UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 1-10211
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ESSEX INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3496934
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 WALL STREET, FORT WAYNE, INDIANA 46802
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 461-4000
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None
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(Former name, former address and former fiscal year,
if changed since last report)
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.
[X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:<PAGE>
Number of Shares
Outstanding
Common Stock As of October 31,
1997
------------- -------------------
---
$0.01 Par Value 29,615,232
2<PAGE>
ESSEX INTERNATIONAL INC.
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 20
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ESSEX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
In Thousands of Dollars (Unaudited)
--------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 4,429 $ 5,567
Accounts receivable (net of allowance of
$5,239 and $5,890) . . . . . . . . . . . . . . . . . 189,717 229,005
Inventories . . . . . . . . . . . . . . . . . . . . . 217,643 225,293
Other current assets . . . . . . . . . . . . . . . . . 12,147 12,348
-------- --------
Total current assets . . . . . . . . . . . . . 423,936 472,213
Property, plant and equipment, (net of accumulated
depreciation of $112,108 and $129,428) . . . . . . . 280,489 277,337
Excess of cost over net assets acquired (net of
accumulated amortization of $17,388 and $20,550) . . 126,619 124,282
Other intangible assets and deferred costs (net of
accumulated amortization of $4,501 and $3,789) . . . 7,417 5,792
Other assets . . . . . . . . . . . . . . . . . . . . . 4,294 3,805
-------- --------
$842,755 $883,429
======== ========
See Notes to Consolidated Financial Statements
3<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS - Continued
December 31, September 30,
1996 1997
In Thousands of Dollars, Except Per Share Data (Unaudited)
--------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks . . . . . . . . . . . . . . . . $ 30,913 $ 42,951
Current portion of long-term debt . . . . . . . . . . 11,576 2,500
Accounts payable . . . . . . . . . . . . . . . . . . . 71,243 77,465
Accrued liabilities . . . . . . . . . . . . . . . . . 63,346 74,663
Deferred income taxes . . . . . . . . . . . . . . . . 15,151 13,809
Total current liabilities . . . . . . . . . . . 192,229 211,388
Long-term debt . . . . . . . . . . . . . . . . . . . . 421,340 331,075
Deferred income taxes . . . . . . . . . . . . . . . . 58,043 52,667
Other long-term liabilities . . . . . . . . . . . . . 12,427 14,900
Common stock subject to put:
1,262,602 shares issued and outstanding
at December 31, 1996 . . . . . . . . . . . . . . . . 12,626 -
Stockholders' equity:
Common stock, par value $0.01 per share; authorized
150,000,000 shares: 22,793,955.5 and 29,509,950
shares issued and outstanding at December 31, 1996
and September 30, 1997, respectively . . . . . . . . 228 295
Additional paid in capital . . . . . . . . . . . . . . 139,145 201,873
Carryover of Predecessor basis . . . . . . . . . . . . (15,259) (15,259)
Retained earnings (deficit) . . . . . . . . . . . . . . 21,976 86,490
------- --------
Total other stockholders' equity . . . . . . . 146,090 273,399
-------- --------
$842,755 $883,429
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
In Thousands of Dollars, Except Per Share Data 1996 1997 1996 1997
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $328,777 $445,166 $974,720 $1,309,275
Cost of goods sold . . . . . . . . . . . . . . 269,813 362,976 813,106 1,059,504
Selling and administrative expenses . . . . . . 28,926 37,530 86,463 112,941
Other (income) expense, net . . . . . . . . . . 401 (560) 204 (634)
-------- -------- -------- ----------
Income from operations . . . . . . . . . . . . 29,637 45,220 74,947 137,464
Interest expense . . . . . . . . . . . . . . . 9,555 8,562 29,879 29,836
-------- -------- -------- ----------
Income before income taxes . . . . . . . . . . 20,082 36,658 45,068 107,628
Provision for income taxes . . . . . . . . . . 8,500 14,600 19,500 42,900
-------- -------- -------- ----------
Net income . . . . . . . . . . . . . . . . . . $ 11,582 $ 22,058 $ 25,568 $ 64,728
======== ======== ======== ==========
Net income . . . . . . . . . . . . . . . . . . $ 11,582 $ 22,058 $ 25,568 $ 64,728
Preferred stock redemption premium . . . . . . (4,105) - (4,105) -
Preferred stock dividend requirement . . . . . (363) - (4,248) -
Preferred stock accretion . . . . . . . . . . . (1,666) - (2,024) -
-------- -------- -------- ----------
Net income applicable to common stock . . . . . $ 5,448 $ 22,058 $ 15,191 $ 64,728
======== ======== ======== ==========
Pro forma net income per share . . . . . . . . $ .41 $ .70 $ .91 $ 2.15
===== ===== ===== ======
</TABLE>
See Notes to Consolidated Financial Statements
5<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period
Ended September 30,
------------------------
In Thousands of Dollars 1996 1997
-------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . $ 25,568 $ 64,728
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 25,489 25,308
Non cash interest expense . . . . . . . . . . . . . 1,585 1,500
Non cash pension expense . . . . . . . . . . . . . 2,170 2,774
Provision for losses on accounts receivable . . . . 958 1,192
Benefit from deferred income taxes . . . . . . . . (2,664) (6,718)
Loss on disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . 1,045 1,217
Changes in operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . (15,572) (40,480)
Increase in inventories . . . . . . . . . . . . . (1,813) (7,650)
Increase (decrease) in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . (3,860) 20,974
Net (increase) decrease in other assets and
liabilities . . . . . . . . . . . . . . . . . . . (7,820) 312
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . 25,086 63,157
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . . (15,677) (22,981)
Proceeds from disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . . 405 3,328
Acquisitions . . . . . . . . . . . . . . . . . . . . (7,631) -
Other investments . . . . . . . . . . . . . . . . . (362) (900)
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES . . . . . . . (23,265) (20,553)
--------- ---------
See Notes to Consolidated Financial Statements
6<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
Nine Month Period
Ended September 30,
------------------------
In Thousands of Dollars 1996 1997
-------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . 110,800 328,600
Repayment of long-term debt . . . . . . . . . . . . (110,640) (427,941)
Proceeds from notes payable to banks . . . . . . . . 390,259 543,898
Repayment of notes payable to banks . . . . . . . . (391,483) (531,860)
Common stock repurchase . . . . . . . . . . . . . . - (500)
Preferred stock redemption . . . . . . . . . . . . . (59,238) -
Proceeds from issuance of common stock . . . . . . . 59,260 46,022
Proceeds from exercise of stock options . . . . . . - 315
--------- ---------
NET CASH USED FOR FINANCING ACTIVITIES . . . . . . . (1,042) (41,466)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . 779 1,138
Cash and cash equivalents at beginning of period . . 3,195 4,429
--------- ---------
Cash and cash equivalents at end of period . . . . . $ 3,974 $ 5,567
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
7<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands of Dollars, Except Per Share Data
----------------------------------------------
NOTE 1 ORGANIZATION AND PUBLIC OFFERINGS
Essex International Inc. (the "Company") (formerly known as BCP/Essex
Holdings Inc.) is the holding company of Essex Group, Inc. ("Essex"). The
principal asset of the Company is all of the outstanding common stock of
Essex.
