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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Each Class Name of Each Exchange on which registered
- ------------------- ------------------------------------------
Common Stock, $.01 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of the Regulation S-K is not contained herein, and need not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
As of March 2, 1998, there were 24,536,870 shares of the Registrant's Common
Stock outstanding. The aggregate market value of Common Stock held by
non-affiliates was $1,000 million (based upon non-affiliate holdings of
24,303,759 shares and a market price of $41.13 per share).
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy Statement for the 1998 Annual Meeting of Shareholders (portions of which
are incorporated by reference in Part III hereof).
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GENERAL CABLE CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
<TABLE>
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PART I Page
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Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters 15
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 22
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 23
PART III
Item 10. Directors and Executive Officers of the Registrant 24
Item 11. Executive Compensation 25
Item 12. Security Ownership of Certain Beneficial Owners and
Management 25
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
On Form 8-K 26
Signatures 28
</TABLE>
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PART I.
ITEM 1. BUSINESS
General Cable Corporation (General Cable or The Company) 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 strength; customer selection, sales and service;
and improved operating efficiency.
General Cable is a Delaware corporation and was incorporated in April 1994. Its
principal executive offices are located at 4 Tesseneer Drive, Highland Heights,
Kentucky 41076 and its telephone number is (606) 572-8000.
General Cable and its predecessors have served the communications and electrical
markets for over 150 years. The Company's immediate predecessor (the
Predecessor) was formed in April 1992 to hold the wire and cable and heavy
equipment businesses of American Premier Underwriters, Inc. (American Premier),
then known as The Penn Central Corporation (PCC). American Premier entered the
wire and cable business in 1981, when it acquired the successor to the original
General Cable Corporation, and significantly expanded the business between 1988
and 1991 by acquiring Carol Cable Company, Inc. and other wire and cable
businesses and facilities. In July 1992, American Premier distributed 88% of the
outstanding common stock of General Cable to American Premier's stockholders and
retained the balance of General Cable's common stock. As a result, General
Cable, which owned wire and cable and heavy equipment businesses, became a
public company with its common stock traded on the Nasdaq Market. In June 1994,
a subsidiary of Wassall PLC (Wassall) acquired General Cable by private
purchases of a $169.8 million General Cable subordinated promissory note and the
General Cable common stock held by American Premier and its affiliate and a
tender offer for the publicly-held General Cable common stock (the Acquisition).
On May 20, 1997, Wassall completed a public offering of 19,435,000 shares of
General Cable common stock at a price of $21.00 per share which represented 80%
of the common stock of General Cable. On August 22, 1997, a second offering of
4,815,000 shares of common stock at a price of $31.00 per share was completed.
These shares represented all of Wassall's remaining holdings of General Cable
common stock.
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The principal markets, products, distribution channels and end-users of each of
General Cable's seven product categories are summarized below:
<TABLE>
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PRINCIPAL
PRODUCT CATEGORY PRINCIPAL MARKETS PRINCIPAL PRODUCTS DISTRIBUTION PRINCIPAL END-USERS
CHANNELS
==================================================================================================================================
<S> <C> <C> <C> <C>
COMMUNICATIONS GROUP:
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Outside Voice and Data Telecom Local Loop PIC; Outside Service Direct; Telecommunications
Wire Distributors System Operators
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Datacom Computer Networking Multi-Conductor/Multi- Distributors; Contractors; Original
And Multimedia Pair; Fiber Optic Direct Equipment Manufacturers
Applications Cable ("OEMs"); Systems
Integrators
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Industrial Building Management; Multi-Conductor; Distributors; Contractors; Consumers;
Instrumentation and Entertainment; Coaxial Cable Retailers; Direct Industrial
Control Equipment Control
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Communication Telecommunication Cable Harness Direct Communications and
Assemblies Industrial Equipment
Manufacturers
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ELECTRICAL GROUP:
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Building Wire Non-Residential and THHN; Romex(R) Distributors; Contractors; Consumers
Residential Products Retailers
Construction
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Portable Cord Industrial Power Rubber and Plastic- Distributors; Industrial; Consumers;
and Jacketed Wire and Retailers; Contractors; OEMs
Control Cable Direct
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Cordset and Power DIY; Construction; Consumer Cordsets; Retailers; Direct; Consumers; Contractors;
Assemblies Industrial Equipment OEM Cordsets; Distributors OEMs
Assemblies
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Automotive Parts Aftermarket Ignition Wire Sets; Retailers; Consumers
Booster Cables Distributors
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</TABLE>
The following table sets forth summarized financial information by product
category for the years ended December 31 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
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Net sales:
<S> <C> <C> <C>
Communications $ 415.8 $ 375.5 $ 357.1
Electrical 718.7 668.1 704.2
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$1,134.5 $1,043.6 $1,061.3
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Operating income:
Communications $ 53.0 $ 51.3 $ 27.7
Electrical 51.5 27.2 16.8
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$ 104.5 $ 78.5 $ 44.5
======== ======== ========
</TABLE>
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COMMUNICATIONS GROUP
The Communications Group manufactures and sells wire and cable products for
voice, data and video transmission applications (Outside Voice and Data
Products), multi-conductor/multi-pair cables used for computer and telephone
interconnections in telephone company central offices and customer premises
(Datacom Products) and specialty products for use in machinery and instrument
interconnection, audio, computer, security and other applications (Industrial
Instrumentation and Control Products), and cable harnesses for
telecommunications equipment manufacturers (OEM Products).
