    —
    
    
    (4,161
    )Total
      deferred from continuing operations
    
    
    (1,102
    )
    
    (11,047
    )
    
    (51,882
    )Income
      taxes from continuing operations
    
    
    (5,312
    )
    
    (10,709
    )
    
    (95,323
    )Income
      taxes from discontinued operations
    
    
    1,115
    
    
    1,897
    
    
    642Provision
      for taxes on gain on sale of DNE
    
    
    10,275
    
    
    —
    
    
    —Total
      income tax (benefit) provision
    
    $
    6,078
    
    $
    (8,812
    )
    $
    (94,681
    )
   
 The
provision (benefit) for income taxes differs from the amount computed by
applying the U.S. federal income tax rate of 35% for the years ended
December 31, 2004, 2003 and 2002, because of the effect of the following
items:
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****(in
      thousands)**Continuing
      operations:Expected
      income tax expense (benefit) at U.S. federal statutory tax
      rate
    
    $
    (4,523
    )
    $
    287,026
    
    $
    (205,176
    )State
      income taxes, net of U.S. federal income tax benefit
    
    
    (542
    )
    
    (1,432
    )
    
    (685
    )Taxes
      on foreign income at rates which differ from the U.S. federal statutory
      rate
    
    
    —
    
    
    —
    
    
    4,915Distributions
      on preferred securities of subsidiary trust
    
    
    —
    
    
    —
    
    
    (5,328
    )Nondeductible
      goodwill amortization and impairment
    
    
    —
    
    
    —
    
    
    113,640Tax
      benefit on charitable contribution of building
    
    
    (722
    )
    
    —
    
    
    —Change
      in valuation allowance
    
    
    149
    
    
    (858
    )
    
    609Change
      in reserves
    
    
    738
    
    
    (128
    )
    
    —Permanent
      difference related to an investment
    
    
    —
    
    
    (300,427
    )
    
    —Other,
      net
    
    
    (412
    )
    
    5,110
    
    
    (3,298
    )Provision
      for income tax benefit from continuing operations
    
    $
    (5,312
    )
    $
    (10,709
    )
    $
    (95,323
    )
 
 F-32
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **13.
Income taxes (Continued)**
 
 Income
(loss) from continuing operations before income taxes, distributions on
preferred securities of subsidiary trust, minority interest, equity in earnings
of affiliate, extraordinary items and cumulative effect of accounting change
attributable to domestic and foreign operations for the years ended
December 31, 2004, 2003 and 2002, was as follows:
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****(in
      thousands)**United
      States
    
    $
    (12,923
    )
    $
    820,076
    
    $
    (558,893
    )Foreign
    
    
    —
    
    
    —
    
    
    (27,323
    )Income
      (loss) from continuing operations before income taxes, distributions on
      preferred securities of Superior subsidiary trust, minority interest,
      equity in earnings of affiliate extraordinary item and cumulative effect
      of accounting change
    
    $
    (12,923
    )
    $
    820,076
    
    $
    (586,216
    )
 
 Items
that result in deferred tax assets and liabilities and the related valuation
allowance at December 31, 2004 and 2003 are as follows:
 
 **December
      31,**
    
    **December
      31,****2004**
    
    **2003****(in
      thousands)**Deferred
      tax assets:Accruals
      not currently deductible for tax
    
    $
    833
    
    $
    2,080Compensation
      expense related to unexercised stock options and
      stock
      grants
    
    
    2,564
    
    
    1,926Net
      operating loss carryforwards
    
    
    5,845
    
    
    5,972Alternative
      minimum tax credit carryforwards
    
    
    —
    
    
    230Other
    
    
    813
    
    
    544Total
      deferred tax assets
    
    
    10,055
    
    
    10,752Less
      valuation allowance
    
    
    (6,662
    )
    
    (6,512
    )Net
      deferred tax assets
    
    
    3,393
    
    
    4,240Deferred
      tax liabilities:Depreciation
    
    
    2,314
    
    
    3,580Inventory
    
    
    8,997
    
    
    9,723Total
      deferred tax liabilities
    
    
    11,311
    
    
    13,303Net
      deferred tax liability
    
    $
    7,918
    
    $
    9,063
 
 The
Company provides reserves for liabilities that may arise as a result of income
tax exposures arising in the normal course of its business. These exposures may
result from specific positions taken by the Company in its tax returns or from
tax planning strategies employed by the Company to minimize its tax liabilities.
Management determines tax exposure items based on positions asserted by tax
authorities as well as management's assessment of exposures from unasserted
items. The calculation of the income tax provision involves significant
estimates and assumptions and actual results could differ from those
estimates.
 
 During
2001, the Company entered into commercial transactions intended to offset the
potential impact of interest rate changes on the Company’s investments,
including the investment of the net cash proceeds from the sale of an equity
investment. The Company claimed tax benefits from these transactions of $11.2
million and $3.2 million in 2001 and 2002, respectively. At December 31, 2001,
the Company established a tax contingency reserve on its balance sheet
corresponding to realized tax benefits. The balances in the reserve at December
31, 2004 and 2003 (including interest) were $16.4 million and $15.6 million,
respectively. The amount of the reserve at December 31, 2003 previously reported
as a component of long-term deferred income taxes has been reclassified to other
long-term liabilities in the accompanying consolidated financial statements. The
remaining $0.5 million of the tax contingency reserve at December 31, 2003
consists of miscellaneous other tax contingencies.
 
 F-33
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **13.
Income taxes (Continued)**
 
 At
December 31, 2004, Alpine had state operating loss carryforwards in the
amount of $5.8 million that can be used to offset future taxable income. The net
operating loss carryforwards expire beginning in 2005 through 2020. Due to the
surrender of authority for doing business in certain states, it is unlikely that
Alpine will realize all of its state net operating loss carryforwards.
Accordingly, Alpine has determined that, pursuant to the provision of SFAS No.
109, a deferred tax valuation allowance in the amount of $5.1 is required on
those deferred tax assets. Availability of the net operating loss carryforwards
might be challenged upon taxing authorities' examinations of the related tax
returns, which could affect the availability of such carryforwards. Alpine
believes, however, that any challenges that would limit the utilization of net
operating loss carryforwards would not have a material adverse effect on
Alpine's financial position.
 
