<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission File No. 1-12983
GENERAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1398235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 Tesseneer Drive
Highland Heights, KY 41076
(Address of principal executive offices)
(606) 572-8000
(Registrant's telephone number, including area code)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 26, 1998
----- -------------------------------
Common Stock, $.01 Par Value 36,816,173
PAGE 1
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GENERAL CABLE CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Statements of Income -
For the three and nine months ended September 30, 1998
and 1997 3
Balance Sheets -
September 30, 1998 and December 31, 1997 4
Statements of Cash Flows -
For the nine months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
</TABLE>
2
<PAGE> 3
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 304.5 $ 306.1 $ 889.8 $ 849.3
Cost of sales 235.2 244.4 696.6 683.8
------- ------- ------- -------
Gross profit 69.3 61.7 193.2 165.5
Selling, general and administrative expenses 29.6 29.6 94.2 89.6
------- ------- ------- -------
Operating income 39.7 32.1 99.0 75.9
------- ------- ------- -------
Interest income (expense):
Interest expense (4.2) (4.4) (12.2) (14.2)
Interest income 0.2 0.3 0.7 0.6
------- ------- ------- -------
(4.0) (4.1) (11.5) (13.6)
------- ------- ------- -------
Earnings before income taxes 35.7 28.0 87.5 62.3
Income tax provision (13.6) (10.7) (33.8) (24.4)
------- ------- ------- -------
Net income $ 22.1 $ 17.3 $ 53.7 $ 37.9
======= ======= ======= =======
Earnings per common share $ 0.60 $ 0.47 $ 1.46 $ 1.04
======= ======= ======= =======
Weighted average common shares 36.8 36.8 36.8 36.6
======= ======= ======= =======
Earnings per common share-assuming dilution $ 0.59 $ 0.46 $ 1.43 $ 1.03
======= ======= ======= =======
Weighted average common shares-assuming
dilution 37.5 37.4 37.6 36.8
======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
- ------ 1998 1997
------------- ------------
(unaudited)
<S> <C> <C>
Assets:
Cash $ 5.6 $ 4.2
Receivables, net 181.8 162.4
Inventories 178.8 163.6
Deferred income taxes 20.1 20.9
Prepaid expenses and other 11.4 10.7
------ ------
Total current assets 397.7 361.8
Property, plant and equipment, net 192.9 155.6
Deferred income taxes 27.4 29.2
Other non-current assets 17.1 17.1
------ ------
Total assets $635.1 $563.7
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 87.5 $ 80.5
Accrued liabilities 59.8 55.4
------- -------
Total current liabilities 147.3 135.9
Long-term debt 253.5 238.5
Other liabilities 61.6 66.9
------ ------
Total liabilities 462.4 441.3
------ ------
Shareholders' Equity:
Common stock, $0.01 par value:
Issued and outstanding shares:
September 30, 1998 - 36,814,254
December 31, 1997 - 36,773,139 0.4 0.4
Additional paid-in capital 84.3 83.3
Retained earnings 88.0 38.7
------ ------
Total shareholders' equity 172.7 122.4
------ ------
Total liabilities and shareholders' equity $635.1 $563.7
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1998 1997
------- -------
<S> <C> <C>
Cash flows of operating activities:
Net income $ 53.7 $ 37.9
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 13.3 10.1
Deferred income taxes 2.6 1.5
Changes in operating assets and liabilities:
Increase in receivables (19.4) (51.2)
(Increase) decrease in inventories (15.2) 0.8
(Increase) decrease in other assets (3.0) 0.4
Increase in accounts payable,
accrued and other liabilities 6.5 15.4
------- -------
Net cash flows of operating activities 38.5 14.9
------- -------
Cash flows of investing activities:
Capital expenditures (52.0) (19.1)
Proceeds from the sale of property 3.5 4.9
Other, net 0.6 (2.1)
------- -------
Net cash flows of investing activities (47.9) (16.3)
------- -------
Cash flows of financing activities:
Dividends paid (4.2) (42.6)
Net borrowings of revolving credit facility 15.6 248.0
Repayment of related party notes payable - (195.8)
Repayment of short-term debt - (2.0)
Repayment of other long-term debt (0.6) (0.6)
------- -------
Net cash flows of financing activities 10.8 7.0
------- -------
Increase in cash 1.4 5.6
Cash-beginning of period 4.2 1.9
------- -------
Cash-end of period $ 5.6 $ 7.5
======= =======
SUPPLEMENTAL INFORMATION
Income taxes paid, net of refunds $ 22.6 $ 14.1
======= =======
Interest paid $ 9.3 $ 12.4
======= =======
NONCASH ACTIVITIES
Issuance of Restricted Stock $ 1.0 $ 5.6
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the accounts of General Cable Corporation and its wholly owned
subsidiaries. All transactions and balances among the consolidated companies
have been eliminated. Certain reclassifications have been made to the prior year
to conform to the current year's presentation.
BASIS OF PRESENTATION The accompanying unaudited consolidated
financial statements of General Cable Corporation and Subsidiaries have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Results of operations for the three and nine
months ended September 30, 1998 are not necessarily indicative of results that
may be expected for the full year. These financial statements should be read in
conjunction with the audited financial statements and notes thereto in General
Cable's 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 30, 1998.