On May 1, 1997, the Company completed its initial public offering (the
"Offering") of 6,546,700 shares of common stock, including 3,546,700
shares sold by existing shareholders. The net proceeds to the Company,
after underwriting commissions and other associated expenses, were
approximately $46,022 of which $29,497 was used to repay borrowings under
the senior unsecured note agreement and the remaining proceeds were
applied to the revolving credit facility. Of the 3,546,700 shares of
common stock sold by the selling shareholders, 1,620,414 common shares
were received upon the redemption of 2,441,062.5 warrants to purchase
common stock of the Company. In connection with the Offering, a one-for-
two reverse stock split and a reclassification of the Company's two
existing classes of common stock into a single class of common stock
occurred and the Company's name was changed from BCP/Essex Holdings Inc.
to Essex International Inc. All common shares, options, warrants, and per
share amounts have been adjusted to give effect to the reverse stock
split.
On September 23, 1997, the Company completed a secondary public offering
(the "Secondary Offering") of 4,180,000 shares of common stock all of
which were sold by existing shareholders. On October 3, 1997 the
underwriters to the Secondary Offering exercised their over-allotment
option resulting in the sale by the selling shareholders of an additional
624,266 shares of common stock. The Company did not receive any of the
proceeds from the sale of the shares offered. Of the 4,804,266 shares of
common stock sold by the selling shareholders, 333,304 common shares were
received upon the redemption of 392,306.5 warrants to purchase common
stock of the Company. No warrants remain outstanding after the Secondary
Offering.
NOTE 2 BASIS OF PRESENTATION
The unaudited interim consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of Company management necessary to present fairly the consolidated
financial position of the Company as of September 30, 1997, and the
consolidated results of operations for the three and nine months ended
September 30, 1996 and 1997, respectively, and cash flows of the Company
for the nine months ended September 30, 1996 and 1997, respectively.
Results of operations for the periods presented are not necessarily
indicative of the results for the full fiscal year. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for
8<PAGE>
the year ended December 31, 1996.
9<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands of Dollars
-----------------------
NOTE 3 INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------- -------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . $171,213 $170,980
Raw materials and work in process . . 56,840 56,621
-------- --------
228,053 227,601
LIFO reserve . . . . . . . . . . . . . (10,410) (2,308)
-------- --------
$217,643 $225,293
======== ========
</TABLE>
The Company values a major portion of its inventories at the lower of
cost or market based on a last-in, first-out ("LIFO") method. Principal
elements of cost included in the Company's inventories are copper,
purchased materials, direct labor and manufacturing overhead. Inventories
valued using the LIFO method amounted to $210,454 and $214,695 at December
31, 1996 and September 30, 1997, respectively.
An actual valuation of inventory under the LIFO method can be made only
at the end of each year based on the inventory levels and costs at that
time. Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory
valuation.
NOTE 4 LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------- -------------
<S> <C> <C>
10% Senior notes . . . . . . . . . . . . $200,000 $200,000
Revolving loan . . . . . . . . . . . . . 179,900 114,200
Term loan . . . . . . . . . . . . . . . . 21,250 19,375
10<PAGE>
Lease obligation . . . . . . . . . . . . 31,766 -
-------- --------
432,916 333,575
Less current portion . . . . . . 11,576 2,500
-------- --------
$421,340 $331,075
======== ========
</TABLE>
11<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands of Dollars
-----------------------
In connection with the Offering, the Company's revolving credit facility
was amended and restated. It continues to provide up to $370,000 in
revolving loans and maintains existing terms and conditions except that
revolving loans bear floating rates of interest, at the Company's option,
at bank prime plus 0.50% or a reserve adjusted Eurodollar rate ("LIBOR")
plus 1.50%. The spreads over the prime and LIBOR rates can be reduced to
0% and .375%, respectively, if a certain specified leverage ratio is
achieved. The average commitment fees during the revolving loan period
are between 0.125% to 0.375% of the average daily unused portion of the
available credit based upon certain financial ratios.
Through September 30, 1997, the Company fully complied with all of the
financial ratios and covenants under the agreements governing its
outstanding indebtedness.
NOTE 5 CONTINGENT LIABILITIES
There are various claims and pending legal proceedings against Essex,
including environmental matters and other matters arising out of the
ordinary course of its business. Pursuant to the 1988 acquisition of Essex
by the Company from United Technologies Corporation ("UTC"), UTC agreed to
indemnify Essex against all losses (as defined) resulting from or in
connection with damage or pollution to the environment and arising from
events, operations, or activities of Essex prior to February 29, 1988 or
from conditions or circumstances existing at February 29, 1988. Except for
certain matters relating to permit compliance, Essex is fully indemnified
with respect to conditions, events or circumstances known to UTC prior to
February 29, 1988. The sites covered by this indemnity are administrated
by UTC and all payments required to be made are paid directly by UTC. The
amounts related to this environmental contingency are not material to the
Company's consolidated financial statements. UTC also provided a second
environmental indemnity which deals with losses related to environmental
events, conditions or circumstances existing at or prior to February 29,
1988, which only became known in the five year period commencing February
29, 1988. As to any such losses, Essex is responsible for the first $4,000
incurred. Management and its legal counsel periodically review the
probable outcome of pending proceedings and the costs reasonably expected
to be incurred. Essex accrues for these costs when it is probable that a
liability has been incurred and the amount of the loss can be reasonably
estimated. After consultation with counsel, in the opinion of management,
the ultimate cost to Essex, exceeding amounts provided, will not
materially affect its consolidated financial position, cash flows or
results of operations. There can be no assurance, however, that future
developments will not alter this conclusion.
Since approximately 1990, Essex has been named as a defendant in a
number of product liability lawsuits brought by electricians and other
skilled tradesmen claiming injury from exposure to asbestos found in
electrical wire products produced a number of years ago. At September 30,
1997, the number of cases filed against Essex was 109 involving
12<PAGE>
approximately 386 claims. Essex' strategy is to defend these cases
vigorously. Essex believes that its liability, if any, in these matters
and the related defense costs will not have a material adverse effect
either individually or in the aggregate upon its business or financial
condition, cash flows or results of operations. There can be no assurance,
however, that future developments will not alter this conclusion.