Outside Voice and Data Products
General Cable's principal Outside Voice and Data Products are plastic insulated
cable (PIC) and outside service wire. PIC is short haul trunk, feeder or
distribution cable from a telephone company central office to the subscriber
premises. It consists of multiple paired conductors (ranging from six pairs to
4,200 pairs) and various types of sheathing, water-proofing, foil wraps and
metal jacketing. Outside service wire is used to connect telephone subscriber
premises to curbside distribution cable.
General Cable sells its Outside Voice and Data Products primarily to
telecommunications system operators through its direct sales force under supply
contracts of varying lengths, and also to telecommunications distributors. In
1997, 1996 and 1995, approximately 8.5%, 10.4% and 8.9%, respectively, of the
Company's net sales were generated by sales of Outside Voice and Data and (to a
lesser extent) Datacom products to its largest customer, US West, pursuant to a
ten-year supply agreement that took effect on November 1, 1994. The agreement
does not guarantee a minimum level of sales. Product prices are subject to
periodic adjustment based upon changes in the cost of copper and other factors.
The agreement is terminable by US West prior to its scheduled expiration date if
the Company does not meet certain performance criteria.
In 1995, 1996 and 1997, sales of Outside Voice and Data Products accounted for
approximately 21%, 24% and 22%, respectively, of the Company's net sales.
Datacom Products
The Company's Datacom Products are high-bandwidth twisted pair copper and fiber
optic cable for the customer premises, local area networks, central office and
OEM telecommunications equipment markets. Customer premises products are used
for wiring at subscriber premises, and include computer, riser rated and plenum
rated wire and cable. Riser cable runs between floors and plenum cable runs in
air spaces, primarily above ceilings in non-residential structures. Local area
network cables run between computers along horizontal race ways and in backbones
between servers. Central office products interconnect components within central
office switching systems and public branch exchanges. General Cable sells
Datacom Products primarily through distributors and agents under the General
Cable(R) brand name. In 1995, 1996 and 1997, sales of Datacom Products accounted
for approximately 9%, 10% and 11%, respectively, of the Company's net sales.
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In December 1996, subsidiaries of the Company and SpecTran formed General
Photonics LLC (General Photonics), an equally-owned joint venture, for the
design, development, manufacture and marketing of communications-grade fiber
optic cable for the customer premises market in the United States, Canada and
Mexico. SpecTran is a developer, manufacturer and marketer of glass optical
fiber and specialty value-added fiber optic components and assemblies. Under the
joint venture arrangement, fiber optic cable and other products manufactured by
General Photonics are marketed primarily through General Cable's sales force
with some direct sales and customer support provided by General Photonics
personnel.
Industrial Instrumentation and Control Products
The Company's Industrial Instrumentation and Control Products include
multi-conductor, multi-pair, coaxial, hook-up, audio and microphone cables,
speaker and television lead wire, high temperature and shielded electronic wire,
and harness assemblies. Primary uses for these products are various applications
within the commercial, industrial instrumentation and control, and residential
markets. These markets require a broad range of multi-conductor products for
applications involving programmable controllers, robotics, process control and
computer integrated manufacturing, sensors and test equipment, as well as cable
for fire alarm, smoke detection, sprinkler control, entertainment and security
systems. Many industrial and commercial environments require cables with
exterior armor and/or jacketing materials that can endure exposure to chemicals,
extreme temperatures and outside elements. The Company offers products that are
specially designed for these applications.
Harness assemblies are used in communications switching systems and industrial
control applications. These assemblies are used in such products as data
processing equipment, telecommunications network switches, office machines and
industrial machinery. General Cable's Industrial Instrumentation and Control
Products are sold primarily through distributors and agents under the Carol(R)
brand name.
ELECTRICAL GROUP
The Electrical Group manufactures and sells wire and cable products (typically
for applications at 600 volts or less) for use in non-residential and
residential structures and in a wide variety of capital goods and consumer uses.
General Cable has four principal Electrical product categories: building wire,
portable cord, cordsets and OEM assemblies, and automotive products.
