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 that have been operated as subsidiaries, including PolyVision Corporation ("PolyVision"), Premier Refractories International Inc. ("Premier"), Superior TeleCom Inc. ("Superior") and DNE Systems, Inc. (“DNE Systems”). At December 31, 2005, Alpine owned approximately 84% of Essex Electric Inc. ("Essex Electric"), which was engaged in the manufacture and sale of electrical wire and cable. On September 30, 2005, Essex Electric entered into an agreement to sell certain of the assets of Essex Electric comprising its building wire business (the “Essex Electric Sale”). In January 2006, Alpine acquired the 16% minority interest in Essex Electric. Essex Electric completed the sale to Southwire Company (“Southwire”) on January 31, 2006. At December 31, 2005, Alpine owned 46% of Superior Cables Ltd., the largest Israeli based producer of wire and cable products.



The agreement with Southwire provided for the sale by Essex Electric of all of its closing date building wire related inventory and prepaid assets, its Florence, Alabama manufacturing plant and equipment, and the assumption by Southwire of certain contracts and selected liabilities, related to the business. Essex Electric retained substantially all of its other liabilities, including the indebtedness under its revolving credit facility. Excluded from the sale were cash, cash equivalents and accounts receivable of Essex Electric, a copper scrap reclamation plant and operation based in Jonesboro, Indiana, a plastic resin compounding plant and operation based in Marion, Indiana, and three leased warehouse distribution centers. The purchase price payable to Essex Electric was the sum of (i) $27 million plus (ii) the closing date value of Essex Electric’s inventory and certain prepaid assets less certain liabilities.

After the close of the Essex Electric Sale, Essex Electric’s operations include the scrap reclamation plant in Jonesboro, Indiana and the plastic resin compounding plant in Marion, Indiana. Additionally, the Company has agreed to increase its investment in Superior Cables Ltd., the largest Israel based wire and cable manufacturer (see Note 23 to the consolidated financial statements) and will continue to explore and consider utilizing its available liquid assets for a range of investments and business acquisitions.

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 continuing operations of Alpine as of December 31, 2005 consisting of Essex Electric and an equity method investment in Superior Cables Ltd. As previously described, certain of the assets of Essex Electric comprising its building wire business were sold as of January 31, 2006.

Superior Cables Ltd.

In December 2002, the Company, through its wholly owned subsidiaries, acquired a 47% equity method investment in Superior Cables Ltd. As a result of the exercise of certain employee stock options since that time, the Company’s current interest in Superior Cables Ltd. is 46%. Superior Cables Ltd. is the largest Israeli wire and cable manufacturer and its shares are traded on the Tel Aviv Stock Exchange. See Note 23 - Subsequent Events to the Alpine consolidated financial statements for a description of the proposed Superior Cables Ltd. share purchase and certain related transactions.



Essex Electric

As of December 31, 2005, Essex Electric manufactured, sold and/or distributed 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 sold its electrical wire and cable products through manufacturers' representatives, as well as a small internal sales group. Its customer base was large and diverse, consisting of consumer product retailers, hardware wholesalers and wholesale electrical and specialty distributors. One customer (Home Depot) accounted for 20% and 23% of Essex Electric's net sales in 2005 and 2004, respectively. Essex Electric served its customers through strategically located regional distribution centers ("RDCs"). These RDCs provided for centralized stocking of "off-the-shelf" building wire products. Essex Electric operated three leased RDCs located in Georgia, California and Indiana at December 31, 2005.

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. Copper is a commodity and is therefore subject to price volatility. Fluctuations in the cost of copper are generally passed along to the customer however depending upon the supply and demand dynamics in the building wire marketplace, such copper cost fluctuations may not always be matched in end product selling prices. 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. As of December 31, 2005, four companies, including Essex Electric, manufactured approximately 75% of the total domestic U.S. building wire production. Essex Electric was subject to strong competition in many markets on the basis of price, delivery time, customer service and ability to meet specialty needs.



Backlog

As of December 31, 2005, Essex Electric had no significant backlog, as finished goods are generally stocked to meet customer demand on a just-in-time basis.

Research and Development

Essex Electric conducted limited research and development activities. These activities were focused on the development of improved compounds that were used as insulation and jacketing materials. During 2005, total research and development expenses related to the electrical wire business were less than 1% of sales.

Export Sales

The Company had no export sales in 2005 or 2004 and $0.5 million in 2003.