13<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands of Dollars
-----------------------
NOTE 6 NET INCOME PER SHARE
Pro forma per share data is computed based upon the weighted average
number of common and common equivalent shares, including common stock
subject to put, outstanding for all periods presented. Common equivalent
shares include outstanding stock options and warrants. Common equivalent
shares are not included in the per share calculation where the effect of
their inclusion would be antidilutive. In accordance with the Securities
and Exchange Commission requirements in connection with the Offering,
common and common equivalent shares issued during the twelve-month period
immediately preceding filing of the Offering have been included in the
calculation of pro forma income per common and common equivalent share as
if they were outstanding for all periods, using the treasury stock method
and an initial public offering price of $17.00 per share through April 17,
1997. Additionally, because the proceeds of the common stock issued in
July 1996 were used to redeem all outstanding preferred stock, the
preferred stock redemption premium, preferred stock dividend requirement
and accretion of preferred stock that appear on the income statement as
reductions to net income have been excluded from this calculation.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share ("FAS 128"), which is required to be
adopted on December 31, 1997. At that time, the Company will be required
to change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary (basic) earnings per share, the dilutive effect of stock options
and warrants will be excluded. The impact is expected to result in an
increase in pro forma primary (basic) earnings per share for the three
months ended September 30, 1996 and 1997 of $.07 and $.06, respectively,
and for the nine months ended September 30, 1996 and 1997 of $.15 and
$.24, respectively. The impact of FAS 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be
material.
14<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Essex International Inc. (the "Company") (formerly known as BCP/Essex
Holdings Inc.) is the holding company of Essex Group, Inc. ("Essex"). The
principal asset of the Company is all of the outstanding common stock of
Essex.
In October 1992, the Company was acquired by Bessemer Holdings, L.P.
("BHLP") (an affiliate and successor in interest to Bessemer Capital
Partners, L.P.), affiliates of Goldman, Sachs & Co., affiliates of
Donaldson, Lufkin & Jenrette Securities Corporation, Chase Equity
Associates, and certain present and former employees of Essex.
On May 1, 1997, the Company completed its initial public offering (the
"Offering") of 6,546,700 shares of common stock, including 3,546,700
shares sold by existing shareholders. The net proceeds to the Company,
after underwriting commissions and other associated expenses, were
approximately $46.0 million of which $29.5 million was used to repay
borrowings under the senior unsecured note agreement and the remaining
proceeds were applied to the Company's revolving credit facility. Of the
3,546,700 shares of common stock sold by the selling stockholders,
1,620,414 common shares were received upon the redemption of 2,441,062.5
warrants to purchase common stock of the Company. In connection with the
Offering, a one-for-two reverse stock split and a reclassification of the
Company's two existing classes of common stock into a single class of
common stock occurred. All common shares, options, warrants, and per
share amounts have been adjusted to give effect to the reverse stock
split.
On October 3, 1997, the Company completed a secondary public offering
(the "Secondary Offering") of 4,804,266 shares of common stock all of
which were sold by existing shareholders. The Company did not receive any
of the proceeds from the sale of the shares offered. Of the 4,804,266
shares of common stock sold by the selling shareholders, 333,304 common
shares were received upon the redemption of 392,306.5 warrants to purchase
common stock of the Company. No warrants remain outstanding after the
Secondary Offering.
Essex, founded in 1930, is a leading developer, manufacturer and
marketer of diversified electrical wire and cable products. Among the
Company's products are building wire for commercial and residential
applications; magnet wire for electromechanical devices such as motors,
transformers and electrical controls; copper voice and datacom wire;
industrial wire for applications in appliances, construction, recreational
vehicles and industrial facilities; and automotive wire and specialty
wiring assemblies for automobiles and trucks.
15<PAGE>
Results of Operations
Product Lines
The following table sets forth for the three and nine months ended
September 30, 1996 and 1997, respectively, the dollar amounts of sales for
each of the Company's major product lines:
<TABLE>
<CAPTION>
Sales
-----------------------------------
Three Months Ended Six Months Ended
September 30, September 30,
1996 1997 1996 1997
------ ------ ------ ------
(In millions)
<S> <C> <C> <C> <C>
Building wire . . . . . . . . . . $119.5 $203.7 $334.1 $589.5
Magnet wire . . . . . . . . . . . 97.2 102.2 295.0 317.4
Communication wire . . . . . . . 43.0 52.7 128.6 142.0
Industrial wire . . . . . . . . . 16.5 30.7 48.0 95.7
Automotive wire . . . . . . . . . 21.4 24.3 70.5 70.3
Other (a) . . . . . . . . . . . . 31.2 31.6 98.5 94.4
------ ------ ------ --------
Total . . . . . . . . . . . . . . $328.8 $445.2 $974.7 $1,309.3
====== ====== ====== ========
</TABLE>
------------
(a) Includes sales of third-party manufactured products, including
electrical insulating products, electric motors, motor repair parts and
pump seals sold through the Company's distribution business unit.
Three Months Ended September 30, 1997
Net sales for the third quarter 1997 were $445.2 million or 35.4% higher
than the comparable period in 1996 on improved sales volume, better
product pricing and higher copper prices, the Company's principal raw
material. During the third quarter 1997, the average price per pound of
copper on the New York Commodity Exchange, Inc. ("COMEX") was $1.02 versus
$.91 for the comparable period in 1996, a 12.1% increase. Copper costs
are generally passed on to customers through product pricing. Third
quarter 1997 sales volume was at record levels exceeding the third quarter
1996 by 26.3%. This growth in sales volume was attributable to increased
product demand across most of the Company's served markets and the October
1996 acquisition of Triangle Wire & Cable, Inc. ("Triangle"). The
Company's operating margin, expressed as a percentage of net sales,
improved significantly during the third quarter 1997 to 10.2% from 9.0% in
the third quarter 1996. The improved operating margin resulted primarily
from better conditions in the Company's building wire markets, economies
of scale derived from higher sales volume and lower per unit manufacturing
costs attributable to continued productivity improvements.
