<PAGE> 1
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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 June 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 July 24, 1998
----- ----------------------------
Common Stock, $.01 Par Value 36,792,349
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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>
Item 1. Consolidated Financial Statements
Statements of Income -
For the three and six months ended June 30, 1998 and 1997 3
Balance Sheets -
June 30, 1998 and December 31, 1997 4
Statements of Cash Flows -
For the six months ended June 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 4. Results of Votes of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
</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 Six Months Ended
June 30, June 30,
------------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $306.7 $292.2 $585.3 $543.2
Cost of sales 239.8 237.2 461.4 439.4
------- ------- ------- -------
Gross profit 66.9 55.0 123.9 103.8
Selling, general and administrative expenses 33.3 30.4 64.6 60.0
-------- -------- -------- --------
Operating income 33.6 24.6 59.3 43.8
-------- -------- -------- --------
Interest income (expense):
Interest expense (4.2) (4.7) (8.0) (9.8)
Interest income 0.2 0.1 0.5 0.3
--------- --------- ---------- ---------
(4.0) (4.6) (7.5) (9.5)
--------- --------- ---------- ---------
Earnings before income taxes 29.6 20.0 51.8 34.3
Income tax provision (11.5) (8.0) (20.2) (13.7)
--------- ---------- --------- ---------
Net income $ 18.1 $ 12.0 $ 31.6 $ 20.6
======= ======== ======= =======
Earnings per common share $ 0.49 $ 0.33 $ 0.86 $ 0.56
======= ======= ======= =======
Weighted average common shares 36.8 36.6 36.8 36.5
======== ======== ======== ========
Earnings per common share-assuming dilution $ 0.48 $ 0.33 $ 0.84 $ 0.56
======= ======= ======= =======
Weighted average common shares-assuming
dilution 37.7 36.6 37.6 36.5
======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
- ------ 1998 1997
---- ----
Current Assets: (unaudited)
<S> <C> <C>
Cash $ 10.6 $ 4.2
Receivables, net 175.2 162.4
Inventories 183.3 163.6
Deferred income taxes 20.4 20.9
Prepaid expenses and other 11.0 10.7
-------- -------
Total current assets 400.5 361.8
Property, plant and equipment, net 178.0 155.6
Deferred income taxes 28.1 29.2
Other non-current assets 17.4 17.1
-------- -------
Total assets $624.0 $563.7
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 91.2 $ 80.5
Accrued liabilities 58.3 55.4
------- -------
Total current liabilities 149.5 135.9
Long-term debt 258.1 238.5
Other liabilities 64.1 66.9
-------- --------
Total liabilities 471.7 441.3
------- -------
Shareholders' Equity:
Common stock, $0.01 par value:
Issued and outstanding shares:
June 30, 1998 - 36,801,524
December 31, 1997 - 36,773,139 0.4 0.4
Additional paid-in capital 84.2 83.3
Retained earnings 67.7 38.7
-------- --------
Total shareholders' equity 152.3 122.4
------- -------
Total liabilities and shareholders' equity $624.0 $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>
Six Months Ended
June 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows of operating activities:
Net income $31.6 $ 20.6
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 8.6 6.7
Deferred income taxes 1.6 1.4
Changes in operating assets and liabilities:
Increase in receivables (12.8) (39.8)
Increase in inventories (19.7) (8.8)
(Increase) decrease in other assets (1.1) 1.0
Increase in accounts payable,
accrued and other liabilities 11.2 14.9
------- ------
Net cash flows of operating activities 19.4 (4.0)
------- ------
Cash flows of investing activities:
Capital expenditures (32.0) (12.3)
Proceeds from the sale of property 1.6 4.6
Other, net 0.2 (1.9)
------- ------
Net cash flows of investing activities (30.2) (9.6)
------- ------
Cash flows of financing activities:
Dividends paid (2.4) (42.6)
Net borrowings of revolving credit facility 20.0 263.0
Repayment of related party notes payable - (195.8)
Repayment of short-term debt - (2.0)
Repayment of other long-term debt (0.4) (0.4)
------- ------
Net cash flows of financing activities 17.2 22.2
------- ------
Increase in cash 6.4 8.6
Cash-beginning of period 4.2 1.9
------- ------
Cash-end of period $10.6 $10.5
======= ======
SUPPLEMENTAL INFORMATION
Income taxes paid, net of refunds $13.0 $ 9.2
======= ======
Interest paid $ 6.9 $ 8.3
======= ======
NONCASH ACTIVITIES
Issuance of Restricted Stock $ 0.8 $ 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 six months ended June 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):
June 30, December 31,
1998 1997
---- ----
Raw materials $ 20.1 $ 20.7
Work-in-progress 26.4 28.4
Finished goods 136.8 114.5
------- -------
Total $183.3 $163.6
====== ======
General Cable values only the copper component of its inventories
using the last-in/first-out (LIFO) method. At June 30, 1998 and December 31,
1997, $77.9 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 $63.5 million at June 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 -- -- 31.6 31.6
Dividends -- -- (2.4) (2.4)
Issuance of Restricted Stock -- 0.8 -- 0.8
Other -- 0.1 (0.2) (0.1)
------ ------- ------- --------
Balance, June 30, 1998 $ 0.4 $ 84.2 $ 67.7 $ 152.3
====== ======= ======= ========
</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.