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Building Wire
General Cable manufactures and sells a broad line of thermosetting,
thermoplastic and elastomeric insulated wire and cable products for the
distribution of electrical power to and within non-residential and residential
structures. The Company's principal building wire products are THHN, a copper
conductor used in non-residential construction and industrial applications,
Romex(R) brand residential circuit, intermediate and feeder sized cables, and
value-added specialty cables for industrial applications.
An increasing portion of the Company's building wire sales consists of sales of
high value-added products that meet more demanding service requirements or
reduce installation costs. These products include tray cable, armored cable,
aluminum utility service cable and control cable used in the operation and
interconnection of protective and signaling devices in electrical distribution
systems. General Cable sells its building wire products primarily to electrical
distributors for resale to electrical contractors, industrial customers and
OEMs. Sales are also made through hardware and home center retail chains and
other retail stores. In 1995, 1996 and 1997, sales of Building Wire accounted
for approximately 43%, 40% and 41%, respectively, of the Company's net sales.
Portable Cord
The Company manufactures and sells a wide variety of rubber and plastic
insulated portable cord products for power and control applications serving
industrial, mining, entertainment, OEM, farming and other markets. Portable cord
products have electrical characteristics similar to building wire, but are
designed and constructed to be used in more dynamic and severe environmental
conditions where a flexible but durable power supply is required. Portable cord
products include both standard commercial cord and cord products designed to
customer specifications. Portable rubber-jacketed power cord, the Company's
largest selling cord product line, is typically manufactured without a
connection device at either end and is sold in standard and customer-specified
lengths. Portable cord is also sold to OEMs for use as power cords on their
products and in other applications, in which case the cord is made to the OEMs'
specifications. The Company also manufactures portable cord for use with
moveable heavy equipment and machinery. General Cable's portable cord products
are sold under the Carol(R) brand name, primarily through electrical
distributors and electrical retailers to industrial customers, OEMs, contractors
and consumers.
General Cable's portable cords are used in the installation of new industrial
equipment and the maintenance of existing equipment, and to supply electrical
power at temporary venues such as festivals, sporting events, concerts and
construction sites. The Company expects demand for portable cord to grow in
response to general economic activity and the development of higher
specification products for more environmentally demanding industrial
applications.
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Cordsets and OEM Assemblies
General Cable focuses primarily on high-performance, value-added cordsets,
including extension cords and multiple outlet power centers, appliance cords for
ranges and dryers, portable lights, and cordsets with surge protection and
ground fault interruption devices for use by consumers, contractors and OEMs.
Cordsets are manufactured with connection devices at one or both ends, with
standard indoor and outdoor, single or multiple outlet extension cords being the
most common example. Jackets for cordset products are typically thermoplastic.
The Company has developed many high-performance plastic and premium rubber
cordsets for use in a wide variety of demanding applications, such as outdoor
locations or rugged job sites.
OEM assemblies are used in a variety of demanding applications such as power
delivery to office modules and for such products as power hand tools, floor care
products and other appliances. The Company targets customers who require premium
cordsets or assemblies that require innovative engineering and for whom the
Company's vertical integration in high-performance wire and cable provides a
competitive cost advantage.
General Cable sells its cordsets and cable harness assemblies primarily to OEMs
and to hardware and home center retail chains, hardware distributors and mass
merchants for resale to consumers and contractors. In addition, an increasing
portion of the Company's cordset sales are to electrical distributors for resale
to retail outlets, electrical contractors, industrial companies and OEMs.
Automotive Products
General Cable's principal automotive products are ignition wire sets and booster
cables for sale to the automotive aftermarket. Booster cable sales are affected
by the severity of weather conditions and related promotional activity by
retailers. As a result, a majority of booster cable sales occur between
September and December.
General Cable sells its automotive wire and cable primarily to automotive parts
retailers and distributors, mass merchants, hardware and home center retail
chains and hardware distributors. The Company's automotive products are also
sold on a private label basis to retailers and other automotive parts
manufacturers.
Other Operations
Genca Corporation (Genca), a subsidiary of General Cable, designs, manufacturers
and sells extruders, extrusion tooling and equipment and synthetic and carbide
wire drawing dies for sale to third parties and for use by General Cable.
Genca's product line of extrusion tooling and equipment includes generic and
specialty crossheads, extrusion and mixing screws, small tools and complete
extrusion equipment systems, including components and related technical
services. These products are used principally for the manufacture of insulated
wire and cable, and the fabrication of plastic tubing and various hoses and
pipes. Genca's products are primarily sold through Genca's agents and direct
sales force to end users.