16<PAGE>
Building wire sales for the third quarter 1997 increased 70.5% as
compared to the third quarter 1996, due primarily to higher sales volume
and copper prices and improved product pricing (without regard to copper
costs). A substantial portion of the increased sales volume was
attributable to Triangle while the remaining improvement was the result of
increased demand within the served markets. Building wire demand
exhibited continued strength during the third quarter 1997 resulting from
new non-residential construction and, the Company believes, a sustained
expansion of the replacement and upgrade segment of the market. Building
wire operating margins during the third quarter 1997 improved
significantly over the comparable period in 1996 due to the
above-mentioned strength of product demand and improved productivity.
Additionally, the operations of Triangle have been integrated rapidly and
effectively, contributing to such productivity improvement.
Sales of magnet wire during the third quarter 1997 improved from the
comparable 1996 period due primarily to higher sales volume and higher
copper prices. Sales volume improvements were attributable to increased
demand for magnet wire in most served markets due, in part, to growth in
the domestic economy and greater use of magnet wire for increased energy
efficiency in electric motors. Magnet wire operating margins improved
during the third quarter 1997 as compared to the third quarter 1996
primarily due to lower production costs attributable to higher sales
volume.
Communication wire sales for the third quarter 1997 were above the
comparable period in 1996 due to higher outside plant ("OSP") and datacom
wire sales volume and higher copper prices. OSP sales volume was 16.1%
higher than the third quarter 1996 which the Company believes is
attributable to improved business conditions within this segment of the
copper communication cable business. Third quarter 1997 datacom wire
sales volume improved from the comparable period in 1996, reflecting
increased product demand in expanding markets such as local area networks
("LANs"), Internet connectivity and other premise applications. Third
quarter 1997 communication wire operating margins decreased from the third
quarter 1996 due to competitive pricing pressure in high end datacom wire,
partially offset by lower production costs attributable to higher sales
volume.
Industrial wire sales in the third quarter 1997 were more than double
the third quarter 1996 due primarily to increased sales volume
attributable to Triangle. Industrial wire operating margins for the third
quarter 1997 remain unchanged from the comparable period in 1996.
Automotive wire sales in the third quarter 1997 were above those in the
comparable period in 1996 due primarily to improved sales volume and
higher copper prices. Automotive operating margins improved due to a
reduction in overhead expenses. Additionally, in conjunction with its
recent QS 9000 certification, the unit has become an approved supplier to
Delphi Packard, the primary wire harness supplier to General Motors.
Other sales in the third quarter 1997 increased from the comparable
period in 1996 due primarily to higher distribution business unit sales of
electrical insulation products.
Cost of goods sold for the third quarter 1997 was 34.5% higher than the
same period in 1996 due primarily to higher sales volume and higher copper
prices. The Company's cost of goods sold as a percentage of net sales was
17<PAGE>
82.1% and 81.5% in the third quarter 1996 and 1997, respectively. The
cost of goods sold percentage decrease resulted primarily from the impact
of improved building wire product pricing, as well as lower per unit
manufacturing costs attributable to continued productivity programs,
including capital investments. Also, the operations of Triangle have been
integrated rapidly and effectively, and have resulted in substantial
improvements in productivity.
Selling and administrative expenses for the third quarter 1997 were
29.7% above the comparable 1996 period, due primarily to incremental
commission, selling and warehouse expenses associated with Triangle.
However, selling and administrative expenses, as a percentage of sales,
were 8.4% in the third quarter of 1997, compared with 8.8% for the same
period in 1996, reflecting general and administrative economies of scale
derived from higher sales volume and improved building wire market
conditions.
Interest expense in the third quarter 1997 was 10.4% below the
comparable period in 1996. The reduction in interest expense was due to
lower debt levels and lower rates of interest on the Company's outstanding
debt. The Company's average rate of interest for the third quarter 1997
declined nearly 40 basis points from the third quarter 1996 due primarily
to an improved leverage ratio resulting in a reduced interest "spread"
over LIBOR, as defined, on the Company's senior credit facilities. Debt
has been reduced due to the application of the proceeds received in the
Offering, as well as a portion of the strong cash flows provided by
operating activities, partially offset by incremental borrowings to
finance the acquisition of Triangle. See "Liquidity, Capital Resources
and Financial Condition" within this section.
Income tax expense was 39.8% of pretax income in the third quarter 1997
compared with 42.3% for the same period in 1996 due to the increase in
pretax income reducing the impact of the amortization of excess cost over
net assets acquired, which is not deductible for income tax purposes.
Nine Months Ended September 30, 1997
Net sales for the first nine months of 1997 were $1,309.3 million or
34.3% higher than the comparable period in 1996 resulting from improved
sales volume and better product pricing. Copper prices were essentially
unchanged. During the first nine months of 1997, the average price per
pound of COMEX copper was $1.09 versus $1.08 for the comparable period in
1996. First nine months 1997 sales volume was at record levels, exceeding
the first nine months of 1996 by 29.0%. This growth in sales volume was
attributable to increased product demand across most of the Company's
served markets and Triangle. The Company's operating margin, expressed as
a percentage of net sales, improved significantly during the first nine
months of 1997 to 10.5% from 7.7% in the first nine months of 1996. The
improved operating margin resulted primarily from better conditions in the
Company's building wire markets, economies of scale derived from higher
sales volume and lower per unit manufacturing costs attributable to
continued productivity improvements.
Building wire sales for the first nine months of 1997 increased 76.4% as
compared to the same period in 1996 due primarily to improved sales volume
and product pricing (without regard to copper costs). A substantial
portion of the increased sales volume was attributable to Triangle while
the remaining improvement was the result of increased demand within the
18<PAGE>
served markets. Building wire demand has exhibited continued strength
during the first nine months of 1997 resulting from new non-residential
construction and, the Company believes, a sustained expansion of the
replacement and upgrade segment of the market. Building wire operating
margins during the first nine months of 1997 improved significantly over
the comparable period in 1996 due to the above-mentioned strength of
product demand and improved productivity as a result of Triangle.
Sales of magnet wire during the first nine months of 1997 improved from
the comparable 1996 period due primarily to higher sales volume. Sales
volume improvements were attributable to increased demand for magnet wire
in most served markets, particularly the transformer and generator
markets. The Company attributes most of this strong demand to growth in
the domestic economy and greater use of magnet wire for increased energy
efficiency in electric motors. Higher energy efficiency within electric
motors requires materially more magnet wire. Magnet wire operating
margins improved during the first nine months of 1997 as compared to the
first nine months of 1996 primarily due to lower production costs
associated with higher sales volume.
Communication wire sales for the first nine months of 1997 were above
the comparable period in 1996 due to higher OSP and datacom wire sales
volume. OSP sales volume for the first nine months of 1997 was 13.8%
higher than the comparable period in 1996 which the Company believes is
attributable to improved business conditions within the repair and
replacement segment of the copper communication cable market. First nine
months 1997 datacom wire sales volume increased 12.4% compared to the same
period in 1996, reflecting increased product demand for expanding markets
such as LANs, Internet connectivity and other premise applications.