NEW STANDARDS In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS No.
130 was adopted during the first quarter of 1998. However, management believes
the disclosure provisions of SFAS No. 130 are not material to its consolidated
financial statements. General Cable will be required to adopt SFAS No. 131
during 1998. Adoption of SFAS No. 131 will not impact the reported results of
operations or financial position of General Cable. However, General Cable is
planning to disclose additional information related to the Electrical and
Communications Groups when SFAS No. 131 is implemented. During 1998 two
additional standards have been issued, SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" and SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". General Cable will be
required to adopt SFAS No. 132 during 1998 and believes that it will not impact
the reported results of operations or financial position of the Company;
however, additional disclosures may be required. General Cable will be required
to adopt SFAS No. 133 no later than January 1, 2000. Management has not yet
analyzed the impact of SFAS No. 133 on its consolidated financial statements.
6
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVENTORIES
-----------
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------ ------
<S> <C> <C>
Raw materials $ 22.2 $ 20.7
Work-in-progress 25.6 28.4
Finished goods 131.0 114.5
------ ------
Total $178.8 $163.6
====== ======
</TABLE>
General Cable values only the copper component of its inventories
using the last-in/first-out (LIFO) method. At September 30, 1998 and December
31, 1997, $73.6 million and $70.7 million, respectively, of inventories were
valued using the LIFO method. Approximate replacement cost of inventories valued
using the LIFO method totaled $58.9 million at September 30, 1998 and $59.3
million at December 31, 1997. 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 are necessarily
based on management's estimates of expected year-end inventory levels and costs.
Because these are subject to many variables beyond management's control, interim
results are subject to the final year-end LIFO inventory valuation.
3. SHAREHOLDERS' EQUITY
--------------------
Changes in shareholders' equity were as follows (in millions):
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1997 $ 0.4 $83.3 $ 38.7 $122.4
Net income - - 53.7 53.7
Dividends - - (4.2) (4.2)
Issuance of Restricted Stock - 1.0 - 1.0
Other - - (0.2) (0.2)
------ ----- ------ ------
Balance, September 30, 1998 $ 0.4 $84.3 $ 88.0 $172.7
====== ===== ====== ======
</TABLE>
On April 17, 1998, the Board of Directors approved a three-for-two stock
split on the Company's Common Stock, effected in the form of a stock dividend
paid on May 14, 1998 to shareholders of record on April 28, 1998. An amount
equal to the par value of the common shares issued was transferred from
additional paid-in capital to the common stock account. The effect of the stock
split has been retroactively reflected as of December 31, 1997 in the
Consolidated Balance Sheet and related footnotes. All references to number of
shares and to per share information have been adjusted to reflect the stock
split on a retroactive basis.
7
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. EARNINGS PER SHARE
------------------
A reconciliation of the numerator and denominator of earnings per common
share to earnings per common share assuming dilution is as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------------------------------
1998 1997
------------------------------------ --------------------------------------
Per Share Per Share
Income(1) Shares(2) Amount Income(1) Shares(2) Amount
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share $22.1 36.8 $0.60 $17.3 36.8 $0.47
===== =====
Dilutive effect of stock options - 0.7 - 0.6
----- ---- ----- ----
Earnings per common share-
Assuming dilution $22.1 37.5 $0.59 $17.3 37.4 $0.46
===== ==== ===== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------------------------
1998 1997
----------------------------------- ---------------------------------------
Per Share Per Share
Income(1) Shares(2) Amount Income(1) Shares(2) Amount
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share $53.7 36.8 $1.46 $37.9 36.6 $1.04
Dilutive effect of stock options - 0.8 - 0.2
----- ---- ----- ----
Earnings per common share-
Assuming dilution $53.7 37.6 $1.43 $37.9 36.8 $1.03
===== ==== ===== ===== ==== =====
</TABLE>
(1) Numerator
(2) Denominator
5. SUBSEQUENT EVENT
----------------
On October 1, 1998, General Cable announced it had entered an agreement
in principle to acquire all the capital stock of Industria Venezolana de Cables
Electricos, C.A. and related companies ("Cabel") from its shareholders. Cabel is
a producer of electrical and communications wire and cable in Venezuela.
Consummation of the transaction is subject to conditions, including negotiation
and execution of definitive acquisition agreements, completion of due diligence
and receipt of corporate and government approvals. It is intended that the
transaction will close before the end of the year.
8
<PAGE> 9
GENERAL CABLE CORPORATION AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
General Cable is a leader in the development, design, manufacture,
marketing and distribution of copper, aluminum and optical fiber wire and cable
products for the communications and electrical markets. Communications wire and
cable transmits low voltage signals for voice, data, video and control
applications. Electrical wire and cable conducts electrical current for power
and control applications. General Cable believes that its principal competitive
strengths include its breadth of product line; brand recognition; distribution
and logistics; customer relationships, sales and service; and improved operating
efficiency.