 **14.
Asset impairment, restructuring and other charges**
 
 During
the years ended December 31, 2004, 2003 and 2002 the Company recorded $3.9,
$13.6 and $36.5 million, respectively, of restructuring and other charges
comprised of costs related to relocation and installation of certain equipment
from closed facilities and the start-up of new manufacturing processes at Essex
Electric’s Florence, AL manufacturing facility, and costs related to the
wind-down of other facilities previously closed and other miscellaneous expenses
related to the Company's restructuring.
 
 The
following tables illustrate the restructuring reserve and the related activities
for 2004 and 2003:
 
 **December 31,**
      **2003**
    
    **Charges**
    
    **Payments**
    
    **December
      31,**
      **2004****(in
      thousands)**Employee
      severance
    
    $
    1,001
    
    $
    19
    
    $
    1,020
    
    $
    —Facility
      exit costs
    
    
    —
    
    
    935
    
    
    935
    
    
    —Equipment
      and inventory relocation costs and other costs
    
    
    —
    
    
    2,942
    
    
    2,942
    
    
    —$
    1,001
    
    $
    3,896
    
    $
    4,897
    
    $
    —
   **December 31,**
      **2002**
    
    **Charges**
    
    **Payments**
    
    **December
      31,**
      **2003****(in
      thousands)**Employee
      severance
    
    $
    1,227
    
    $
    3,640
    
    $
    3,866
    
    $
    1,001Facility
      exit costs
    
    
    200
    
    
    792
    
    
    992
    
    
    —Equipment
      and inventory relocation costs and other costs
    
    
    —
    
    
    9,123
    
    
    9,123
    
    
    —$
    1,427
    
    $
    13,555
    
    $
    13,981
    
    $
    1,001
 
 Asset
impairments were recognized during 2003 at the Sikeston facility for items idled
during the restructuring efforts and later identified for sale. The targeted
assets had an original net book value of $1.1 million of which $0.5 million
impairment write-off was recognized to reduce the cost to its fair market value.
The resulting $0.6 million value is reported as assets held for sale as of
December 31, 2003. An additional impairment was taken at the Florence facility
for assets involved in exiting the industrial product line. The total impairment
loss amounted to $0.1 million, recorded in December 2003, with residual assets
held for sale valued at $0.1 million.
 
 As a
result of the Electrical Acquisition (see Note 5), Superior evaluated for
impairment the long-lived assets of its Electrical wire business, DNE and
Superior Israel pursuant to SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." In accordance with SFAS No. 144, such
impairment test was based on probability weighted estimated future cash flows
related to such assets including assessment of cash proceeds associated with the
sale to Alpine of the Electrical wire business, DNE and Superior's investment in
Superior Israel. As a result of such review and the subsequent asset sale in
connection with the Electrical Acquisition, Superior recorded a pre-tax charge
in 2002, principally related to the Electrical wire business, of
$177.9 million to recognize an impairment of the identified long-lived
assets of the Electrical wire business and Superior Israel and the loss on
consummation of the Electrical Acquisition transaction. Alpine recorded a
corresponding pre-tax charge of $139.0 million for the
 
 F-34
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **14.
Asset impairment, restructuring and other charges
(Continued)**
 
 year
ended December 31, 2002 reflecting Superior's impairment charge and the loss
recognized by Superior on consummation of the Electrical Acquisition
attributable to the non-controlling interest in Superior.
 
 During
the year ended December 31, 2002, Superior recorded restructuring and other
charges of $33.3 million. These charges included $27.3 million,
$4.2 million, $0.9 million and $0.9 million, respectively,
related to (i) the closure of its Communications Group Elizabethtown,
Kentucky and Winnipeg, Canada manufacturing facilities; (ii) the closure of
its OEM Group Rockford, Illinois manufacturing facility; (iii) the shutdown
of its Electrical Group Canadian operations and (iv) operational
restructuring activities at Superior Israel. These actions were principally
taken to more closely align productive capacity with current market demands and
to reduce overall manufacturing costs. The $33.3 million charge included a
$18.1 million write-down of idled property, plant and equipment,
$9.0 million of employee separation costs and $6.2 million of other
facility related closure costs. Costs to relocate inventory and manufacturing
equipment into remaining facilities are being expensed as incurred.
Additionally, during the
 year
ended December 31, 2002, Alpine recorded restructuring and other charges of
$1.4 million related to certain termination and retirement benefits paid in
connection with Alpine corporate administrative staff reductions and Essex
Electric recorded restructuring and other charges of $1.8 million
consisting of $1.6 million of employee termination costs and $0.2 of
facility exit costs related to closure of its Columbia City, Indiana plant. At
December 31, 2002, $1.4 million, primarily related to employee
separation costs, is included in accrued expenses in the consolidated financial
statements.
 
 **15.
Derivative financial instruments and fair value
information**
 
 The
Company to a limited extent, uses, forward fixed price contracts and derivative
financial instruments to manage, commodity price risks. The Company is exposed
to credit risk in the event of nonperformance by counter parties for metal
forward price contracts, and metals futures contracts but the Company does not
anticipate nonperformance by any of these counter parties. The amount of such
exposure is generally limited to the unrealized gains (losses) within the
underlying contracts.
 
 ***Commodity
price risk management***
 
 The cost
of copper, the Company's most significant raw material has been subject to
significant volatility over the past several years. In anticipation of a
significant reduction in inventory levels in 2003, the Company entered into
copper futures sales contracts to minimize the price risk associated with
declining copper costs. These contracts were liquidated throughout the year in
step with the decreases in inventory. **** In
December 2003, the Company purchased approximately $13 million of copper
inventory for use in the production process in the first quarter of 2004. In
connection with such purchases, the Company entered into copper futures
contracts to match the copper price to the consumption period. As such, these
contracts were recorded at fair value at December 31, 2003 resulting in a charge
to earnings of $0.6 million. These contracts were subsequently liquidated in the
first quarter of 2004.
 
 
 Similarly,
in December 2004, the Company purchased approximately $9 million of copper
inventory for use in the first quarter of 2005 and the Company entered into
copper futures contracts to match the copper price to the consumption period.
These contracts were also recorded at fair value at December 31, 2004 resulting
in a charge to cost of sales of $0.4 million. These contracts were liquidated in
the first quarter of 2005.
 F-35
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued**
 
 **16.
Commitments and contingencies**
 
 Total
rent expense under cancelable and noncancelable operating leases was $2.7
million, $3.2 million and $10.0 million during the years ended
December 31, 2004, 2003 and 2002, respectively.
 