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COMPETITION
The markets for all of General Cable's products are highly competitive, and the
Company experiences competition from at least one major competitor within each
market. Due to the diversity of its product lines, however, the Company believes
that no single competitor competes with the Company across the entire spectrum
of the Company's product lines. General Cable believes that it has developed
strong customer relations as a result of its ability to supply customer needs
across a broad range of products, its commitment to quality control and
continuous improvement, its continuing investment in information technology, its
emphasis on customer service, and its substantial product and distribution
resources.
Although the primary competitive factors for General Cable's products vary
somewhat across the different product categories, the principal factors
influencing competition are generally breadth of product line, inventory
availability and delivery time, price, quality and customer service. Price is a
highly significant factor for certain lines within the Company's Electrical
product categories. Many of the Company's products are made to industry
specifications, and are therefore essentially functionally interchangeable with
those of competitors. However, the Company believes that significant
opportunities exist to differentiate all of its products on the basis of
quality, consistent availability, conformance to manufacturer's specifications
and customer service. Within the communications market, conformance to
manufacturer's specifications and technological superiority are also important
competitive factors. Brand recognition is also a primary differentiating factor
in the portable cord market and, to a lesser extent, in the Company's other
product groups.
RAW MATERIALS
The principal raw material used by General Cable in the manufacture of its wire
and cable products is copper. General Cable purchases copper in either cathode,
rod or wire form from a number of major domestic and foreign producers,
generally through annual supply contracts. In 1997, the Company produced
approximately 31% of the copper rod used in its manufacturing operations at its
cast copper rod mill, which uses both cathode and recycled copper. Copper is
available from many sources, and General Cable believes that it is not dependent
on any single supplier of copper. In 1997, the Company's largest supplier of
copper accounted for approximately 26% of the Company's copper purchases.
General Cable has centralized its copper purchasing to capitalize on economies
of scale and to facilitate the negotiation of favorable purchase terms from
suppliers. The cost of copper has been subject to considerable volatility over
the past several years. However, as a result of a number of practices intended
to match copper purchases with sales, the Company's profitability has generally
not been significantly affected by changes in copper prices. The Company does
not engage in speculative metals trading or other speculative activities, nor
does it engage in activities to hedge the underlying value of its copper
inventory.
Other raw materials utilized by the Company include nylon, PVC resin and
compounds, polyethylene and plasticizers, fluoropolymer compounds, a variety of
filling, binding and sheathing materials, and aluminum wire. The Company
believes that all of these materials are available in sufficient quantities
through purchases in the open market.
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PATENTS AND TRADEMARKS
General Cable believes that the success of its business depends more on the
technical competence, creativity and marketing abilities of its employees than
on any individual patent, trademark or copyright. Nevertheless, General Cable
has a policy of seeking patents when appropriate on inventions concerning new
products and product improvements as part of its ongoing research, development
and manufacturing activities.
General Cable owns 35 U.S. patents, which expire in 1999 through 2017, and has
six patent applications pending in the U.S. In addition, the Company owns 25
foreign patents, which expire in 1998 through 2015. The Company also owns 82
registered trademarks and 37 trademarks for which application for registration
is pending.
Although in the aggregate these patents and trademarks are of considerable
importance to the manufacturing and marketing of many of the Company's products,
the Company does not consider any single patent or trademark or group of patents
or trademarks to be material to its business as a whole. While General Cable
occasionally obtains patent licenses from third parties, none are deemed to be
significant. Trademarks which are considered to be important are Carol(R),
Genca(R), General Cable(R), Romex(R), Vutron(R) and DreamLan(TM), and the
General Cable triangle symbol. General Cable believes that the Company's
products bearing these trademarks have achieved significant brand recognition
within the industry.
General Cable also relies on trade secret protection for its confidential and
proprietary information. General Cable routinely enters into confidentiality
agreements with its employees. There can be no assurance, however, that others
will not independently obtain similar information and techniques or otherwise
gain access to the Company's trade secrets or that the Company will be able to
effectively protect its trade secrets.
ENVIRONMENTAL MATTERS
The Company is subject to numerous federal, state, local and foreign laws and
regulations relating to the storage, handling, emission and discharge of
materials into the environment, including CERCLA, the Clean Water Act, the Clean
Air Act (including the 1990 amendments) and the Resource Conversation and
Recovery Act.
Subsidiaries of the Company have been identified as potentially responsible
parties (PRPs) with respect to several sites designated for cleanup under CERCLA
or similar state laws, which impose liability for cleanup of certain waste sites
and for related natural resource damages without regard to fault or the legality
of waste generation or disposal. Persons liable for such costs and damages
generally include the site owner or operator and persons that disposed or
arranged for the disposal of hazardous substances found at those sites. Although
CERCLA imposes joint and several liability on all PRPs, in application, the PRPs
typically allocate the investigation and cleanup costs based, among other
things, upon the volume of waste contributed by each PRP. Settlements can often
be achieved through negotiations with the appropriate environmental agency
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or the other PRPs. PRPs that contributed small amounts of waste (typically less
than 1% of the waste) are often given the opportunity to settle as "de minimis"
parties, resolving their liability for a particular site. The Company does not
own or operate any of the waste sites with respect to which it has been named as
a PRP by the government. Based on its review and other factors, the Company
believes that costs to the Company relating to environmental clean-up at these
sites will not have a material adverse effect on its results of operations, cash
flows or financial position.