Communication wire operating margins in the first nine months of 1997
declined from the comparable period in 1996 due to the completion in 1996
of certain OSP supply contracts which were not repeated in 1997 coupled
with competitive pricing pressure in high end datacom wire.
Industrial wire sales in the first nine months of 1997 were nearly
double those in the comparable period in 1996 due to an increase in sales
volume of which a substantial portion was attributable to Triangle.
Industrial wire
19<PAGE>
operating margins for the first nine months of 1997 remained essentially
unchanged from the comparable period in 1996.
Automotive wire sales in the first nine months of 1997 approximated
those in the comparable period in 1996. United States and Canadian light
vehicle production for the first nine months of 1997 declined about two
percent from the same period last year, but is expected to approximate
1996 levels by year end. This business unit has had considerable success
expanding its customer sales base of automotive wire harness
manufacturers. Operating margins improved due to reduced overhead
expenses.
Other sales in the first nine months of 1997 decreased from the
comparable period in 1996. Distribution business unit sales of third-
party manufactured products, primarily within the motor repair segment,
declined due, in part, to unusually mild seasonal weather conditions which
necessitated fewer repair parts for motors, transformers and pumps.
Cost of goods sold for the first nine months of 1997 was 30.3% higher
than the same period in 1996 due primarily to higher sales volume. The
Company's cost of goods sold as a percentage of net sales was 83.4% and
80.9% in the first nine months of 1996 and 1997, respectively. The cost
of goods sold percentage decrease resulted primarily from the impact of
improved building wire product pricing as well as lower per unit
manufacturing costs attributable to continued productivity programs,
including capital investments. Also, the operations of Triangle have been
integrated rapidly and effectively, thereby driving substantial
improvements in productivity.
Selling and administrative expenses for the first nine months of 1997
were 30.6% above the comparable 1996 period due primarily to incremental
commission, selling and warehouse expenses associated with Triangle.
However, selling and administrative expenses, as a percentage of sales,
were 8.6% in the first nine months of 1997, compared with 8.9% for the
same period in 1996, reflecting general and administrative economies of
scale derived from higher sales volume and improved building wire market
conditions.
Interest expense in the first nine months of 1997 approximated the same
period in 1996. Incremental borrowings to finance the acquisition of
Triangle were offset by lower rates of interest on the Company's
outstanding debt and reduced debt levels due to the application of the
proceeds received from the Offering and a portion of the strong cash flows
provided by operating activities. The Company's average rate of interest
for the first nine months of 1997 declined 50 basis points from the
comparable period in 1996 due to an improved leverage ratio resulting in a
reduced interest "spread" over LIBOR, as defined, on the Company's senior
credit facilities.
Income tax expense was 39.9% of pretax income in the first nine months
of 1997 compared with 43.3% for the same period in 1996 due to the
increase in pretax income reducing the impact of the amortization of
excess cost over net assets acquired, which is not deductible for income
tax purposes.
Liquidity, Capital Resources and Financial Condition
General
20<PAGE>
The Company is a holding company with no operations and virtually no
assets other than its ownership of all the outstanding common stock of
Essex. All such stock is pledged, however, to the lenders under the
Restated Credit Agreement (as defined herein). Accordingly, the Company's
ability to meet its cash obligations is dependent on Essex' ability to pay
dividends, to loan, or otherwise advance or transfer funds to the Company
in amounts sufficient to service the Company's cash obligations.
The Company expects that it may receive certain cash payments from Essex
from time to time to the extent cash is available and to the extent it is
permitted under the terms of the Restated Credit Agreement and the
indenture under which Essex' 10% Senior Notes due 2003 (the "Senior
Notes") were issued (the "Senior Note Indenture"). Such payments may
include (i) an amount necessary under the tax sharing agreement between
Essex and the Company to enable the Company to pay Essex' taxes as if
computed on an unconsolidated basis; (ii) an annual management fee to an
affiliate of BHLP of up to $1.0 million; and (iii) certain other amounts
to meet ongoing expenses of the Company (such amounts are considered to be
immaterial both individually and in the aggregate, however, because the
Company has no operations, other than those conducted through Essex, or
employees thereof). To the extent Essex makes any such payments, it will
do so out of operating cash flow, borrowings under the Restated Credit
Agreement or other sources of funds it may obtain in the future subject to
the terms of the Restated Credit Agreement and the Senior Note Indenture.
The Company's aggregate notes payable to banks and long-term debt at
September 30, 1997 was $376.5 million and its stockholders' equity was
$273.4 million. The resulting ratio of debt to total capitalization
improved to 58% from 75% at December 31, 1996. As of September 30, 1997,
the Company was in compliance with all covenants under the agreements
governing its outstanding indebtedness.
Credit Facilities and Lines of Credit
The Company maintains the following credit facilities: (i) a $370.0
million revolving credit agreement dated as of October 31, 1996, by and
among Essex, the Company, the Lenders named therein, and The Chase
Manhattan Bank, as administrative agent (the "Revolving Credit Agreement")
which was amended and restated effective April 23, 1997 (the "Restated
Credit Agreement"); (ii) a $25.0 million agreement and lease, dated as of
April 12, 1995, by and between Essex and Mellon Financial Services
Corporation #3 (the "Sale and Leaseback Agreement"); (iii) a $15.0 million
(U.S. dollar) credit agreement by and between a subsidiary of Essex and
the Bank of Montreal (the "Canadian Credit Agreement"); and (iv) bank
lines of credit with various lending banks which provide for unsecured
borrowings for working capital of up to $50.0 million.
The Restated Credit Agreement, which terminates October 31, 2001,
provides for up to $370.0 million in revolving loans, subject to specified
percentages of eligible assets and reduced by borrowings under the
Canadian Credit Agreement and unsecured bank lines of credit ($8.0 million
and $35.0 million outstanding, at September 30, 1997, respectively). The
Restated Credit Agreement also provides a $25.0 million letter of credit
subfacility. Outstanding borrowings bear floating rates of interest, at
the Company's option, at bank prime plus 0.50% or a reserve adjusted
Eurodollar rate ("LIBOR") plus 1.50%. The spreads over the prime and
LIBOR rates can be reduced to 0% and .375%, respectively, if a certain
specified leverage ratio is achieved. Based upon the specified leverage
21<PAGE>
ratio at September 30, 1997, the Company's floating rate of interest for
borrowings under the Restated Credit Agreement is LIBOR plus 0.375%. The
average commitment fees during the revolving loan period are between
0.125% to 0.375% of the average daily unused portion of the available
credit based upon certain financial ratios. Indebtedness under the
Restated Credit Agreement is guaranteed by the Company and all of Essex'
subsidiaries, and is secured by a pledge of the capital stock of Essex and
its subsidiaries and by a first lien on substantially all assets of the
Company and its subsidiaries. The Company's ability to borrow under the
Restated Credit Agreement is restricted by the financial covenants
contained therein as well as by certain debt limitation covenants
contained in the Senior Note Indenture. As of September 30, 1997, the
Company had $147.2 million of undrawn capacity based upon a borrowing base
of $304.4 million, reduced by outstanding borrowings under: (i) the
Restated Credit Agreement ($114.2 million), (ii) unsecured bank lines of
credit ($35.0 million) and (iii) the Canadian Credit Agreement ($8.0
million).