 At
December 31, 2004, future minimum lease payments under noncancelable
operating leases are as follows:
 
 **Year**
    
    **(in
      thousands)**2005
    
    $
    2,2162006
    
    
    1,9292007
    
    
    1,2472008
    
    
    8622009
    
    
    359Thereafter
    
    
    899
 
 The
Company subleases a portion of each of their three regional distribution
centers. The Company received $0.8 million of sublease income during 2004. Below
are the future lease commitments from the subleases related to these subleases.
 
 **Year**
    
    **(in
      thousands)**2005
    
    $
    8662006
    
    
    3902007
    
    
    137
 
 At
December 31, 2004 the Company had committed approximately $17.1 million to
outside vendors for the purchase of goods and services, of which approximately
$1.1 million was related to certain capital projects. The remainder was
primarily for inventory and other supply items.
 
 Approximately
24% of the Company's total labor force at December 31, 2004 is covered by
collective bargaining agreements. Contracts covering approximately 100% of the
Company's unionized work force are due to expire at various times in 2007. The
Company considers relations with its employees to be satisfactory.
 
 The
Company is subject to lawsuits incidental to its business. In the opinion of
management, based on its examination of such matters and discussions with
counsel, the ultimate resolution of all pending or threatened litigation, claims
and assessments will have no material effect upon Alpine's consolidated
financial position, liquidity or results of operations.
 
 Alpine's
operations are subject to environmental laws and regulations in each of the
jurisdictions in which it owns or operates facilities or for which it has
assumed liabilities, governing, among other things, emissions into the air,
discharges to water, the use, handling and disposal of hazardous substances and
the investigation and remediations of soil and groundwater contamination both
on-site at past and current facilities and at off-site disposal locations.
Alpine, as to two sites, and Essex Electric, as to one site, are currently
involved in environmental investigations which may result in certain remedial
activities being required under the oversight of two state regulatory agencies.
Alpine currently does not believe that any of the environmental matters and for
which it may be liable, will have a material adverse effect upon its business,
financial condition, liquidity or results of operations.
 
 
 The
Company accepts certain customer orders for future delivery at fixed prices. As
copper is the most significant raw material used in the manufacturing process,
the Company enters into forward purchase fixed price commitments for copper to
properly match its cost to the value of the copper to be billed to the
customers. At December 31, 2004, the Company had forward fixed price
purchase commitments of 0.5 million copper pounds.
 
 F-36
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 
 **17.
Related party transactions**
 
 As
discussed in Note 5, in December 2002 the Company acquired certain assets and
liabilities from Superior (the “Electrical Acquisition”). At that time, the
Company also entered into a supply and transitional services agreement with
Superior which was subsequently replaced in November 2003 by a new supply and
services agreement between Superior Essex Inc. (the successor company to
Superior pursuant to the Plan of Reorganization) and Essex Electric
(collectively, the “Supply Agreements”). The Supply Agreements provided for the
purchase from Superior of certain specified quantities of copper rod and certain
transitional administrative services to Alpine Holdco and Essex Electric. The
Supply Agreements expired on December 31, 2004 in accordance with their terms.
The total cost of copper rod purchased under the Supply Agreements in 2004, 2003
and 2002 was $89.2 million, $99.6 million, and $10.8 million respectively. The
cost of administrative service for 2004, 2003 and 2002 was $1.4, $4.4 and $0.3
million, respectively.
 
 Essex
Electric subleases a portion of the Company’s leased facilities at Ontario,
California and McDonough, Georgia to Superior. Lease payments to Essex Electric
by Superior were $0.7 and $0.8 in 2004 and 2003, respectively.
 
 
 Essex
Electric processes insulated copper wire at its Jonesboro, IN scrap reclamation
center for Superior. Essex Electric charges a fee for this service and retains,
then sells, the copper reclaimed. The charges to Superior for these services
recorded in net sales were $0.6, $0.5 and $0.5 million for 2004, 2003 and 2002,
respectively.
 
 In
October 2003, Superior, under it’s rights under the Security Holder’s Agreement
dated December 11, 2002, purchased 169 newly issued shares of Essex Electric
common stock for an aggregate cash purchase price of $0.5 million (See Note 1).
 
 In
January 2005, Superior, under it’s rights under the Security Holder’s Agreement,
purchased 445 newly issued shares of Essex Electric common stock for an
aggregate cash purchase price of $1.2 million (See Note 1).
 
 At
December 31, 2004 and 2003, Alpine has outstanding loans to certain
officers totaling $0.4 and $0.5 million, respectively, relating to the tax
implications associated with the exercise in prior years of stock options and
restricted stock grants. The unpaid balance, which is added to accumulated
deficit, bears interest at prime plus 0.5%. During 2002, the Company agreed to
forgive $0.3 million, of such loans and accrued interest, with such
forgiveness to occur over a ten year period, subject to certain employment
conditions.
 
 During
2004, the Company assigned life insurance policies to a former employee and
current member of the Board of Directors for the Company, in satisfaction of its
obligation to pay $159,545 of annual premiums in respect of the polices. The
aggregate net cash surrender value of the polices at the time of assignment was
$207,032.
 
 F-37
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **18.
Preferred stock**
 
 Alpine
has authorized 500,000 shares of preferred stock with a par value of $1.00 per
share. The preferred stock may be issued at the discretion of the Board of
Directors in one or more series with differing terms, limitations and rights.
 
 On June
23, 2003, Alpine completed a private placement of 8,287 shares of a new issue of
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock")
to its directors and certain officers for a purchase price of $380 per share, or
an aggregate of approximately $3.1 million. Holders of the Series A
Preferred Stock are entitled to receive, when, as and if declared by the board
of directors out of funds legally available for payment, cash dividends at an
annual rate of $30.40 per share. The Series A Preferred Stock originally
was convertible into Common Stock, at the option of the holder, at the rate of
691 shares of Common Stock per share of Series A Preferred. As a result of a
special dividend declared by the Company (see Note 22), the conversion rate
increased to 743.01. Since the market price of the common stock on the
subscription date (June 23, 2003) was $0.76 per share and the original
conversion price was $0.55 per share, a beneficial conversion feature of $1.2
million was recorded as a reduction to the mandatorily redeemable series A
cumulative preferred stock line of the balance sheet with the offset to capital
in excess of par. The beneficial conversion feature was recorded as a dividend
as of December 29, 2004 when the privately placed Series A Preferred Stock
became convertible following the increase in authorized but unissued shares of
Common Stock from 25 million to 50 million shares.
 