American Premier, in connection with the Acquisition, agreed to indemnify
General Cable against liabilities (including all environmental liabilities)
arising out of General Cable's or its predecessors' ownership or operation of
the Indiana Steel & Wire Company and Marathon Manufacturing Holdings, Inc.
businesses (which were divested), without limitation as to time or amount.
American Premier also agreed to indemnify General Cable against 66 2/3% of all
other environmental liabilities arising out of General Cable's or its
predecessors' ownership or operation of other properties and assets in excess of
$10 million but not in excess of $33 million which are identified during the
seven year period ending June 2001. General Cable also has claims against third
parties with respect to some of these liabilities. While it is difficult to
estimate future environmental liabilities accurately, the Company does not
currently anticipate any material adverse effect on its results of operations,
financial condition or cash flows as a result of compliance with federal, state,
local or foreign environmental laws or regulations or cleanup costs of the sites
discussed above.
EMPLOYEES
At December 31, 1997, approximately 4,400 persons were employed by General
Cable, and collective bargaining agreements covered approximately 2,600
employees at 14 locations. During the last five years, the Company has
experienced two strikes affecting a total of three facilities; both were settled
on satisfactory terms. Union contracts will expire at six facilities in 1998 and
two facilities in 1999. The Company believes that its relationships with
employees are good.
ITEM 2. PROPERTIES
General Cable operates 17 manufacturing facilities in the U.S. The Company owns
14 of the facilities, which encompass approximately 3.6 million square feet. The
remaining three facilities, totaling approximately 216,000 square feet, are
leased under agreements with expiration dates ranging from 1998 to 2000. In
addition, General Cable operates two manufacturing facilities outside the U.S.,
totaling approximately 51,000 square feet. General Cable also leases four
regional distribution centers, totaling approximately 917,000 square feet,
located in Anaheim, CA; Dallas, TX; Vineland, NJ and Atlanta, GA, and a 64,000
square foot warehouse in Des Plaines, Illinois. These leases expire in 2001 and
2002. One additional regional distribution center is managed by a company agent
in Chicago, IL.
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General Cable's principal properties are listed below. The Company believes that
its properties are generally well maintained and are adequate for the Company's
current level of operations.
<TABLE>
<CAPTION>
SQUARE USE/PRODUCT OWNED
LOCATION FEET LINE(S) OR LEASED
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<S> <C> <C> <C>
MANUFACTURING FACILITIES
Manchester, NH 533,000 Electronic and Datacom Products Owned
Plano, TX 404,000 Electrical Products and Rod Mill Owned
Lincoln, RI 398,000 Electrical Products and Automotive Owned
Bonham, TX 360,000 Outside Voice and Data Products Owned
Montoursville, PA 318,000 Cordsets and Electrical Products Owned
Monticello, IL 250,000 Outside Voice and Data Products Owned
Kingman, AZ 243,000 Electrical Products Owned
Watkinsville, GA 224,000 Electrical Products Owned
Altoona, PA 195,000 Automotive Products Owned
Lawrenceburg, KY 190,000 Outside Voice and Data Products and
Datacom Products Owned
Williamstown, MA 167,000 Electrical Products and Cordsets Owned
Taunton, MA 138,000 Wire Fabricating Leased
Sanger, CA 105,000 Datacom Products Owned
Cass City, MI 100,000 Datacom Products Owned
Clearwater, FL 72,000 Extrusion Systems and Tooling Owned
Kenly, NC 50,000 Electrical OEM Products Leased
Ft. Wayne, IN 28,000 Wire Drawing Dies Leased
Piedras Negras, Mexico 40,000 Communications Assemblies Leased
Wellingborough, UK 11,000 Automotive and Electrical OEM Products Leased
DISTRIBUTION AND OTHER FACILITIES:
Atlanta, GA 328,000 Distribution Center Leased
Dallas, TX 200,000 Distribution Center Leased
Vineland, NJ 200,000 Distribution Center Leased
Anaheim, CA 189,000 Distribution Center Leased
Highland Heights, KY 166,000 Corporate Headquarters and Laboratory Owned
Des Plaines, IL 64,000 Warehouse Leased
Toronto, Ontario Canada 24,000 Sales Office and Warehouse Leased
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS
General Cable is subject to numerous federal, state, local and foreign laws and
regulations relating to the storage, handling, emission and discharge of
materials into the environment, including CERCLA, the Clean Water Act, the Clean
Air Act (including the 1990 amendments) and the Resource Conservation and
Recovery Act.