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<PAGE> 8
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 June 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 $18.1 36.8 $0.49 $12.0 36.6 $0.33
===== =====
Dilutive effect of stock options - 0.9 - -
----- ---- ----- ----
Earnings per common share-
Assuming dilution $18.1 37.7 $0.48 $12.0 36.6 $0.33
===== ==== ===== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 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 $31.6 36.8 $0.86 $20.6 36.5 $0.56
===== =====
Dilutive effect of stock options - 0.8 - -
----- ---- ----- ----
Earnings per common share-
Assuming dilution $31.6 37.6 $0.84 $20.6 36.5 $0.56
===== ==== ===== ===== ==== =====
</TABLE>
(1) Numerator
(2) Denominator
5. SUBSEQUENT EVENT
On July 21, 1998 General Cable announced plans to close its Montoursville, PA
cordset assembly plant. Operations at the plant will be phased out over the next
nine to eighteen months, and will be replaced with production from a new
manufacturing facility. The company believes the costs incurred related to the
closure of the facility will not be material to its consolidated financial
statements.
8
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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 $0.78 per pound during the second quarter
and first six months of 1998, $1.14 per pound during the second quarter of 1997
and $1.13 per pound during the first six 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
second 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 JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997
General Cable continued to achieve improved results in earnings per share
in the second quarter of 1998. Fully diluted earnings per share increased 45% to
$0.48, up from $0.33 per share in the second quarter of 1997. Earnings increased
significantly as a result of substantially higher sales volume and the results
of the Company's continuing productivity improvement initiatives.
Net sales increased 5% to $306.7 million for the second quarter of 1998,
up from $292.2 million for the same period in 1997 despite a $0.36 decrease in
the average monthly COMEX price per pound of copper in the three months ended
June 30, 1998 compared to the same period in 1997. After adjusting the 1997 net
sales to reflect the $0.36 lower average price per pound of copper in the second
quarter of 1998, net sales were actually $47.8 million, or 18%, higher than the
first quarter of 1997. The increase in copper-adjusted net sales reflected a 13%
increase in the copper-adjusted net sales of Electrical products and a 28%
increase in the copper-adjusted net sales of Communications products.
The growth in Communications products resulted from substantially higher
sales of plastic insulated cable (PIC) to a broad base of Local Telephone
Exchange Carrier customers. PIC sales through key distributor customers were
also up about 35 percent. In addition, copper-adjusted net sales of data
communications products rose almost 27%, with the largest increases coming in
General Cable's high performing enhanced category cables. The sales growth in
Communication products continues to be driven by the ongoing proliferation of
personal computers, and growth in Internet use, local and wide area networks,
high-speed modems and access lines, and advanced voice, data and video
applications.
The growth in Electrical products sales in the second quarter of 1998
compared to the same period in 1997 was primarily due to increased volume of
building wire, driven by new customer wins primarily in the retail channel, and
increased volume of industrial power and control products, consumer cordsets and
automotive products.
In support of the 18% copper-adjusted top-line growth, selling, general
and administrative expenses increased 10% to $33.3 million in the second quarter
of 1998 from $30.4 million in the second quarter of 1997 primarily reflecting
higher volume - related expenses such as transportation, and higher salary and
related costs, primarily in engineering and supply chain management, to support
the Company's sales growth. During the second quarter of 1998, 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 11.7% in the second quarter of 1997, to 10.9% in the second
quarter of 1998.