 On
November 10, 2003, the Company completed the sale of 9,977 shares of Series A
Preferred Stock pursuant to a rights offering to holders of the Common Stock.
Common stockholders were offered a right to purchase one share of Series A
Preferred Stock at a price of $380 per share for each 500 shares of common stock
held on September 29, 2003. The terms of the Series A Preferred Stock are the
same as that purchased by the officers and directors in the private placement
discussed above. Total proceeds received from the sale were
$3.8 million. The recording of dividends, if any, on the Series A Preferred
Stock will reduce the Company's earnings per share in the period recorded. Since
the market price of the Common Stock on the date of issuance (November 10, 2003)
was $0.92 per share and the original conversion price was $0.55 per share, a
beneficial conversion feature of $2.6 million was recorded. This was recorded as
a dividend since the shares were immediately convertible, offset with a credit
to capital in excess of par. The Company may cause conversion of the Series A
Preferred Stock into common stock if the Company's common stock is then listed
on the New York Stock
Exchange or the American Stock Exchange or is traded on the Nasdaq National
Market System and the average closing price of a share of the Company's common
stock for any 20 consecutive trading days equals or exceeds 300% of the
conversion price then in effect. The Series A Preferred Stock is subject to
mandatory redemption by the Company ratably on the last day of each quarter
during the three-year
period commencing on December 31, 2009 at the liquidation value of $380 per
share, plus accrued and unpaid dividends. Additionally, if the Company
experiences a change in control it will, subject to certain limitations, offer
to redeem the Series A Preferred Stock at a cash price of $380 per share plus
(i) accrued and unpaid dividends and (ii) if the change of control
occurs prior to December 31, 2007, all dividends that would be payable from
the redemption date through December 31, 2007.
 
 At
December 31, 2004, 177 shares of 9% Cumulative Convertible Preferred Stock
(“9% Preferred Stock”) were outstanding and at December 31, 2003, 250 shares of
9% Cumulative Convertible Senior Preferred Stock ("9% Senior Preferred Stock")
and 177 shares of 9% Cumulative Convertible Preferred Stock were outstanding.
 
 The 9%
Senior Preferred Stock is senior in ranking to holders of Alpine's common stock
and the 9% Preferred Stock. Each share is convertible at any time into 199
shares of Alpine common stock at a conversion price of $5.02 per share, subject
to customary adjustments, and is redeemable by Alpine at any time, in whole or
in part at a price equal to the liquidation value per share. The 9% Senior
Preferred Stock carries 100 votes per share, votes as a single class with
Alpine's common stock on all matters submitted to stockholders and is entitled
to vote as a separate class in the event of any proposal to (i) amend any
of the principal terms of the preferred stock; (ii) authorize, create,
issue or sell any class of stock senior to or on a parity with the 9% Senior
Preferred Stock as to dividends
or liquidation preference; or (iii) merge into, consolidate with, or sell
all or substantially all of the assets of Alpine to another entity. The holders
of not less than 66 2 / 3 % of the
9% Senior Preferred Stock must approve any transaction subject to the class
voting rights. In June 2004, Alpine redeemed all remaining shares of 9% Senior
Preferred Stock outstanding at liquidation value of $250 thousand. The 9%
Preferred Stock is convertible into 105 1 / 2 shares
of common stock, subject to customary adjustments. Alpine may redeem the stock
at any time, in whole or in part at a price equal to the liquidation value per
share.
  F-38
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **19.
Stockholder rights agreement**
 
 Under the
Company's Stockholder Rights Plan, last amended in March 2003 ("the Plan"), a
Preferred Share Purchase Right ("Right") is attached to each share of common
stock pursuant to which the holder will, in certain takeover-related
circumstances, become entitled to purchase from the Company one one-hundredth of
a share of Series A Junior Participating Preferred Stock at a price of
$75.00, subject to adjustment, with each share having substantially the rights
and preferences of 100 shares of common stock. The Rights will separate from the
common shares after a person or entity or group of affiliated or associated
persons (other than certain grandfathered persons) acquire beneficial ownership
of 15% (or in the case of Steven S. Elbaum, 40%) or more of the outstanding
common shares) or commence a tender offer that would result in a person or group
acquiring, beneficial ownership of 15% or more of the outstanding common shares.
Grants of stock options and restricted stock by the board of directors of the
Company (and its committees) to its officers, will not by itself cause an
officer to become an acquiring person. Also, in certain takeover-related
circumstances, each Right (other than those held by an acquiring person) will be
exercisable for shares of common stock of the Company or stock of the acquiring
person having a market value of twice the exercise price. Once certain
triggering events have occurred to cause the Rights to become exercisable, each
Right may be exchanged by the Company for one share of common stock.
 
 The
Rights are redeemable at any time, prior to the time that a person becomes an
acquiring person, by the Company before their expiration on February 17,
2009 at a redemption price of $0.01 per Right. At December 31, 2004,
200,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance under this Plan.
 
 **20.
Business segments and foreign operations**
 
 Prior to
the Electrical Acquisition on December 11, 2002, the Company’s reportable
segments were historically the strategic businesses of Superior that offered
different products and services to different customers. These segments were
communications, magnet wire (formerly known as OEM) and electrical. The
communications segment included copper and fiber optic outside plant and premise
wire and cable, and all of the Superior Cable Ltd. products. The magnet wire
segment included magnet wire and related products. The electrical segment
included building and industrial wire and cable. The operations of DNE Systems
and Superior Cable Ltd. were historically included within the communications
segment. As a result of the Electrical Acquisition, the deconsolidation of
Superior effective December 11, 2002, and the sale of DNE effective July 29,
2004, the Company’s reportable segments for periods after December 11, 2002,
consist only of the electrical segment. The results of DNE have been treated as
discontinued operations for all periods.
 
 The
Company evaluates segment performance based on a number of factors, with
operating income, before restructuring and other charges and asset impairments,
being the most critical. Intersegment sales are generally recorded at cost, are
not significant and, therefore, have been eliminated below.
 