All statements, other than statements of historical fact, included in
this report, including the statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations", are, or may be
considered, forward-looking statements under Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. Important
factors that could cause results to differ materially from those discussed in
the forward-looking statements (Forward Statements) include: price competition,
particularly in certain segments of the building wire and cordset markets, and
other competitive pressures; general economic conditions, particularly those
affecting the non-residential construction industry; the Company's ability to
retain key customers and distributors; the Company's ability to increase
manufacturing capacity; the cost of raw materials, including copper; the level
of growth in demand for products serving various segments of the communications
markets; the Company's ability to introduce successfully new or enhanced
products; the impact of qualified technological changes; the Company's ability
to achieve productivity improvements; and the impact of changes in industry
standards and the regulatory environment. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting for the
Company are qualified in their entirety by the Forward Statements.
General Cable's reported net sales are directly influenced by the price
of copper. Copper prices have been volatile, with the copper cathode daily
selling price on the COMEX averaging $0.75 per pound during the third quarter
and $0.77 during the first nine months of 1998, $1.02 per pound during the third
quarter of 1997 and $1.09 per pound during the first nine months of 1997.
However, as a result of a number of practices intended to match copper purchases
with sales, the Company's overall profitability has not been significantly
affected by changing copper prices. General Cable generally passes changes in
copper prices along to its customers, although there are timing delays of
varying lengths depending upon the type of product, competitive conditions and
particular customer arrangements. General Cable does not engage in speculative
metals trading or other speculative activities. Also, the Company does not
engage in activities to hedge the underlying value of its copper inventory.
9
<PAGE> 10
GENERAL CABLE CORPORATION AND SUBSIDIARIES
General Cable generally experiences certain seasonal trends in sales and
cash flow. Larger amounts of cash are generally required during the first and
third quarters of the year to build inventories in anticipation of higher demand
during the spring and summer, when construction activity increases. In general,
receivables related to higher sales activity during the spring and summer are
collected in the third and fourth quarters of the year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1997
General Cable continued to achieve record-setting results in earnings per
share in the third quarter of 1998. Fully diluted earnings per share increased
28% to $0.59, the best quarterly earnings in the Company's history, up from
$0.46 per share in the third quarter of 1997. Earnings increased significantly
as a result of higher sales volume and the results of the Company's continuing
productivity improvement initiatives.
After adjusting 1997 net sales to reflect the $0.27 decrease in the
average monthly Comex price per pound of copper in the third quarter of 1998,
net sales increased 9% to $304.5 million, up from $278.6 million for the same
period in 1997. The increase in copper-adjusted net sales reflected a 5%
increase in the copper-adjusted net sales of Electrical products and a 16%
increase in the copper-adjusted net sales of Communications products. Net sales
on an as reported basis decreased from $306.1 million in the third quarter of
1997 to $304.5 million in the third quarter of 1998 reflecting the lower average
price per pound of copper in the third quarter of 1998.
The growth in Communications products resulted from higher sales of
plastic insulated cable (PIC) to a broad base of Local Telephone Exchange
Carrier and distribution customers which increased 19% on a copper-adjusted
basis. The significant sales growth resulted in part from higher sales of PIC to
commercial distributors, primarily Graybar and Power & Telephone Supply Company.
Sales of telecommunications products to commercial distributors in the third
quarter of 1998 were double the sales in the same period of 1997. In addition,
copper-adjusted net sales of data communications products rose almost 12%, with
the largest increases coming in General Cable's high performing enhanced
category cables which increased almost 70% versus last year. Preferred customer
partnering continued to prove to be an effective strategy with sales to the
Company's largest data communications customer up 33% in the quarter compared to
the same period last year. The ongoing proliferation of personal computers,
growth in Internet use, expansion of local and wide area networks, high-speed
modems and access lines, and advanced voice, data and video applications
continue to drive sales growth in communications products.
The growth in Electrical products sales in the third quarter of 1998
compared to the same period in 1997 was primarily due to increased volume of
building wire, industrial power and control products, and consumer cordsets.
Consumer cordset products were up 26% in the third quarter with increased sales
to both TruServ and ACE Hardware. Cordset sales to The Home Depot also grew,
primarily due to the success of General Cable's new line of Romex(R) Brand
Contractor Tough(R) extension cords.
10
<PAGE> 11
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Selling, general and administrative expenses were $29.6 million in both
the third quarter of 1998 and 1997. The Company continued to leverage its sales
growth as evidenced by the fact that selling, general and administrative
expenses as a percentage of copper-adjusted net sales declined from 10.6% in the
third quarter of 1997, to 9.7% in the third quarter of 1998.
Operating profit increased 24% to $39.7 million in the third quarter of
1998 from $32.1 million in the third quarter of 1997. The substantial
improvement in operating profit reflects the 9% increase in copper-adjusted
sales, a reduction in costs associated with outsourcing less PIC cable in the
third quarter of 1998 compared to the third quarter of 1997 and an 6.3%
productivity improvement led by manufacturing cost reductions. The reduction in
PIC cable outsourcing was achieved despite an increase of more than 21% in PIC
cable sales volume by the timely, planned launch of new PIC cable production
capacity throughout the first nine months of 1998. The manufacturing cost
reductions are the result of process improvements to reduce material costs and
usage, and improved throughput. These improvements in operating profit were
partially offset by lower building wire pricing in the third quarter; the price
premium over copper cost was down 8% versus last year.
Net interest expense was $4.0 million in the third quarter of 1998
compared to $4.1 million in the third quarter of 1997.