The Sale and Leaseback Agreement provided $25.0 million for the sale and
leaseback of certain of the Company's fixed assets. The lease obligation
has a seven-year term expiring in May 2002. The principal component of
the rental is paid quarterly, with the amount of each of the first 27
payments equal to 2.5% of lessor's cost of the equipment, and the balance
due at the final payment. The interest component is paid on the unpaid
principal balance and is calculated by the lessor at LIBOR plus 2.5%. The
effective interest rate can be reduced by 0.25% to 1.125% if certain
specified financial conditions are achieved.
As of September 30, 1997, $8.0 million was outstanding under the
Canadian Credit Agreement and denoted as notes payable to banks in the
Company's Consolidated Balance Sheets. Borrowings are secured by the
subsidiary's accounts receivable. Interest rates for borrowings under the
Canadian Credit Agreement are based upon Canadian market rates for
banker's acceptances with spreads similar to the Restated Credit
Agreement. The Canadian Credit Agreement terminates on May 30, 1998,
although it may be extended for successive one-year periods upon the
mutual consent of the subsidiary and the Bank of Montreal.
The Company had $35.0 million outstanding of unsecured bank lines of
credit as of September 30, 1997. Such amount is denoted as notes payable
to banks in the Company's Consolidated Balance Sheets. These lines of
credit bear interest at rates subject to agreement between the Company and
the lending banks.
Cash Flow and Working Capital
In general, the Company requires liquidity for working capital, capital
expenditures, debt repayments, interest and taxes. Of particular
significance to the Company are its working capital requirements which
increase whenever it experiences strong incremental demand in its business
or a significant rise in copper prices. Historically, the Company has
satisfied its liquidity requirements through a combination of funds
generated from operating activities together with funds available under
its credit facilities. Based upon historical experience and the
availability of funds under its credit facilities, the Company expects
that its usual sources of liquidity will be sufficient to enable it to
meet its cash requirements for working capital, capital expenditures, debt
repayments, interest and taxes for the remainder of 1997 and for 1998.
22<PAGE>
Operating Activities. Net cash provided by operating activities in the
first nine months of 1997 was $63.2 million, compared to $25.1 million
during the same period in 1996. The increase in cash provided by
operating activities was primarily the result of higher net income and
accrued liabilities partially offset by higher accounts receivable and
inventories associated with the Company's sales growth.
Investing Activities. Capital expenditures of $23.0 million in the
first nine months of 1997 were $7.3 million more than the comparable
period in 1996. Capital expenditures in 1997 are expected to be
approximately 50% above 1996 levels and will be used to improve
manufacturing efficiency, support the newly acquired Triangle facilities
and equipment and expand capacity. At September 30, 1997, approximately
$12.9 million was committed to outside vendors for capital expenditures.
The Company sold an idle plant during 1997 realizing $2.7 million in net
proceeds. The Restated Credit Agreement imposes limitations on capital
expenditures, business acquisitions and investments.
Financing Activities. The net proceeds to the Company from the
Offering, after underwriting commissions and other associated expenses,
were approximately $46.0 million of which $29.5 million was used to repay
borrowings under the senior unsecured note agreement dated as of April 12,
1995, by and among Essex, the Company, as guarantor, the lenders named
therein and The Chase Manhattan Bank, as administrative agent. The
remaining proceeds were applied to the Company's revolving credit
facility.
Long-Term Liquidity Considerations
The Senior Notes mature in 2003 and at the option of the Company may be
redeemed commencing in May 1998, in whole or in part, at redemption prices
ranging from 103.75% of principal in 1998 to 100% in 2001. The terms of
the Sale and Leaseback Agreement include a balloon payment of $8.1 million
in 2002. The Company expects that its traditional sources of liquidity
will enable it to meet its long-term cash requirements for working
capital, capital expenditures, interest and taxes, as well as its debt
repayment obligations under the Sale and Leaseback Agreement.
23<PAGE>
The Company's operations involve the use, disposal and cleanup of
certain substances regulated under environmental protection laws. The
Company has accrued $0.9 million for environmental remediation and
restoration costs. The accrual is based upon management's estimate of the
Company's exposure in light of relevant available information including
the allocations and remedies set forth in applicable consent decrees,
third-party estimates of remediation costs, the estimated ability of other
potentially responsible parties to pay their proportionate share of
remediation costs, the nature of each site and the number of participating
parties. Subject to the difficulty in estimating future environmental
costs, the Company expects that any sum it may have to pay in connection
with environmental matters in excess of the amounts recorded or disclosed,
if any, will not have a material adverse effect on its financial position,
results of operations or cash flows.
General Economic Conditions and Inflation
Although net sales are heavily influenced by the price of copper, the
Company's major raw material, the Company's profitability is generally not
significantly affected by changes in copper prices because the Company
generally has been able to pass on its cost of copper to its customers and
the Company attempts to match its copper purchases with its production
requirements, thereby minimizing copper cathode and rod inventories. In
the short term, however, pronounced changes in the price of copper may
tend to affect gross profits within the building wire product line because
such changes affect cost of goods sold more quickly than those changes can
be reflected in the pricing of building wire products.
The Company believes that it is only affected by inflation to the extent
that the economy in general is affected. Should inflationary pressures
drive costs higher, the Company believes that general industry price
increases would sustain operating results, although there can be no
assurance that this will be the case. In addition, the Company believes
that its sensitivity to downturns in its primary markets is less
significant than it might otherwise be due to its diverse customer base,
broad product line and its strategy of attempting to match its copper
purchases with its needs.
Information Regarding Forward Looking Statements
This report contains various forward-looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to have been correct. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those expected. Among
the key factors that may have a direct bearing on the Company's operating
results are fluctuations in the economy, demand for the Company's
products, the impact of price competition and fluctuations in the price of
copper.