 F-39
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **20.
Business segments and foreign operations (Continued)**
 
 Operating
results for each of the Company's reportable segments are presented below.
Corporate and other items shown below are provided to reconcile to the Company's
consolidated statements of operations, cash flows and balance sheets.
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****(in
      thousands)**Net
      sales:Communications
      (a)
    
    $
    —
    
    $
    —
    
    $
    433,602Magnet
      wire
    
    
    —
    
    
    —
    
    
    464,536Electrical
      (b)
    
    
    315,894
    
    
    302,112
    
    
    465,869$
    315,894
    
    $
    302,112
    
    $
    1,364,007Depreciation
      expense:Communications
    
    $
    —
    
    $
    —
    
    $
    17,760Magnet
      wire
    
    
    —
    
    
    —
    
    
    12,592Electrical
    
    
    858
    
    
    690
    
    
    7,601Corporate
      and other
    
    
    30
    
    
    79
    
    
    2,586$
    888
    
    $
    769
    
    $
    40,539Operating
      income (loss):Communications
    
    $
    —
    
    $
    —
    
    $
    19,061Magnet
      wire
    
    
    —
    
    
    —
    
    
    38,128Electrical
    
    
    (1,590
    )
    
    (14,397
    )
    
    (10,591
    )Corporate
      and other
    
    
    (3,799
    )
    
    (2,039
    )
    
    (24,307
    )Restructuring
      and other charges and asset impairments
    
    
    (4,231
    )
    
    (14,144
    )
    
    (500,201
    )$
    (9,620
    )
    $
    (30,580
    )
    $
    (477,910
    )Total
      assets:Communications
    
    $
    —
    
    $
    —
    
    $
    —Magnet
      wire
    
    
    —
    
    
    —
    
    
    —Electrical
    
    
    93,005
    
    
    87,923
    
    
    158,793Corporate
      and other
    
    
    39,782
    
    
    10,565
    
    
    12,002Total
      assets of continuing
      operations
    
    $
    132,787
    
    $
    98,488
    
    $
    170,795Total
      assets of discontinued operations
    
    
    —
    
    
    9,300
    
    
    12,326Total
      assets
    
    $
    132,787
    
    $
    107,788
    
    $
    183,121Capital
      expenditures:Communications
    
    $
    —
    
    $
    —
    
    $
    3,207Magnet
      wire
    
    
    —
    
    
    —
    
    
    1,995Electrical
    
    
    5,036
    
    
    7,374
    
    
    3,139Corporate
      and other
    
    
    67
    
    
    25
    
    
    1,034$
    5,103
    
    $
    7,399
    
    $
    9,375
  F-40
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **20.
Business segments and foreign operations (Continued)**
 
 (a)
    Net
      sales to the regional Bell operating companies ("RBOCs") and major
      independent telephone companies accounted for 42% of the Communication
      Group net sales for the year ended December 31, 2002 Superior Cable
      net sales represented 24% of the Communication Group net sales for the
      year ended December 31, 2002. No customer accounted for more than 10%
      of net sales for 2002.
 
 (b)
    One
      customer accounted for 23% and 18% of net sales for the years ended
      December 31, 2004 and 2003, respectively. No customer accounted for
      more than 10% of net sales for 2002.
 
 The
following provides information about domestic and foreign operations for the
years ended December 31, 2004, 2003 and 2002:
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002****(in
      thousands)**Net
      sales:United
      States
    
    $
    315,894
    
    $
    302,112
    
    $
    1,209,898Canada
    
    
    —
    
    
    —
    
    
    20,296Israel
    
    
    —
    
    
    —
    
    
    89,472United
      Kingdom
    
    
    —
    
    
    —
    
    
    44,341Total
      Net Sales from Continuing Operations
    
    $
    315,894
    
    $
    302,112
    
    $
    1,364,007Long-lived
      assets:United
      States
    
    $
    16,927
    
    $
    15,241
    
    $
    13,470
   F-41
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **21.
Quarterly financial information (unaudited)**
 
 The
Company's unaudited quarterly results of operations for the year ended
December 31, 2004 and 2003 are as follows:
 
  **Quarter
      Ended 2004****March
      31**
    
    **June
      30**
    
    **September
      30**
    
    **December
      31**
    
    **Year
      Ended**
      **December
      31****(in
      thousands, except per share data)**Net
      sales
    
    $
    81,937
    
    $
    76,678
    
    $
    80,354
    
    $
    76,925
    
    $
    315,894Gross
      profit
    
    
    10,187
    
    
    6,578
    
    
    4,972
    
    
    (2,181
    )
    
    19,556Income
      from continuing operations
    
    
    772
    
    
    (746
    )
    
    (2,837
    )
    
    (4,332
    )
    
    (7,143
    )Income
      from discontinued operations
    
    
    703
    
    
    892
    
    
    (93
    )
    
    —
    
    
    1,502Gain
      on sale of DNE
    
    
    —
    
    
    —
    
    
    19,088
    
    
    (7
    )
    
    19,081Net
      income (loss)
    
    
    1,475
    
    
    146
    
    
    16,158
    
    
    (4,339
    )
    
    13,440Net
      income (loss) per share of common stock – basicFrom
      continuing operations, net of preferred dividends
    
    
    0.05
    
    
    (0.07
    )
    
    (0.33
    )
    
    (0.38
    )
    
    (0.77
    )From
      discontinued operations
    
    
    0.06
    
    
    0.07
    
    
    (0.01
    )
    
    —
    
    
    0.11Gain
      on sale of DNE
    
    
    —
    
    
    —
    
    
    1.39
    
    
    —
    
    
    1.42Net
      income (loss)
    
    
    0.11
    
    
    —
    
    
    1.05
    
    
    (0.38
    )
    
    0.76Net
      income (loss) per share of common stock – diluted (a)From
      continuing operations
    
    
    0.03
    
    
    (0.07
    )
    
    (0.33
    )
    
    (0.38
    )
    
    (0.77
    )From
      discontinued operations
    
    
    0.03
    
    
    0.07
    
    
    (0.01
    )
    
    —
    
    
    0.11Gain
      on sale of DNE
    
    
    —
    
    
    —
    
    
    1.39
    
    
    —
    
    
    1.42Net
      income (loss)
    