The effective income tax rate for the third quarter of 1998 was 38.1%
compared to 38.2% for the third quarter of 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1997
General Cable's continued record-setting results during the first nine
months of 1998 included substantial growth in earnings per share, return on net
assets and copper-adjusted net sales. Fully diluted earnings per share increased
39% to $1.43, up from $1.03 per share in the first nine months of 1997. The
significant improvement was fueled by substantially higher sales volume and
continuing productivity improvement initiatives. In addition, return on net
assets for the first nine months of 1998 of 18.4% was up 3.6 points over the
same period in the prior year.
Net sales for the nine months ended September 30, 1998 increased $40.5
million, or 5% to $889.8 million from net sales of $849.3 million for the same
period in 1997 despite a $0.32 decrease in the average monthly COMEX price per
pound of copper in the nine months ended September 30, 1998 compared to the same
period in 1997. After adjusting the net sales for the first nine months of 1997
to reflect the $0.32 lower average monthly COMEX price per pound of copper in
the first nine months of 1998, net sales were $128.2 million, or 17%, higher
than the first nine months of 1997. The increase in copper-adjusted net sales
reflects a 9% increase in the copper-adjusted net sales of Electrical products
and 30% increase in the copper-adjusted net sales of Communications products.
11
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
The 30% increase in Communications product sales was the result of
significantly higher sales of PIC and datacom products. The PIC sales increases
include sales to a broadening base of Local Telephone Exchange Carrier
customers. PIC sales through key distribution customers were also up about 28%.
Sales growth of data communication products was primarily in high-performance,
enhanced category cables. The 9% growth in Electrical product sales resulted
from increased volume of building wire products and to a lesser extent,
increased volume in instrumentation cable, industrial power and control
products, consumer cordset products, and products for the automotive
aftermarket.
General Cable continued to show excellent sales growth with key customers
through "The Power of One" strategy. Copper-adjusted net sales to the Company's
top 20 customers increased 31% through the first nine months of 1998, reflecting
General Cable's continuing ability to partner with customers for mutually
beneficial growth in revenues and earnings.
Despite substantial top-line growth, selling, general and administrative
expenses increased only $4.6 million, or 5% to $94.2 million in the first nine
months of 1998 from $89.6 million in the first nine months of 1997. The increase
reflected higher transportation costs related to higher volume, increased
salaries for additional staffing to support sales growth and costs associated
with year 2000 compliance. Selling, general and administrative expenses as a
percentage of copper-adjusted net sales declined from 11.8% in the first nine
months of 1997, to 10.6% in the first nine months of 1998 as the Company
continued to leverage its sales growth.
Operating profit increased 30% to $99.0 million in the first nine months
of 1998 from $75.9 million in the first nine months of 1997. The significant
improvement in operating profit reflects the 17% increase in copper-adjusted net
sales, manufacturing productivity of 5.9%, and selling, general and
administrative expense productivity. These were partially offset by lower
building wire pricing and higher costs associated with temporarily purchasing
PIC products from third parties at a cost in excess of General Cable's
manufacturing cost to satisfy PIC demand in excess of capacity. General Cable
brought PIC capacity on stream during the first quarter of 1998 and an
additional PIC capacity expansion was completed at the Bonham, Texas plant in
September 1998. These capacity additions have reduced and will continue to
reduce the adverse effect on operating margins of outsourcing PIC products.
Net interest expense was $11.5 million in the first nine months of 1998
compared to $13.6 million in the first nine months of 1997. The reduction
reflects the impact of refinancing the remaining related party debt in May, 1997
with borrowing under a new credit facility at a lower effective interest rate.
The effective income tax rate for the nine months ended September 30,
1998 was 38.6% compared to 39.2% for the nine months ended September 30, 1997
due to a lower state effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
In general, General Cable requires cash for working capital, capital
expenditures, debt repayment, interest and taxes. General Cable's working
capital requirements increase when it experiences strong incremental demand for
products and/or significant copper price increases.
12
<PAGE> 13
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Cash flow provided by operating activities in the first nine months of
1998 was $38.5 million. Net income before depreciation and deferred taxes of
$69.6 million and an $6.5 million increase in accounts payable, accrued
liabilities and other long-term liabilities were partially offset by a $3.0
million increase in other assets, a $19.4 million increase in accounts
receivable and an $15.2 million increase in inventories. The increase in
accounts receivable was due to the strong growth in sales in the last two months
of the third quarter of 1998 compared to the last two months of the fourth
quarter of 1997 partially offset by lower copper cost in 1998. The 9% increase
in inventory was due to the 17% sales growth experienced during 1998, and
reveals a 10% improvement in inventory turnover.
Cash flow used in investing activities was $47.9 million in the first
nine months of 1998, principally reflecting $52.0 million of capital
expenditures, primarily focused on increased capacity and improved manufacturing
productivity, offset by $3.5 million from the proceeds of sale of other
property.
Cash flow provided by financing activities in the first nine months of
1998 was $10.8 million, primarily reflecting proceeds of borrowings of $15.6
million under General Cable's revolving credit line, partially offset by $4.2
million of dividends paid during the first nine months.