Employees

As of December 31, 2005, the Company employed approximately 410 employees, substantially all of which were employees of Essex Electric. Approximately 360 employees were or will be terminated, some of which were rehired by Southwire, in connection with the Essex Electric Sale (see Note 22 to the Alpine consolidated financial statements). Approximately 30 persons employed by the Company at December 31, 2005 are represented by unions. Collective bargaining agreements expire in 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 2005, 2004 and 2003.





Item 1A. Risk Factors

Our success depends on key members of our management, the loss of whom could adversely affect our business.

Our success depends largely on the efforts and abilities of key management employees, particularly our Chief Executive Officer. The loss of the services of key personnel or the inability to attract qualified employees could have a material adverse effect on our business and financial results.

Unspecified Industry and Acquired Business; Unascertainable Risks

As previously discussed, following the completion of the Essex Electric Sale on January 31, 2006, the continuing operations of our Company consist of a compounding operation in Marion, Indiana, and a copper scrap reclamation operation in Jonesboro, Indiana, and the equity investment in our 46% owned affiliate Superior Cables Ltd. During February 2006, our Company entered into agreements, which if completed, will result in our increasing our investment and ownership interest in Superior Cables Ltd. Additionally, we will continue to explore and consider utilizing our available liquid assets for a range of investment and business acquisitions. However, no specific investment or acquisition opportunities have been identified. Accordingly, our shareholders currently have no basis to evaluate the comparative risks and merits of investing in the industry or business in which our Company may invest or acquire. To the extent that our Company may acquire or invest in a business in a high-risk industry, our Company will become subject to those risks. Similarly, if our Company acquires or invests in a financially unstable business or a business that is in the early stages of development, our Company will become subject to the risks to which such businesses are subject. Although management intends to consider the risks inherent in any industry and business in which we may become involved, there can be no assurance that we will correctly assess such risks.



The liquidity of our common stock may be adversely affected by completion of our tender offer.

Our common stock is currently quoted on the OTC Bulletin Board and average daily trading volume for the six-month period between July 1, 2005 and December 31, 2005 was approximately 48,000 shares. On March 1, 2006, we commenced a modified “Dutch Auction” tender offer, which will expire on April 3, 2006, unless extended, (see Note 23 to the consolidated financial statements). We agreed to purchase up to 6 million shares of our common stock tendered in response to the offer, representing approximately 36.3% of our outstanding common shares and, assuming conversion of all of our outstanding Series A Preferred stock, 22.3% of such common shares. The tender offer is subject to a number of terms and conditions described in the related offering materials. Completion of the purchase in accordance with the terms of our offer will significantly reduce our public float (the number of shares owned by non-affiliate stockholders and available for trading in the securities market) and could adversely affect the liquidity of our common stock.

As a result of the change in our investment holdings, following completion of the Essex Electric Sale, we are relying on an exemption from the definition of “investment company” that will require us to take action with respect to our investments within one year. If we do not make the required changes to our investment holdings, we could be required to register as an investment company with significant restrictions on our business.

The regulatory scope of the federal Investment Company Act, which was enacted principally for the purpose of regulating vehicles for pooled investments in securities, extends generally to companies engaged primarily in the business of investing, reinvesting, owning, holding or trading in securities. The Investment Company Act may, however, also be deemed to be applicable to companies that do not intend to be characterized as an investment company but which, nevertheless, may be deemed to be within the definitional scope of certain provisions of the Investment Company Act. In general, unless exclusion applies, a company is an investment company if it owns “investment securities” with a value exceeding 40% of the value of its total assets on an unconsolidated basis, excluding government securities and cash items. We do not intend and do not consider our company to be an investment company and our anticipated activities involve exploring the acquisition of one or more operating businesses. However, from the time of the sale of the building wire assets of Essex Electric and the collection of its retained accounts receivable, the composition of our investment portfolio has caused us to fall within the definition of an investment company. Therefore, we are now relying on a one-year temporary exclusion for companies that are in transition and that have a bona fide intent to be engaged primarily in a business other than investing in securities as soon as possible, but in any event within one year.

If by February 28, 2007, we are deemed to be an investment company, our activities would be restricted, including restrictions on the nature of our investments and the issuance or repurchase of securities. We would most likely be required to register under the Investment Company Act and file reports, and adopt corporate governance rules including significant reporting, record keeping, voting, proxy, disclosure and other rules and regulations. In the event we were deemed to be an investment company, our failure to satisfy such regulatory requirements could have a material adverse effect on us.



Item 1B. Unresolved Staff Comments

None