24<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Item Exhibit Index
---- -------------
4.9 Amendment No. 1 dated as of June 1, 1997 to the
Agreement
and Lease between Mellon Leasing Corporation and Essex
Group, Inc.
4.10 Amendment No. 2 dated as of September 2, 1997 to the
Agreement and Lease between Mellon Leasing Corporation
and
Essex Group, Inc.
11.1 Calculation of net income per common share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed by the Company during the
quarter
ended September 30, 1997.
25<PAGE>
SIGNATURE
Pursuant to the requirements 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.
BCP/ESSEX HOLDINGS INC.
(Registrant)
November 7, 1997 /s/ David A. Owen
---------------------------------
David A. Owen
Executive Vice President,
Treasurer and Chief Financial
Officer
(Principal Financial Officer)
26<PAGE>
EXHIBIT
11.1
ESSEX INTERNATIONAL INC.
CALCULATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
In Thousands of Dollars, Except Per 1996 1997 1996 1997
Share Data
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income used in calculation of pro
forma net income per common and
common equivalent share (a) . . . . $ 11,582 $ 22,058 $ 25,568 $ 64,728
========== ========== ========== ==========
Weighted average common shares
outstanding . . . . . . . . . . . . 24,042,598 29,154,127 24,035,026 27,056,384
Common shares issuable with respect
to common stock equivalents, with
a dilutive effect based on the
Treasury Stock method . . . . . . . 4,040,011 2,341,785 4,047,897 3,117,679
---------- ---------- ---------- ----------
Weighted average number of common
and common equivalent shares (b) . 28,082,609 31,495,912 28,082,923 30,174,063
========== ========== ========== ==========
Pro forma net income per common and
common equivalent share (c) . . . . $ .41 $ .70 $ .91 $ 2.15
===== ====== ====== ======
</TABLE>
(a) Since the proceeds of the common stock issued in July 1996 were used
to redeem all outstanding preferred stock, the preferred stock redemption
premium, preferred stock dividend requirement and accretion of preferred
stock that appear on the income statement as reductions to net income have
been excluded from this calculation.
(b) Pro forma per share data is computed based upon the weighted average
number of common and common equivalent shares, including common stock
subject to put, outstanding for all periods presented. Common equivalent
shares include outstanding stock options and warrants. Common equivalent
shares are not included in the per share calculation where the effect of
their inclusion would be antidilutive. In accordance with the Securities
and Exchange Commission requirements in connection with the Offering,
common and common equivalent shares issued during the twelve-month period
immediately preceding the filing of the initial public offering have been
included in the calculation of pro forma income per common and common
equivalent share as if they were outstanding for all periods, using the
treasury stock method and an initial public offering price of $17.00 per<PAGE>
share through April 17, 1997.
(c) The computation of fully diluted income per share has not been
presented herein since the per share amounts do not differ from the
primary computation outlined above.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q as
of September 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000846919
<NAME> ESSEX INTERNATIONAL INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,567
<SECURITIES> 0
<RECEIVABLES> 234,895
<ALLOWANCES> 5,890
<INVENTORY> 225,293
<CURRENT-ASSETS> 472,213
<PP&E> 406,765
<DEPRECIATION> 129,428
<TOTAL-ASSETS> 883,429
<CURRENT-LIABILITIES> 211,388
<BONDS> 331,075
0
0
<COMMON> 295
<OTHER-SE> 273,104
<TOTAL-LIABILITY-AND-EQUITY> 883,429
<SALES> 1,309,275
<TOTAL-REVENUES> 1,309,275
<CGS> 1,059,504
<TOTAL-COSTS> 1,059,504
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,836
<INCOME-PRETAX> 107,628
<INCOME-TAX> 42,900
<INCOME-CONTINUING> 64,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,728
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.15
</TABLE>
AMENDMENT NO. 1
Amendment No. 1 dated as of June 1, 1997 (this "Amendment") between
MELLON LEASING CORPORATION, a Pennsylvania corporation and formerly Mellon
Financial Services Corporation #3, as Lessor ("Lessor"), and ESSEX GROUP,
INC., a Michigan corporation, as Lessee ("Lessee"), to the AGREEMENT AND
LEASE dated as of April 12, 1995 (the "Agreement"), between Lessor and
Lessee;
WITNESSETH THAT:
WHEREAS, Lessee has requested that Lessor agree to amend the
Agreement is hereinafter provided;
WHEREAS, Lessor is willing so to amend the Agreement upon and
subject to the terms and conditions hereinafter provided;
WHEREAS, unless otherwise defined herein or unless the context
otherwise requires, terms defined in the Agreement shall have the meanings
therein set forth;
NOW, THEREFORE, the parties hereto, in consideration of the premises
and their mutual covenants hereinafter set forth and intending to be
legally bound, hereby agree as follows:
1. Amendments. Section (b)(iv) of Annex 1 to the Lease Schedule
is hereby amended in its entirety to read in its entirety as set forth
below:
Applicable Margins.
The Applicable Margin for each interest rate Option for any day
shall mean the percentage set forth below opposite the relevant Level:
Level Euro-Rate Option Base Rate Option
I 3/4% 3/8%
II 7/8% 3/8%
III 1% 3/8%
IV 1 1/8% 3/8%
V 1 1/2% 1/2%
VI 1 7/8% 7/8%
As used herein, "Level" shall mean, as of any date of determination,
the level set forth below then in effect, as determined in accordance with
the following provisions:
Level Leverage Ratio
I Less than or equal to 2.0 to 1.0
II Less than or equal to 2.5 to 1.0
but greater than 2.0 to 1.0
III Less than or equal to 3.0 to 1.0
but greater than 2.5 to 1.0
IV Less than or equal to 3.5 to 1.0
but greater than 3.0 to 1.0<PAGE>
V Less than or equal to 4.0 to 1.0
but greater than 3.5 to 1.0
VI Greater than 4.0 to 1.0
For the purposes of this definition, the Level shall be determined as at
the end of each of the first three quarterly periods of each fiscal year
of Holdings and as at the end of each fiscal year of Holdings, for the
period (a "Level Test Period") of four consecutive fiscal quarters ending
on the last day of such quarterly period of fiscal year, as the case may
be, based on the relevant financial statements delivered pursuant to
Section 7.1; changes in the Level shall become effective on the date on
which such financial statements are delivered to Lessor (but in any event
not later than the 50th day after the end of each of the first three
quarterly periods of each fiscal year or the 105th day after the end of
each fiscal year, as the case may be) and shall remain in effect until the
next change to be effected pursuant to this definition, provided, that, if
any financial statements referred to above are not delivered within the
time periods specified above, then, until such financial statements are
delivered, the Level as at the end of the fiscal period that would have
been covered thereby shall be deemed to be Level VI.