    
    0.06
    
    
    —
    
    
    1.05
    
    
    (0.38
    )
    
    0.76
 
 **Quarter
      Ended 2003****March
      31**
    
    **June
      30**
    
    **September
      30**
    
    **December
      31**
    
    **Year
      Ended**
      **December
      31****(in
      thousands, except per share data)**Net
      sales
    
    $
    89,354
    
    $
    80,154
    
    $
    69,485
    
    $
    63,119
    
    $
    302,112Gross
      profit
    
    
    5,787
    
    
    5,269
    
    
    3,712
    
    
    397
    
    
    15,165Income
      from continuing operations
    
    
    (3,040
    )
    
    (4,628
    )
    
    (3,404
    )
    
    842,297
    
    
    831,225Income
      from discontinued operations
    
    
    726
    
    
    854
    
    
    707
    
    
    1,264
    
    
    3,551Net
      income (loss)
    
    
    (2,314
    )
    
    (3,774
    )
    
    (2,697
    )
    
    843,561
    
    
    834,776Net
      income (loss) per share of common stock – basicFrom
      continuing operations
    
    
    (0.21
    )
    
    (0.31
    )
    
    (0.26
    )
    
    69.74
    
    
    60.13From
      discontinued operations
    
    
    0.05
    
    
    0.06
    
    
    0.05
    
    
    0.11
    
    
    0.26Net
      income (loss)
    
    
    (0.16
    )
    
    (0.25
    )
    
    (0.21
    )
    
    69.85
    
    
    60.39Net
      income (loss) per share of common stock – diluted (a)From
      continuing operations
    
    
    (0.21
    )
    
    (0.31
    )
    
    (0.26
    )
    
    38.36
    
    
    51.01From
      discontinued operations
    
    
    0.05
    
    
    0.06
    
    
    0.05
    
    
    0.06
    
    
    0.22Net
      income (loss)
    
    
    (0.16
    )
    
    (0.25
    )
    
    (0.21
    )
    
    38.42
    
    
    51.23
 
 (a)
    Net
      income per diluted share of common stock for the twelve months is
      determined by computing a year-to-date weighted average of the number of
      incremental shares included in each quarterly diluted net income per share
      calculation. As a result, the sum of net income per share for the four
      quarterly periods may not equal the net income per share for the years
      ended December 31, 2004 and 2003.
   F-42
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **21.
Quarterly financial information (unaudited) (Continued)**
   **Quarter
      Ended 2004****March
      31**
    
    **June
      30**
    
    **September
      30**
    
    **December
      31**
    
    **Year
      Ended**
      **December
      31****(in
      thousands, except per share data)**Reconciliation
      of 10Q amounts to amounts reported above:Net
      sales10Q
      as filed (for quarters 1-3 in 2004)
    
    
    88,833
    
    
    76,678
    
    
    80,354
    
    
    76,925
    
    
    322,790Discontinued
      Operations (a)
    
    
    (6,896
    )
    
    —
    
    
    —
    
    
    —
    
    
    (6,896
    )Net
      Customer Sales as reported
    
    
    81,937
    
    
    76,678
    
    
    80,354
    
    
    76,925
    
    
    315,894Gross
      profit10Q
      as filed (for quarters 1-3 in 2004)
    
    
    13,894
    
    
    6,578
    
    
    4,972
    
    
    (2,181
    )
    
    23,263Discontinued
      Operations (a)
    
    
    (3,707
    )
    
    —
    
    
    —
    
    
    —
    
    
    (3,707
    )Gross
      profit as reported
    
    
    10,187
    
    
    6,578
    
    
    4,972
    
    
    (2,181
    )
    
    19,556
 
  **Quarter
      Ended 2003****March
      31**
    
    **June
      30**
    
    **September
      30**
    
    **December
      31**
    
    **Year
      Ended**
      **December
      31****(in
      thousands, except per share data)**Reconciliation
      of 10Q amounts to amounts reported above:Net
      sales10Q
      as filed (for quarters 1-3 in 2004)
    
    
    97,542
    
    
    80,154
    
    
    69,485
    
    
    63,119
    
    
    310,300Discontinued
      Operations (a)
    
    
    (8,188
    )
    
    —
    
    
    —
    
    
    —
    
    
    (8,188
    )Net
      Customer Sales as reported
    
    
    89,354
    
    
    80,154
    
    
    69,485
    
    
    63,119
    
    
    302,112Gross
      profit10Q
      as filed (for quarters 1-3 in 2004)
    
    
    9,731
    
    
    5,269
    
    
    3,712
    
    
    397
    
    
    19,109Discontinued
      Operations (a)
    
    
    (3,944
    )
    
    —
    
    
    —
    
    
    —
    
    
    (3,944
    )Gross
      profit as reported
    
    
    5,787
    
    
    5,269
    
    
    3,712
    
    
    397
    
    
    15,165
 
 (a)
    DNE
      sale was announced during second quarter and classified as discontinued
      operations the second quarter and
thereafter.
 
 **22.
Special Dividend and Common Stock Reverse/Forward Split**
 
 On August
24, 2004, Alpine declared a special dividend of up to $0.40 per share of Common
Stock and a special dividend of $103.65 per share of Series A Preferred Stock to
shareholders of record on September 14, 2004 (the “Record Date”). The amount of
the Special dividend in respect of the Common Stock was reduced proportionately,
to $0.36 per share, to adjust for additional shares of Common Stock issued by
the Company between August 24, 2004 and the Record Date. This resulted in
special dividend payments of $4.9 million in respect of the Common Stock and
$1.5 million in respect of the Series A Preferred Stock. Under the respective
terms of the stock based compensation plans of the Company (see note 11), the
Company is required to allocate a deemed dividend in respect of shares of
restricted Common Stock granted and unvested and/or deposited and credited to
participant accounts under the Alpine Deferred Stock Account Plan in an amount
equal to any cash dividend paid in respect of the Common Stock. Accordingly, on
September 30, 2004, the Company declared, but did not yet pay, a total deemed
dividend of $0.9 million, $0.6 million of which was recorded to compensation
expense during 2004. The remainder will be amortized over the vesting period of
such unvested or deferred shares of Common Stock.
 F-43
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 **22.
Special Dividend and Common Stock Reverse/Forward Split
(Continued)**
 
 On
December 30, 2004 the Company effected a reverse 1-for-100 stock split followed
immediately by a forward 100-for-1 stock split of the Common Stock. As permitted
under the Delaware General Corporation Law, stockholders whose shares of Common
Stock were converted into less than 1 share as a result of the reverse split had
these shares canceled and received cash payments equal to the fair value of the
shares cancelled.
 