In May 1997, as part of the initial public offering of common stock,
General Cable entered into a new $350.0 million credit facility with The Chase
Manhattan Bank as administrative agent, and a syndicate of banks (the Credit
Facility). The Credit Facility consists of a five-year senior unsecured
revolving credit and competitive advance facility in an aggregate principal
amount of $350.0 million. Borrowings are guaranteed by General Cable's principal
operating subsidiaries.
General Cable made an initial borrowing of $268.0 million and used the
proceeds of such borrowing to (i) repay all of its revolving bank debt, (ii)
repay all intercompany debt and advances owed to Wassall and its subsidiaries;
(iii) pay $42.6 million as a dividend to Wassall; (iv) pay $2.0 million for the
purchase of two related companies, Carol Cable Europe Ltd. and Carol Cable Ltd.,
from Wassall; and (v) pay expenses of the refinancing of $0.4 million.
Borrowings under the Credit Facility were $245.6 million at September 30, 1998.
The Credit Facility loans bear interest, at General Cable's option, at
(i) a spread over LIBOR or (ii) the Alternate Base Rate, which is defined as the
higher of (a) the Agent's Prime Rate, (b) the secondary market rate for
certificates of deposit (adjusted for reserve requirements) plus 1% or (c) the
Federal Funds Effective Rate.
In November 1997, General Cable entered into interest rate swap
agreements with the three banks which effectively fix interest rates for
specific amounts borrowed under the Credit Facility as follows (dollars in
millions):
<TABLE>
<CAPTION>
Fixed
Notional Interest
Period Amounts Rate
------ ------- ----
<S> <C> <C>
November 1997 to November 1998 $180.0 5.9%
November 1998 to November 1999 125.0 6.2%
November 1999 to November 2000 75.0 6.2%
November 2000 to November 2001 25.0 6.2%
</TABLE>
13
<PAGE> 14
GENERAL CABLE CORPORATION AND SUBSIDIARIES
A facility fee accrues on the full amount of the Credit Facility,
regardless of usage. The facility fee ranges between 8.0 and 20.0 basis points
per annum and the spread over LIBOR ranges between 17.0 and 42.5 basis points
per annum. Both the facility fee and the spread over LIBOR are subject to
periodic adjustment depending upon General Cable's Leverage Ratio. As a result
of the Company's continuing strong financial performance, both the facility fee
and the spread over LIBOR were adjusted down effective March 31, 1998 to the
minimum amount provided under the Credit Facility. The Credit Facility restricts
certain corporate acts and contains required minimum financial ratios and other
covenants.
YEAR 2000
In the fourth quarter of 1997, General Cable completed a study to
determine the cost of upgrading and modifying computer software for Year 2000
compliance. The Company estimates that these costs will not exceed $2.0 million.
The majority of the work necessary to upgrade to Year 2000 compliance has been
completed. In addition, the Company is communicating with third parties with
whom it conducts business to determine the extent to which General Cable may be
vulnerable if their systems are not Year 2000 compliant in a timely manner.
Where practicable, the Company will assess and attempt to mitigate its risks
with respect to the failure of these third parties to convert their systems. The
effect, if any, on the Company's results of operations from the failure of third
parties to be Year 2000 ready, is not reasonably estimable. Initial work will
begin in the fourth quarter to develop a contingency plan to protect the
business for Year 2000 related interruption. These plans are anticipated to be
completed by the second quarter of 1999.
14
<PAGE> 15
GENERAL CABLE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - General Cable Corporation Stock Loan Incentive Plan
27.1 - Financial Data Schedule
(b) Reports on Form 8-K - None
15
<PAGE> 16
GENERAL CABLE CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, General
Cable Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENERAL CABLE CORPORATION
Signed: November 9, 1998 By: s/CHRISTOPHER F. VIRGULAK
--------------------------
Christopher F. Virgulak
Executive Vice President, Chief
Financial Officer and Treasurer
16
<PAGE> 1
EXHIBIT 10.1
GENERAL CABLE CORPORATION
Stock Loan Incentive Plan
1. PURPOSE. The purpose of the Stock Loan Incentive Plan (the "Plan") of
General Cable Corporation ("General Cable") is to facilitate the
purchase, by executive officers and key employees of General Cable and
its subsidiaries (collectively, the "Company"), of up to $6,125,000 in
market value of General Cable's common stock ("Aggregate
Subscription"). The aggregate open market purchase ("Aggregate
Purchase") will be made by a single agent selected by the Company (the
"Purchase Agent") over a period of time necessary for the Purchase
Agent to complete the purchase consistent with maintaining an orderly
market for the Company's common stock ("Purchase Period"). The
purchases facilitated by the Plan are intended to achieve the following
specific purposes:
a) more closely align financial rewards available to
executives and key employees with the financial
returns realized by the Company's shareholders;
b) increase motivation of executives and key employees
to manage the Company as owners; and
c) increase the percentage ownership of common stock by
executives and key employees of the Company.
2. ELIGIBILITY. To be eligible to participate in the Plan, an individual
("Eligible Participant") must be designated for participation by the
Compensation Committee of General Cable's Board of Directors in the
case of executive officers or the Chief Executive Officer of General
Cable in case of other participants ("Committee").