Subsidiaries of General Cable have been identified as PRPs with respect to
several sites designated for cleanup under CERCLA or similar state laws, which
impose liability for cleanup of certain waste sites and for related natural
resource damages without regard to fault or the legality of waste generation or
disposal. General Cable does not own or operate any of the waste sites with
respect to which it has been named as a PRP by the government. Based on its
review and other factors, management believes that costs to the Company relating
to environmental clean-up at these sites will not have a material adverse effect
on its results of operations, cash flows or financial position.
American Premier, in connection with the Acquisition, agreed to indemnify
General Cable against liabilities (including all environmental liabilities)
arising out of General Cable's or its predecessors' ownership or operation of
the Indiana Steel & Wire Company and Marathon Manufacturing Holdings, Inc.
businesses (which were divested by the Predecessor prior to the Acquisition),
without limitation as to time or amount. American Premier also agreed to
indemnify General Cable against 66 2/3% of all other environmental liabilities
arising out of General Cable's or its predecessors' ownership or operation of
other properties and assets in excess of $10 million but not in excess of $33
million which are identified during the seven year period ending June 2001.
General Cable also has claims against third parties with respect to some of
these liabilities. While it is difficult to estimate future environmental
liabilities accurately, the Company does not currently anticipate any material
adverse effect on its results of operations, financial condition or cash flows
as a result of compliance with federal, state, local or foreign environmental
laws or regulations or cleanup costs of the sites discussed above.
There are approximately 4,792 pending non-maritime asbestos cases involving
subsidiaries of General Cable. The overwhelming majority of these cases involve
employees in shipyards alleging exposure to asbestos-contaminated shipboard
cable manufactured by General Cable's predecessors. In addition to the Company's
subsidiaries, numerous other wire and cable manufacturers have been named as
defendants. Most cases previously filed have been dismissed with prejudice and
without imposition of liability against General Cable. In some instances,
individual cases have settled on a nominal basis. In addition, subsidiaries of
the Company have been named, together with numerous other wire and cable
manufacturers, as defendants in approximately 18,500 suits brought by plaintiffs
alleging asbestos-related injury from the maritime industry (MARDOC cases),
under the supervision of the U.S. District Court for the District of Easter
Pennsylvania (the District Court). On May 1, 1996 the District Court ordered
that 9,373 of such MARDOC cases be dismissed without prejudice for failure to
plead sufficient facts. Pursuant to that order of dismissal, plaintiffs'
attorney was permitted to bring future MARDOC cases only if the cases were
brought in admiralty under the Merchant Marine Act of 1920 (commonly known as
the Jones Act) and if counsel paid a filing fee for each new complaint and
pleaded sufficient facts showing an asbestos-related injury as well as product
identification specific as to each defendant. Based upon its experience to date,
the Company does not believe that the outcome of the pending non-maritime and
MARDOC asbestos cases will have a material adverse effect on its results of
operations, cash flows or financial position.
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In January 1994, General Cable entered into a settlement agreement with certain
principal primary insurers concerning liability for the costs of defense,
judgments and settlements, if any, in all of the asbestos litigation described
above. Subject to the terms and conditions of the settlement agreement, the
insurers are responsible for a substantial portion of the costs and expenses
incurred in the defense or resolution of such litigation. Accordingly, based on
(i) the terms of the insurance settlement agreement; (ii) the relative costs and
expenses incurred in the disposition of past asbestos cases; (iii) reserves
established on the books of the Company which are believed to be reasonable; and
(iv) defenses available to the Company in the litigation, the Company believes
that the resolution of the present asbestos litigation will not have a material
adverse effect on its results of operations, cash flows or financial position.
Liabilities incurred in connection with asbestos litigation are not covered by
the American Premier indemnification.
On May 13, 1997, the Company notified the U.S. Consumer Product Safety
Commission (CPSC) under Section 15(b) of the Consumer Product Safety Act that it
had initiated a product recall of certain outdoor power center units
manufactured at one of its facilities between April 7, 1997 and May 5, 1997
because of potential problems with the electrical insulation for such units. The
Company filed certain follow-up reports with the CPSC as required by applicable
regulations and filed a final report terminating administrative reporting as of
September 30, 1997. As of that date, the Company had recovered or located the
substantial majority of the units and was not aware of any claim or incident of
personal injury or property damage involving the units. However, there can be no
assurance that there will be no such claims or incidents.
General Cable is also involved in various routine legal proceedings and
administrative actions. In the opinion of the Company's management, such
proceedings and actions should not, individually or in the aggregate, have a
material adverse effect on its results of operations, cash flows or financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 1997.