10
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Operating profit increased 37% to $33.6 million in the second quarter of
1998 from $24.6 million in the second quarter of 1997. The substantial
improvement in operating profit reflects the 18% increase in copper-adjusted
sales and productivity improvement led by manufacturing cost reductions. 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
second quarter; the price premium over copper cost was down 8% versus last year.
The price premiums improved substantially in June, up 7% from April and down
only 3% versus prior year.
Net interest expense was $4.0 million in the second quarter of 1998
compared to $4.6 million in the second quarter of 1997. The reduction reflects
the impact of refinancing 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 second quarter of 1998 was 39%
compared to approximately 40% for the second quarter of 1997.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
General Cable's continued improvement in results during the first six
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
50% to $0.84, up from $0.56 per share in the first six 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 six months of 1998 of 16.7% was up 4.4 points over the same
period in the prior year.
Net sales for the six months ended June 30, 1998 increased $42.1 million,
or 8% to $585.3 million from net sales of $543.2 million for the same period in
1997 despite a $0.35 decrease in the average monthly COMEX price per pound of
copper in the six months ended June 30, 1998 compared to the same period in
1997. After adjusting the net sales for the first six months of 1997 to reflect
the $0.35 lower average monthly COMEX price per pound of copper in the first six
months of 1998, net sales were $102.5 million, or 21% higher than the first six
months of 1997. The increase in copper adjusted net sales reflects an 11%
increase in the copper-adjusted net sales of Electrical products and 39%
increase in the copper-adjusted net sales of Communications products.
The 39% 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 broad base of Local Telephone Exchange Carrier customers.
Sales growth of data communication products was primarily in high-performance,
enhanced category cables. The growth in Electrical product sales resulted from
increased volume of building wire products and to a lesser extent, increased
volume in industrial power and control products, consumer cordset products, and
products for the automotive aftermarket.
11
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Capitalizing on "The Power of One" strategy, General Cable continued to
show excellent sales growth with key customers. Copper-adjusted net sales to the
Company's top 20 customers increased 39%, nearly twice the overall
copper-adjusted growth rate, reflecting General Cable's continuing ability to
partner with customers for mutually beneficial growth in revenues and earnings.
Despite substantial top-line growth, general and administrative expenses
increased only $4.6 million, or 8% to $64.6 million in the first six months of
1998 from $60.0 million in the first six months of 1997. The increase reflected
higher transportation costs and increased salaries for additional staffing to
support sales growth. Selling, general and administrative expenses as a
percentage of copper-adjusted net sales declined from 12.5% in the first six
months of 1997, to 11.0% in the first six months of 1998 as the Company
continued to leverage its sales growth.
Operating profit increased 35% to $59.3 million in the first six months
of 1998 from $43.8 million in the first six months of 1997. The significant
improvement in operating profit reflects the 21% increase in copper-adjusted net
sales, manufacturing cost reductions, 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 is
underway at the Bonham, Texas plant for start-up during the second half of 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 $7.5 million in the first six months of 1998
compared to $9.5 million in the first six 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 six months ended June 30, 1998 was
39% compared to 40% for the six months ended June 30, 1997.
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.
Cash flow provided by operating activities in the first six months of
1998 was $19.4 million. Net income before depreciation and deferred taxes of
$41.8 million and an $11.2 million increase in accounts payable, accrued
liabilities and other long-term liabilities were partially offset by a $1.1
million increase in other assets, a $12.8 million increase in accounts
receivable and an $19.7 million increase in inventories. The increase in
accounts receivable was due to the strong growth in sales in the last two months
of the second quarter of 1998 compared to the last two months of the fourth
quarter of 1997 partially offset by lower copper cost in 1998. The increase in
inventory was due to a build of inventories in anticipation of increased
seasonal demand in the third quarter of 1998.
12
<PAGE> 13
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Cash flow used in investing activities was $30.2 million in the first six
months of 1998, principally reflecting $32.0 million of capital expenditures,
primarily focused on increased capacity and improved manufacturing productivity.