 **23.
Subsequent Event**
 
 On March
23, 2005, the Company announced its decision to close its manufacturing
operations in Anaheim, California as of April 30, 2005. This action is in
accordance with the Company’s restructuring plan which began over two years ago.
The real estate was sold in 2003 and the Company has been leasing the property
since that time. It is anticipated that the Company will incur between $1.5
million and $2.0 million in one-time non recurring costs associated with this
action.
 F-44
   **SCHEDULE
I**
 
 **THE
ALPINE GROUP, INC.**
 **(PARENT
COMPANY)**
 
 **CONDENSED
BALANCE SHEETS**
 **(in
thousands)**
  **December
      31,****2004**
    
    
    **2003****ASSETS**Current
      assets:Cash
      and cash equivalents
    
    $
    217
    
    $
    207Marketable
      securities
    
    
    35,827
    
    
    6,761Deferred
      income tax asset
    
    
    614
    
    
    1,061Other
      current assets
    
    
    1,826
    
    
    863Total
      current assets
    
    
    38,484
    
    
    8,892Investment
      in consolidated subsidiaries
    
    
    16,620
    
    
    27,405Property,
      plant and equipment, net
    
    
    79
    
    
    1,159Advances
      and loans to subsidiaries
    
    
    1,986
    
    
    2,016Deferred
      income taxes
    
    
    2,654
    
    
    2,190Long-term
      investments and other assets
    
    
    1,506
    
    
    1,417Total
      assets
    
    $
    61,329
    
    $
    43,079
  **LIABILITIES
      AND STOCKHOLDERS’ EQUITY**Current
      liabilities:Current
      portion of long-term debt
    
    $
    386
    
    $
    137Accounts
      payable
    
    
    45
    
    
    31Income
      taxes
    
    
    7,336
    
    
    —Accrued
      expenses
    
    
    3,158
    
    
    82Total
      current liabilities
    
    
    10,925
    
    
    250Long-term
      debt, less current portion
    
    
    3,122
    
    
    3,777Other
      long-term liabilities
    
    
    17,782
    
    
    17,530Mandatorily
      redeemable Series A preferred stock
    
    
    5,545
    
    
    5,664Stockholders'
      equity:9%
      cumulative convertible preferred stock at liquidation value
    
    $
    177
    
    $
    427Common
      stock, $.10 par value; authorized 50,000,000 shares and 25,000,000;
      24,670,054 and 22,146,884 shares issued at December 31, 2004 and 2003,
      respectively
    
    
    2,467
    
    
    2,214Capital
      in excess of par value
    
    
    168,446
    
    
    165,706Accumulated
      other comprehensive income
    
    
    (20
    )
    
    57Accumulated
      deficit
    
    
    (52,955
    )
    
    (58,201
    )Shares
      of common stock in treasury, at cost; 10,929,985 and 11,109,872 shares at
      December 31, 2004 and 2003, respectively
    
    
    (93,705
    )
    
    (93,861
    )Receivable
      from stockholders
    
    
    (415
    )
    
    (484
    )Total
      stockholders' equity
    
    
    23,955
    
    
    15,858Total
      liabilities and stockholders' equity
    
    $
    61,329
    
    $
    43,079
 
 F-45
 **SCHEDULE
I (cont')**
 
 **THE
ALPINE GROUP, INC.**
 **(PARENT
COMPANY)**
 
 **CONDENSED
STATEMENTS OF OPERATIONS**
 **(in
thousands)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Revenues:Interest
      and dividend income
    
    $
    401
    
    $
    137
    
    $
    —Intercompany interest
    
    
    190
    
    
    —
    
    
    —Intercompany dividend
    
    
    28,099
    
    
    —
    
    
    —Other
      income
    
    
    42
    
    
    70
    
    
    2,914$
    28,732
    
    $
    207
    
    $
    2,914Expenses:General
      and administrative
    
    
    4,104
    
    
    1,893
    
    
    2,971Restructuring
      and other charges
    
    
    —
    
    
    —
    
    
    1,400Interest
      expense
    
    
    519
    
    
    437
    
    
    562Loss
      on investments in securities
    
    
    —
    
    
    —
    
    
    4,085Other
      expense
    
    
    820
    
    
    167
    
    
    —5,443
    
    
    2,497
    
    
    9,018Net
      revenues (expenses)
    
    
    23,289
    
    
    (2,290
    )
    
    (6,104
    )Gain
      on cancellation of equity investment in Superior (Note
      1)
    
    
    —
    
    
    854,262
    
    
    —Income
      (loss) before income taxes, equity in net income of affiliates, equity in
      net income (loss) of subsidiaries, income (loss) from discontinued
      operations and cumulative effect of accounting
      change
    
    
    23,289
    
    
    851,972
    
    
    (6,104
    )Benefit
      (provision) for income taxes
    
    
    936
    
    
    (389
    )
    
    5,905Loss
      before equity in income (loss) of affiliates, equity in net income (loss)
      of subsidiaries, income from discontinued operations and cumulative effect
      of accounting change
    
    
    24,225
    
    
    851,583
    
    
    (199
    )Equity
      in net income (loss) of subsidiaries, net:Alpine
      Holdco
    
    
    (10,785
    )
    
    (16,807
    )
    
    10,861Superior
      and others
    
    
    
    
    
    —
    
    
    (882,233
    )Gain
      (loss) from continuing operations before cumulative effect of accounting
      change
    
    
    13,440
    
    
    834,776
    
    
    (871,571
    )Cumulative
      effect of accounting change for goodwill
      impairment
    
    
    —
    
    
    —
    
    
    (3,030
    )Net
      income (loss)
    
    $
    13,440
    
    $
    834,776
    
    $
    (874,601
    )
 
 F-46
 **SCHEDULE
I (cont')**
 
 **THE
ALPINE GROUP, INC.**
 **(PARENT
COMPANY)**
 
 **CONDENSED
STATEMENTS OF CASH FLOWS**
 **(in
thousands)**
 
 **Year
      Ended December 31,****2004**
    
    **2003**
    
    **2002**Cash
      flows provided by (used for) operating
      activities
    
    $
    36,513
    
    $
    (1,104
    )
    $
    (8,727
    )Cash
      flows from investing activities:Investments
      in and advances to subsidiaries
    