3. ADMINISTRATION. The Plan shall generally be administered by the
Committee. The Committee is authorized, subject to the provisions of
the Plan, to establish such rules and regulations as it deems necessary
for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in
connection with the Plan and any Awards granted hereunder as it deems
necessary or advisable. All determinations and interpretations and to
take such action in connection with the Plan and any Awards granted
hereunder as it deems necessary or advisable including delegating
functions and administration. All determinations and interpretations
made by the Committee shall be binding and conclusive on all
participants and their legal representatives. No member of the Board,
no member of the Committee and no employee of the Company shall be
liable for any act or failure to act hereunder, except in circumstances
involving his or her bad faith, gross negligence or willful misconduct,
or for any act
<PAGE> 2
or failure to act hereunder by any other member or employee or by any
agent to whom duties in connection with the administration of this Plan
have been delegated. The Company shall indemnify members of the
Committee and any agent of the Committee who is an employee of the
Company, against any and all liabilities or expenses to which they may
be subjected by reason of any act or failure to act with respect to
their duties on behalf of the Plan, except in circumstances involving
such person's bad faith, gross negligence or willful misconduct.
4. PARTICIPATION.
A. Conditions. To become a Plan participant ("Participant"), an
Eligible Participant must satisfy the following requirements:
i) submit a completed, signed and irrevocable agreement
to acquire all or a portion (but no less than the
minimum dollar amount) of the Committee's designated
purchase opportunity applicable to each Eligible
Participant ("Initial Purchase Opportunity") no later
than a date and time specified by the Committee or
its designees;
ii) complete and sign all necessary agreements and other
documents relating to the Loan described in Section 5
below, and
iii) satisfy all other conditions of participation
specified in this Plan or by the Committee or its
designees.
Each of the agreements and other documents specified in
subsections (i), (ii) and (iii) and any other agreements
required to implement the Plan must be in such form and must
be submitted at such times and to such Company officers as
specified by the Committee or its designees. No Eligible
Participant is required to participate in the Plan.
B. Minimum/Maximum Purchase. Each Eligible Participant shall have
the opportunity to purchase between the minimum and maximum
aggregate common stock dollar amount as designated by the
Committee ("Purchase Option"). Eligible Participants may not
purchase less than the minimum dollar amount; however, if the
maximum aggregate of $6,125,000 is not subscribed for,
Eligible Participants may have the right, on a pro-rata basis
(but subject to final approval of the Committee in its sole
and absolute discretion), to purchase an aggregate common
stock dollar amount which exceeds the maximum amount specified
in that Eligible Participant's Purchase Option.
5. PAYMENT OF PURCHASE PRICE; RECEIPT OF SHARES. Individual Participants
shall inform the Company of the total dollar amount of the Company's
common stock
2
<PAGE> 3
such Participant elects to have purchased on his behalf ("Total
Purchase Amount"), such Total Purchase Amount to be no less or no
greater than the respective minimum or maximum dollar amounts specified
in the Participant's Purchase Option (unless subsequently adjusted by
the Committee due to an undersubscription or otherwise). The number of
shares of common stock received by a Participant shall be determined by
dividing a Participant's Total Purchase Amount by the weighted average
price of the Aggregate Purchase ("Average Purchase Price") during the
Purchase Period. All Participants shall receive their portion of the
Aggregate Purchase ("Purchased Shares") at identical share prices.
Each Participant must deliver in cash or a Promissory Note (on terms
and conditions specified in Section 5 hereof or as otherwise determined
by the Committee) an amount equal to the Total Purchase Amount. No
Purchased Shares will be issued to any Participant until General Cable
has received payment in full for all shares and no Participant will
have the right to borrow any funds from General Cable in excess of the
amount necessary to satisfy such Participant's obligations hereunder.
All payments must be made at the time, place and manner specified by
the Committee or its designees.
6. SHARE PURCHASE FINANCING.
A. Provision of Loan. To facilitate the transactions contemplated
hereby, General Cable has agreed to provide to each
Participant, on a full recourse, unsecured basis, 100% of the
funds necessary to fund the total Purchase Amount of the
Purchased Shares (the "Loan"). Each Participant must execute
all Loan and related documentation (in form and substance
satisfactory to the Committee). Each Participant is fully
obligated to repay General Cable all principal and interest
relating to the Loan as of the Acquisition Date (as defined).
B. Loan Terms. The term of the Loan shall be for a period of five
years from the Acquisition Date (subject to acceleration for a
Change in Control, and termination of employment (other than
due to Retirement or Disability)), or other event as
determined by the Committee), commencing on the date upon
which the Aggregate Purchase is completed by the Purchase
Agent (the "Acquisition Date"). Interest on the outstanding
Loan balance shall accrue at an annual rate of 5.12% (unless
increased to 15% due to the sale of any Purchased Shares, or
due to any Default as defined), commencing on the Acquisition
Date, but such interest shall not become payable until the
Loan becomes due and payable in accordance with its terms and
the terms hereof. All dividends on the Purchased Shares shall
be credited against, and deducted from, such final amount of
Loan
3
<PAGE> 4
principal, interest and fees due General Cable from
Participant for the Purchased Shares. A Participant shall have
the right to prepay the Loan, in part or in full, at any time
prior to the Loan Repayment Date.
C. If Participant sells any Purchased Shares and any amounts
remain due and payable to the Company pursuant to the Loan,
the interest rate shall increase to 15% until the balance of
the Loan and all interest due thereon is paid in full.