PART II.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
Report, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations", are,
or may be considered, forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Important factors that could cause actual results to differ materially
from those discussed in such forward-looking statements (Cautionary 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
14
<PAGE> 15
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 on behalf of the Company are
expressly qualified in their entirety by such Cautionary Statements.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
General Cable's common stock, $0.01 par value (Common Stock), commenced trading
on the New York Stock Exchange (NYSE) on May 16, 1997, under the symbol "GCN".
The following table sets forth the high and low daily sales prices for the
Common Stock as reported on the NYSE for the period from May 16, 1997, when the
Common Stock was first traded, to December 31, 1997:
<TABLE>
<CAPTION>
Stock Price
------------------
High Low
---- ---
<S> <C> <C>
Second Quarter (commencing May 16) $26 1/4 $20 3/4
Third Quarter $36 1/4 $25 3/8
Fourth Quarter $39 1/8 $31 15/16
</TABLE>
General Cable paid a $0.05 per share dividend in the fourth quarter of 1997 and
intends to pays a $0.05 quarterly dividend in the future. The payment of
dividends is subject to the discretion of the Board of Directors and the
requirements of Delaware law and will depend upon general business conditions,
the financial performance of the Company and other factors the Board of
Directors may deem relevant. The Credit Facility contains certain provisions
that restrict the ability of the Company to pay dividends or to repurchase its
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth in the following table for the years ended
December 31, 1997, 1996, 1995 and the period June 9, 1994 to December 31, 1994
were derived from audited consolidated financial statements after the
Acquisition. The selected financial data set forth in the following table for
the periods including January 1, 1994 to June 8, 1994 and the year ended
December 31, 1993 were derived from the audited consolidated financial
statements of the Predecessor. As a result of the Acquisition, which was
accounted for as a purchase, the Company's results of operations, cash flows and
financial position for the periods after June 8, 1994 are not comparable to
prior periods.
The pro forma statement of operations data give pro forma effect to the
refinancing of the Company's debt under a new Credit Facility as if it had
occurred on January 1, 1996. The pro forma financial adjustments are based upon
available information and certain assumptions that the Company believes are
reasonable. Such pro forma data are for informational purposes only and may not
be indicative of the results of operations of the Company had the debt
refinancing actually occurred on such date.
15
<PAGE> 16
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the consolidated financial statements of the Company and related
notes thereto (in millions, except per share data). Certain reclassifications
have been made to conform to current years presentation.
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
------------------------------------------------------ -------------------------
JUNE 9 JANUARY 1
YEAR ENDED DECEMBER 31, TO DECEMBER 31, TO JUNE 8,
1997 1996 1995 1994 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $1,134.5 $1,043.6 $1,061.3 $ 543.3 $355.0 $794.2
Gross profit 225.4 188.3 138.7 73.4 44.2 97.7
Operating income 104.5 78.5 44.5 20.3 1.1 2.3
Interest expense, net (17.3) (19.6) (20.7) (11.0) (12.1) (29.0)
Earnings(loss) before income taxes 87.2 58.9 23.8 9.3 (11.0) (26.3)
Loss from discontinued operations(1) -- -- -- -- -- (31.3)
Income tax benefit (provision) (34.0) (19.7) 1.5(2) (6.5) 0.1 -
Net income (loss) 53.2 39.2 25.3 2.8 (10.9) (57.6)
Earnings per common share (3) $ 2.18 $ 1.62 $ 1.04 $ 0.12
Earnings per common share -
assuming dilution(3) $ 2.16 $ 1.62 $ 1.04 $0.12
Weighted average shares outstanding (3) 24.4 24.3 24.3 24.3
Weighted average shares outstanding -
assuming dilution(3) 24.6 24.3 24.3 24.3
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net income $54.6 $42.5
Earnings per common share (3) $2.24 $1.75
Earnings per common share-
assuming dilution (3) $2.22 $1.75
OTHER DATA:
Average daily COMEX price per pound of
copper cathode $1.04 $ 1.06 $ 1.35 $ 1.20 $ 0.91(4) $ 0.85
Capital expenditures $42.6 $ 30.0 $ 26.2 $ 9.1 $ 6.2 $ 11.7
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
------------------------------------------------------ -----------------------
BALANCE SHEET DATA: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working Capital $225.9 $ 205.6 $ 234.4 $ 224.8 $ 227.7
Net assets of discontinued operations(1) - - - - 48.4
Total assets 563.7 513.6 535.6 518.7 620.4
Long-term debt 238.5 205.1 205.9 206.5 293.4
Dividends to shareholders 43.8 55.1 - - -
Shareholders' equity 122.4 107.4 122.9 97.6 139.9
<FN>
- -----------------------------
Footnotes
(1) Represents the Predecessor's loss from operations and loss on the sale of
the assets of its Marathon LeTourneau Company heavy equipment
manufacturing subsidiary. The net assets sold are reflected as net assets
of discontinued operations.