    
    —
    
    
    (1,899
    )
    
    (13,689
    )Capital
      expenditures
    
    
    (66
    )
    
    (25
    )
    
    —Purchase
      of marketable securities
    
    
    (39,360
    )
    
    (6,672
    )
    
    —Proceeds
      from sale of marketable securities and other
      investments
    
    
    10,213
    
    
    —
    
    
    23,530Proceeds
      from sale of (investment in) PolyVision
    
    
    —
    
    
    1,296
    
    
    —Proceeds
      from sale of assets
    
    
    346
    
    
    —
    
    
    —Restricted
      cash
    
    
    —
    
    
    —
    
    
    87Other
    
    
    —
    
    
    —
    
    
    2Cash
      flows provided by (used for) investing
      activities
    
    
    (28,867
    )
    
    (7,300
    )
    
    9,930Cash
      flows from financing activities:Long-term
      borrowings
    
    
    (630
    )
    
    —
    
    
    —Debt
      / equity issuance costs
    
    
    —
    
    
    (39
    )
    
    —Repayments
      of long-term borrowings
    
    
    —
    
    
    (2,247
    )
    
    (30,755
    )Issue
      of preferred stock
    
    
    —
    
    
    6,940
    
    
    —Dividends
      on preferred stock
    
    
    (2,044
    )
    
    (206
    )
    
    (38
    )Dividends
      on common stock
    
    
    (4,947
    )
    
    —
    
    
    —Proceeds
      from stock options exercised
    
    
    234
    
    
    —
    
    
    139Purchase
      of treasury shares
    
    
    —
    
    
    (5
    )
    
    (76
    )Preferred
      stock redemptions
    
    
    (250
    )
    
    —
    
    
    —Proceeds
      from minority interest in sub
    
    
    —
    
    
    471
    
    
    —Other
    
    
    1
    
    
    1
    
    
    —Cash
      flows provided by (used for) financing
      activities
    
    
    (7,636
    )
    
    4,915
    
    
    (30,730
    )Net
      increase (decrease) in cash and cash
      equivalents
    
    
    10
    
    
    (3,489
    )
    
    (29,527
    )Cash
      and cash equivalents at beginning of
year
    
    
    207
    
    
    3,696
    
    
    33,223Cash
      and cash equivalents at end of year
    
    $
    217
    
    $
    207
    
    $
    3,696Supplemental
      cash flow disclosures:Cash
      paid for interest
    
    $
    328
    
    $
    543
    
    $
    2,300Cash
      paid (refunded) for income taxes, net
    
    $
    730
    
    $
    (1,385
    )
    $
    (4,275
    )
 F-47
 **SCHEDULE
I (cont')**
 ****
 **THE
ALPINE GROUP, INC.**
 **(PARENT
COMPANY)**
 
 **December
      31,****2004**
    
    **2003****(in
      thousands)**Long-term
      debt consists of:6%
      Junior Subordinate Notes, net of discount of $1.1 million
    
    $
    3,122
    
    $
    3,059Other
    
    
    386
    
    
    8553,508
    
    
    3,914Less
      current portion
    
    
    386
    
    
    137$
    3,122
    
    $
    3,777
 
 Minimum
current maturities of long-term debt outstanding as of December 31, 2004
are as follows:
 
 **Fiscal
      Year**
    
    **Amount**
      **(in
      thousands)**2005
    
    $
    3862006
    
    
    02007
    
    
    1,0462008
    
    
    1,0462009
    
    
    1,046Thereafter
    
    
    1,046
 
 An
intercompany dividend totaling $28.1 million was paid from Alpine Holdco to the
parent company during 2004. This dividend was primarily proceeds from the sale
of DNE and was consented to by the Alpine Holdco lenders.
  F-48
 **SCHEDULE
II**
 
 **THE
ALPINE GROUP, INC. AND SUBSIDIARIES**
 **SCHEDULE
II** **—** **VALUATION
AND QUALIFYING ACCOUNTS**
 **Years
Ended December 31, 2004, 2003 and 2001**
 **** **(in
thousands)**
 
 **Additions****Description**
    
    **Balance
      at**
      **Beginning**
      **of
      Period**
    
    **Charged
      to**
      **Costs
      and**
      **Expenses**
    
    **Charged
      to**
      **Other**
      **Accounts**
    
    **Deductions**
    
    **Balance
      at**
      **End
      of Period****Year
      Ended December 31, 2004:**Allowance
      for restructuring activities
    
    $
    1,001
    
    $
    3,896
    
    
    —
    
    $
    (4,897)
    (a)
    $
    —Allowance
      for doubtful accounts
    
    
    263
    
    
    120
    
    
    —
    
    
    4
    
    
    387LIFO
      reserve
    
    
    9,007
    
    
    13,202
    
    
    —
    
    
    —
    
    
    22,209**Year
      Ended December 31, 2003:**Allowance
      for restructuring activities
    
    $
    1,427
    
    $
    13,555
    
    
    —
    
    $
    (13,981)
    (a)
    $
    1,001Allowance
      for doubtful accounts
    
    
    364
    
    
    115
    
    
    —
    
    
    (217
    )
    
    263LIFO
      reserve
    
    
    —
    
    
    9,007
    
    
    —
    
    
    —
    
    
    9,007**Year
      Ended December 31, 2002:**Allowance
      for restructuring activities
    
    
    608
    
    
    10,076
    
    
    —
    
    
    (9,257)
    (b)
    
    1,427Allowance
      for doubtful accounts
    
    
    8,358
    
    
    1,027
    
    
    —
    
    
    (9,021)
    (c)
    
    364LIFO
      reserve
    
    
    4,631
    
    
    (4,631
    )
    
    —
    
    
    —
    
    
    —
 
 ___________
 
 (a)
    Payments
      for restructuring liabilities(b)
    Payments
      for restructuring liabilities
    $
      (6,043)Effect
      of Superior deconsolidation
    (3,214)$(9,257)(c)
    Write-offs
      net of recoveries
    $
      (1,275)Effect
      of Superior deconsolidation
    (7,746)$
      (9,021)
   F-49