2. Representations and Warranties. Lessee hereby represents and
warrants to Lessor that the representations and warranties of Lessee set
forth in Section 5.2 of the Agreement and true and correct on and as of
the date hereof except that for purposes of this Section 2, each reference
in Section 5.2 to "this Agreement" shall mean the Agreement as amended by
this Amendment, each such reference to "December 31, 1993" shall mean
"December 31, 1995", each such reference to "December 31, 1994" shall mean
"December 31, 1996" and each such reference to "Closing Date" shall mean
"Amendment Closing Date" as hereinafter defined.
3. Conditions Precedent. This Amendment shall be effective as of
June 1, 1997 upon satisfaction of the following conditions (the dates upon
which such conditions are satisfied being herein called the "Amendment
Closing Date"):
a. Delivery by Lessee to Lessor of a certificate of a
Responsible Officer to the effect that (i) the representations and
warranties of Lessee set forth in Section 2 hereof are true and correct on
and as of the Amendment Closing Date as though made on such Date and (ii)
on such Date no Event of Default or Unmatured Default has occurred and is
continuing; and
b. Delivery by Lessee to Lessor of an opinion of counsel to
Lessee as to the matters set forth in Sections 5.2(a) (as to Lessee and
Michigan and Indiana only), 5.2(b) (second sentence only) and 5.2(c) of
the Agreement as restated in Section 2 hereof.
4. Miscellaneous. The parties hereto hereby confirm that the
Agreement, as amended hereby, does and shall remain in full force and
effect.
WITNESS the date execution hereof as of the day and year first above
written.
MELLON LEASING CORPORATION,
Lessor
2<PAGE>
By /s/ Michael R. Langrecker
Title: Vice President
ESSEX GROUP, INC., Lessee
By /s/ David A. Owen
Title: Executive Vice President, CFO
3<PAGE>
AMENDMENT NO. 2
Amendment No. 2 dated as of September 2, 1997 (this "Amendment")
between MELLON LEASING CORPORATION, a Pennsylvania corporation and
formerly Mellon Financial Services Corporation #3, as Lessor ("Lessor"),
and ESSEX GROUP, INC., a Michigan corporation, as Lessee ("Lessee"), to
the AGREEMENT AND LEASE dated as of April 12, 1995, as amended to date
(the "Agreement"), between Lessor and Lessee;
WITNESSETH THAT:
WHEREAS, Lessee has requested that Lessor agree to amend the
Agreement is hereinafter provided;
WHEREAS, Lessor is willing so to amend the Agreement upon and
subject to the terms and conditions hereinafter provided;
WHEREAS, unless otherwise defined herein or unless the context
otherwise requires, terms defined in the Agreement shall have the meanings
therein set forth;
NOW, THEREFORE, the parties hereto, in consideration of the premises
and their mutual covenants hereinafter set forth and intending to be
legally bound, hereby agree as follows:
1. Amendments. Section 14.1(j) of the Agreement is hereby
amended in its entirety to read in its entirety as set forth below:
(j) (i) The Bessemer Group in the aggregate shall cease to
beneficially own (within the meaning of Rule 13d-3 of the Securities
and Exchange commission), directly or indirectly, securities
representing at least 20% on a fully diluted basis of the ordinary
voting power for the election of directors of Holdings; (ii) any
Person or group (within the meaning of Rule 13d-5 of the Securities
and Exchange Commission), other than any Person or group consisting
solely of one or more members of the Bessemer Group, Investors and
directors, officers or employees (or former directors, officers or
employees) of Holdings or any of its Subsidiaries, shall, directly
or indirectly, have the power to vote or direct the voting of
securities representing a greater percentage of the ordinary voting
power for the election of directors of Holdings than securities then
beneficially owned by the Bessemer Group; (iii) any Person or group,
other than any Person or group consisting solely of members of the
Bessemer Group, Investors and directors, officers or employees (or
former directors, officers or employees) of Holdings or any of its
subsidiaries, shall have acquired, by contract or otherwise, the
power to exercise directly or indirectly a controlling influence
over the management or policies of Holdings; (iv) Holdings shall
cease to own and control, of record and beneficially, directly, 100%
of each class of outstanding Capital Stock of Lessee free and clear
of all Liens (except Liens created by the Holdings Pledge
Agreement); (v) Lessee shall issue any Capital Stock (or any
security convertible into any of its Capital Stock) that is not
pledged to Administrative Agent for the benefit of the lenders, or
(vi) at any time that any Senior Notes are outstanding, a "change of
Control" (as defined in the Senior Note Indenture) shall occur (for
purposes of this Section 14.1(j), the terms "Bessemer Group",
"Liens", "Capital Stock", "Investors", "Holdings Pledge Agreement",
"Senior Notes", "Senior Note Indenture", "Administrative Agent" and<PAGE>
"Lenders" shall have the respective meanings assigned to such terms
in the Credit Agreement);
2. Representations and Warranties. Lessee hereby represents and
warrants to Lessor that the representations and warranties of Lessee set
forth in Section 5.2 of the Agreement and true and correct on and as of
the date hereof except that for purposes of this Section 2, each reference
in Section 5.2 to "this Agreement" shall mean the Agreement as amended by
this Amendment, each such reference to "December 31, 1993" shall mean
"December 31, 1995", each such reference to "December 31, 1994" shall mean
"December 31, 1996" and each such reference to "Closing Date" shall mean
"Amendment Closing Date" as hereinafter defined.
3. Conditions Precedent. This Amendment shall be effective as of
September 2, 1997 upon satisfaction of the following conditions (the date
upon which such condition is satisfied being herein called the "Amendment
Closing Date"):
a. Delivery by Lessee to Lessor of a certificate of a
Responsible Officer to the effect that (i) the representations and
warranties of Lessee set forth in Section 2 hereof are true and correct on
and as of the Amendment Closing Date as though made on such Date and (ii)
on such Date no Event of Default or Unmatured Default has occurred and is
continuing.
4. Miscellaneous. The parties hereto hereby confirm that the
Agreement, as amended hereby, does and shall remain in full force and
effect.
WITNESS the date execution hereof as of the day and year first above
written.
MELLON LEASING CORPORATION,
Lessor
By /s/ Michael R. Langrecker
Title: Vice President
ESSEX GROUP, INC., Lessee
By /s/ David A. Owen
Title: Executive Vice President, CFO
2<PAGE>