Cash flow provided by financing activities in the first six months of
1998 was $17.2 million, primarily reflecting proceeds of borrowings of $20.0
million under General Cable's revolving credit line, partially offset by $2.4
million of dividends paid during the first six 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 $250.0 million at June 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):
Fixed
Notional Interest
Period Amounts Rate
------ ------- ----
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%
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 strong financial performance in 1997, 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. An amendment to the Credit
Facility agreement dated April 17, 1998 eliminated the prior limitation of
annual dividends to an aggregate maximum of $0.20 per share outstanding as of
the immediately preceding fiscal year. However, aggregate annual dividends will
still generally be restricted to 50% of the net income in the preceding fiscal
year as stated in the original agreement.
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 will be
completed by October 1998. 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.
14
<PAGE> 15
GENERAL CABLE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
General Cable's Annual Meeting of Shareholders was held on May 19,
1998. Proxies were solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934 and each of the following matters was voted upon and
approved by the shareholders as indicated below. Of the 36,802,800 shares
outstanding, 4,780,850 were not voted.
(a) Election of Directors:
For Against
--- -------
Jeffrey Noddle 31,904,355 117,595
John E. Welsh, III 31,904,910 117,040
The following Directors are continuing in office after the date of the
Annual Meeting: Gregory B. Kenny, Robert L. Smialek, Gregory E. Lawton
and Stephen Rabinowitz.
(b) Ratification of appointment of Deloitte & Touche LLP
to audit the 1998 consolidated financial statements of General
Cable. Votes for - 31,994,418; votes against- 6,982; and
abstentions - 20,550.
(c) Approval of the General Cable Corporation 1997 Stock
Incentive Plan as amended. Votes for - 19,307,958; votes
against - 12,663,915; and abstentions - 50,077.
(d) Approval of the General Cable Corporation 1998
Annual Incentive Plan. Votes for-28,203,859; votes against -
652,603; and abstentions - 55,986.
ITEM 5. OTHER INFORMATION
The Securities and Exchange Commission has made recent changes to the
proxy rules in Regulation 14A under the Securities Exchange Act, including Rule
14a-5. General Cable is providing below certain information to shareholders
concerning the procedures that will apply to the exercise of discretionary
authority by management under proxies solicited by and granted to General Cable
for the 1999 Annual Meeting of Shareholders.
Under General Cable's Amended and Restated Bylaws, a proxy granted to
General Cable's management relating to the 1999 Annual Meeting will give
management discretionary authority to vote on any proposal properly placed
before the shareholders unless a shareholder follows the advance notice
procedure in the Bylaws. This procedure requires that written notice of the
proposal must be given to the
15
<PAGE> 16
GENERAL CABLE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION (CON'T)
Secretary of the Company at its headquarters address sixty (60) days before the
Annual Meeting. The notice must include the following: (i) the names and
business addresses of the proponent and all persons acting together in concert
with the proponent; (ii) the names and addresses of the shareholder proponent
and other persons identified in item (i) as shown on the books of General Cable;
(iii) the class and number of shares of General Cable beneficially owned by the
proponent and the persons identified in item (i); (iv) a description of the
stockholder proposal containing all material information about the proposal; and
(v) such other information as the Board of Directors reasonably determines is
necessary or appropriate to enable the Board of Directors and stockholders of
General Cable to consider the proposal. The Bylaw provision also provides that
if the officer presiding at the Annual Meeting determines that the proposal was
not made in accord with the Bylaw's procedures, the officer may disregard the
proposal at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K - None
16
<PAGE> 17
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: August 6, 1998 By: s/CHRISTOPHER F. VIRGULAK
--------------------------
Christopher F. Virgulak
Executive Vice President, Chief
Financial Officer and Treasurer
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000886035
<NAME> GENERAL CABLE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,600
<SECURITIES> 0
<RECEIVABLES> 182,700
<ALLOWANCES> 7,500
<INVENTORY> 183,300
<CURRENT-ASSETS> 400,500
<PP&E> 228,500
<DEPRECIATION> 50,500
<TOTAL-ASSETS> 624,000
<CURRENT-LIABILITIES> 149,500
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 151,900
<TOTAL-LIABILITY-AND-EQUITY> 624,000
<SALES> 585,300
<TOTAL-REVENUES> 585,300
<CGS> 461,400
<TOTAL-COSTS> 461,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> 51,800
<INCOME-TAX> 20,200
<INCOME-CONTINUING> 31,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,600
<EPS-PRIMARY> .86
<EPS-DILUTED> .84
<FN>
A three for two stock split occurred on May 14, 1998, prior
Financial Data Schedules have not been restated.
</FN>
</TABLE>