7. CUSTODIAN OF PURCHASED SHARES. Purchased Shares are at all times
subject to the restriction contained in Section 9. The Purchased Shares
will be held in Street name in a brokerage account maintained for that
purpose by the Purchase Agent.
8. STOCKHOLDER RIGHTS. The Purchased Shares shall be purchased by the
Purchase Agent in open market transactions. Participants shall have all
of the rights of a stockholder with respect to the Purchased Shares,
including the right to vote and the right to receive dividends or other
distributions on the common stock.
9. SALE RESTRICTIONS REGARDING PURCHASED SHARES. Each Participant is
permitted to sell all or any portion of the Purchased Shares, subject
to notifying the Secretary of General Cable in writing and complying
with applicable federal or state securities laws as determined by the
Company.
10. GAINS ON SALE OF PURCHASED SHARES. A Participant who either (x)
voluntarily terminates or (y) sells, pledges or otherwise disposes of
Purchased Shares prior to the third anniversary of the Exercise Date
shall pay to General Cable within seven (7) days of such disposition
50% of any "Sale Gain" which will be measured by the difference between
the sale price of the Purchased Shares and the Average Purchase Price
paid for the Purchased Shares by Participant; provided that no gain
shall be paid to General Cable pursuant to this Section in the event of
termination of employment pursuant to Sections 13 and 14 hereof, or in
connection with a Change in Control (as defined in the General Cable
Corporation 1997 Stock Incentive Plan).
11. REPAYMENT OF THE LOAN. Unless otherwise due earlier or forgiven in
accordance with the terms and provisions of this Plan, Participant must
repay the Loan and all interest accrued thereon no later than 5 years
from the Acquisition Date.
A. Failure to Repay Loan Principal or Interest. Any failure by
Participant to fully satisfy this repayment obligation will
result in a Default. In the event
4
<PAGE> 5
of a Default, the Company reserves the right to (a) enforce
its rights to compel repayment of the Loan and all interest
accrued thereon, (b) cancel all MRSU's granted to Participant
(such cancellation not to exceed the value of the
Participant's obligation to the Company hereunder), and (c)
increase the effective interest rate on the Loan to 15% per
annum, which may be applied retroactively to the Acquisition
Date. The Company will also be entitled to all of its out of
pocket costs and fees and expenses incurred in enforcing its
rights hereunder, including legal fees.
B. Forgiveness of Interest. In the event that each of the
following occurs:
(i) Participant has vested in the MRSUs,
(ii) General Cable achieves no less than 15% cumulative
year over year improvement in annualized operating
income for five years, and
(iii) the Loan is repaid and satisfied from and after
thirty-six (36) months,
all accrued and unpaid interest due on the Loan (net of
dividend payments received) or interest paid to Loan
repayment, as the case may be, shall be forgiven.
12. MATCHING RESTRICTED STOCK UNITS ("MRSU'S").
A. Grant of Matching Restricted Stock Units. Each Participant
shall be granted, as of the Acquisition Date, a number of
MRSU's equal to the number of Purchased Shares the Participant
has invested in at that date. The Company shall establish and
maintain for each Participant a matching account to which
MRSU's shall be credited under this Section ("Matching
Account").
B. Dividend Equivalents. No Participant shall be entitled to
receive any dividend equivalents with respect to the MRSU's as
long as the Loan (or any other amounts due the Company) remain
outstanding and unpaid. A Participant shall be entitled to
receive dividend equivalents in respect of MRSU's credited to
a Matching Account after the Loan has been satisfied.
C. Settlement. MRSU's not previously forfeited under Section
11(E) or accelerated hereunder, shall be settled as soon as
practicable after the fifth anniversary of the Acquisition
Date. The Committee may accelerate such settlement in other
circumstances deemed sufficient in its sole and
5
<PAGE> 6
absolute discretion. Such settlement shall be effected by
issuance and delivery, as promptly as practicable on or after
the settlement date, of one share of common stock for each
MRSU being settled. The Committee may, in its discretion, make
delivery of shares hereunder by depositing such shares into an
account maintained by or for the Participant (or of which the
Participant is a joint owner, with the Participant's consent).
If the Committee determines to settle MRSU's by making a
deposit of shares into such an account, the Company may settle
any fractional Unit by means of such deposit if practicable
under the terms of such account. In other circumstances or if
so determined by the Committee, the Company may instead pay
cash in lieu of delivery of a fractional share, on such basis
as the Committee may determine. In no event will the Company
in fact issue fractional shares. Upon such settlement, all
obligations of the Company in respect of such MRSU's shall be
terminated, and the shares so distributed shall not be subject
to any risk of forfeiture or restriction on transferability
imposed under the Plan.
D. Vesting. Purchased Shares vest in the MRSUs if (i) Participant
has been continuously employed for five years after the
Acquisition Date and (ii) Participant has owned all Purchased
Shares for three years from the Acquisition Date.
E. Forfeiture. Participant shall forfeit all MRSU's credited to
the Matching Account in the event that any of the following
shall occur:
(i) Participant is terminated by the Company (whether or
not for Cause), or Participant voluntarily terminates
his/her employment prior to five years from the
Acquisition Date;
(ii) Participant sells any of the Purchased Shares prior
to three years from the Acquisition Date; or
(iii) Participant fails to satisfy in full, for any reason
whatsoever, the obligation to repay the Loan and all
interest and fees related thereto.
13. DEATH. If, at any time while the Loan is outstanding, a Participant's
employment with the Company terminates solely because of the
Participant's death, the Participant (or the Participant's
representative in the case of Participant's death) may sell (i) all or
any portion of the Purchased Shares; and (ii) all or any portion of the
shares delivered in settlement of MRSU's. Upon Participant's death, his
or her Loan shall become due and payable. To the extent the value of
Purchased Shares and MRSU's are insufficient to satisfy the outstanding
balance of
6
<PAGE> 7
principal and interest (net of dividends) due to the Company with
respect to Participant's Loan, the Company shall be responsible for any
such loss.
14. DISABILITY/RETIREMENT. If Participant's employment terminates due to
Disability (as defined in Section 14(f) of the General Cable
Corporation 1997 Stock Incentive Plan) or Retirement (after reaching
60th birthday), Participant's rights under this Plan shall continue as
if Participant was still an active employee, provided that Participant
does not participate in any activities deemed harmful to General Cable,
including without limitation competing, directly or indirectly, against
the Company, disclosing confidential information pertaining to the
Company to any third party, soliciting or otherwise inducing employees
to terminate their employment, or making any desparaging remarks
regarding the Company, its business, affairs or employees, and
Participant's commitment with respect thereto is set forth in an
agreement acceptable to the Company.
15. CHANGE IN CONTROL. In the event of a Change in Control (as defined in
Section 13 of the General Cable Corporation 1997 Stock Incentive Plan),
the following provisions shall apply:
(i) the Loan (including all accrued interest thereon),
shall become payable immediately;
(ii) all Vesting requirements with respect to the MRSU's
shall be deemed to be satisfied;
(iii) all restrictions with respect to the Purchased Shares
and the MRSU's shall be of no further force and
effect;
(iv) to the extent the value of the original number of
Purchased Shares and MRSUs is insufficient to satisfy
the outstanding balance of principal and interest
(net of dividends) due to the Company with respect to
Participant's Loan, the Company shall be responsible
for any such loss.
16. ADJUSTMENTS TO COMMON STOCK. In the event that the Board determines
that any dividend or other distribution (whether in the form of cash,
common stock, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange
of common stock or other securities of the Company, issuance of
warrants or other rights to purchase common stock or other securities
of the Company, or other similar corporate transaction or event affects
the common stock such that an adjustment is determined by the Committee
to be appropriate to prevent dilution or enlargement of the benefits or
potential
7
<PAGE> 8
benefits intended to be made available under the Plan, then the
Committee may, in such manner as it may deem equitable, make such
adjustments and take such actions in respect of common stock hereunder
as it deems appropriate, desirable or necessary.
17. AMENDMENT. The Board of Directors reserves the right to amend or
terminate this Plan at any time, subject to any restrictions imposed by
state or federal law or any other plan maintained by the Company;
provided; however, that no such amendment or termination shall affect
any vested rights.
18. NO RIGHT TO CONTINUED EMPLOYMENT. The existence of the Plan and the
execution of an Election Form, and any actions undertaken thereunder,
shall not confer upon the Participant any right to continued employment
by the Company.
19. BINDING TERMS. The terms of the Plan and the Election Forms and the
decisions of the Committee, or its designee, shall be binding upon the
Company, its successors and assigns, and each Participant and his or
her heirs and legal representatives. Except as otherwise provided, the
Plan is governed solely by the provisions as stated herein.
20. TAXES. Participant shall be responsible to satisfy applicable federal,
state, local or other tax withholding requirements with respect to the
distribution of common stock and any taxes imposed on a Participant
shall be the sole responsibility of the Participant. Without limiting
the generality of the foregoing, if any contribution or payment under
the Plan obligates the Company to deduct or withhold an amount for
purposes of federal, state, local or other taxes, such obligation may
be satisfied by the remittance by the Participant of an amount in cash
or stock equal to the amount required to be deducted or withheld prior
to such contribution or payment, as determined by the Company in its
sole and absolute discretion.
21. GOVERNING LAW. This Plan, the rights granted hereunder, and actions
taken in connection herewith, shall be governed and construed in
accordance with the laws of the Commonwealth of Kentucky (without
regard to principles of conflicts of laws).
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000886035
<NAME> GENERAL CABLE CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,600
<SECURITIES> 0
<RECEIVABLES> 189,000
<ALLOWANCES> 7,200
<INVENTORY> 178,800
<CURRENT-ASSETS> 397,700
<PP&E> 247,700
<DEPRECIATION> 54,800
<TOTAL-ASSETS> 635,100
<CURRENT-LIABILITIES> 147,300
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 172,300
<TOTAL-LIABILITY-AND-EQUITY> 635,100
<SALES> 889,800
<TOTAL-REVENUES> 889,800
<CGS> 696,600
<TOTAL-COSTS> 696,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,200
<INCOME-PRETAX> 87,500
<INCOME-TAX> 33,800
<INCOME-CONTINUING> 53,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,700
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.43
<FN> A three for two stock split occurred on May 14, 1998. Prior Financial Data
Schedules have not been restated.
</FN>
</TABLE>