(2) At December 31, 1995, the Company recognized the full value of its net
deferred tax assets; accordingly, goodwill recorded in the Acquisition
was eliminated and the Company recognized a tax benefit of $1.7 million.
(3) Earnings per share was computed based on the weighted average common
shares outstanding for each period, adjusted for a 121,250-for-1 stock
split. Earnings per common share - assuming dilution were computed after
giving effect to the dilutive effect of stock options.
(4) The average daily COMEX price per pound for the full year 1994 was $1.07.
</TABLE>
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
General Cable's reported net sales are directly influenced by the price of
copper. The price of copper has been subject to considerable volatility, with
the daily selling price of copper cathode on the COMEX averaging $1.04 per pound
in 1997, $1.06 per pound in 1996, and $1.35 per pound in 1995. However, as a
result of a number of practices intended to match copper purchases with sales,
General Cable's profitability has generally not been significantly affected by
changes in 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, nor does it engage in activities
to hedge the underlying value of its copper inventory.
General Cable generally experiences certain seasonal trends in sales and cash
flow. Relatively significant 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 months, when construction activity
increases. In general, receivables related to higher sales activity during the
spring and summer months are collected during the third and fourth quarters of
the year.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, statement of income
data in millions of dollars and as a percentage of net sales.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996(1) 1995(1)
---------------------- ---------------------------- --------------------
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,134.5 100.0% $1,043.6 100.0% $1,061.3 100.0%
Cost of sales 909.1 80.1 855.3 82.0 922.6 86.9
------- ------ ------- ------ ------- ------
Gross profit 225.4 19.9 188.3 18.0 138.7 13.1
Selling, general and
administrative expenses 120.9 10.7 109.8 10.5 94.2 8.9
----- ------ ----- ------ -------- ------
Operating income 104.5 9.2 78.5 7.5 44.5 4.2
Interest expense, net (17.3) (1.5) (19.6) (1.9) (20.7) (2.0)
----- ------- ----- ------ -------- ------
Earnings before income taxes 87.2 7.7 58.9 5.6 23.8 2.2
Income tax benefit (provision) (34.0) (3.0) (19.7) (1.9) 1.5 0.1
----- ------- ----- ------ --------- ------
Net income $53.2 4.7% $ 39.2 3.8% $ 25.3 2.4%
===== ======= ====== ====== ======= ======
</TABLE>
(1) Percentages do not add due to rounding.
17
<PAGE> 18
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net sales for 1997 increased $90.9 million, or 9%, to $1,134.5 million from 1996
net sales of $1,043.6 million. The increase reflects an increase of $40.3
million, or 11%, in the net sales of the Communications Group and an increase of
$50.6 million, or 8%, in the net sales of the Electrical Group. Such amounts
reflect a $0.02 decrease in the average monthly COMEX price per pound of copper
in 1997 compared to 1996, which did not materially affect reported net sales.
The increase in Communications Group net sales was primarily attributable to
higher sales volume of datacom products, partially offset by lower selling
prices of certain high speed data cables in 1997. The growth in Electrical Group
net sales was primarily due to more favorable building wire pricing and
increased sales volume of building wire, portable cord and OEM cordsets products
in 1997 compared to 1996.
Sales to General Cable's top 20 customers for 1997 were approximately 53% of
total sales, and increased at the rate of 22% from 1996, when they were 47% of
total sales. The increase resulted from further development of supply
relationships with preferred customers who have a favorable combination of
industry position, product mix, procurement practices and volume.
Gross profit increased $37.1 million, or 20%, to $225.4 million in 1997 from
$188.3 million in 1996. General Cable's gross profit percentage was 19.9% in
1997 compared to 18.0% in 1996. On a copper-adjusted basis (to 1997), General
Cable's gross profit percentage was 18.2% in 1996. The improvement in 1997 was
primarily attributable to manufacturing cost reductions combined with favorable
building wire pricing, partially offset by a decrease in pricing for certain
high speed data cables.
The reduction in manufacturing costs in 1997 compared to 1996 primarily
reflected (i) the carryover effects of production facilities rationalized in
1996; (ii) improvement in capacity utilization, including the conversion of
certain facilities from five day to seven day per week continuous production
schedules; (iii) product redesigns to reduce material costs; and (iv) capital
investment and other improvements in manufacturing processes to improve
materials usage, reduce waste, reduce labor and increase throughput.
Selling, general and administrative expenses increased $11.1 million, or 10%, to
$120.9 million in 1997 from $109.8 million in 1996. The increase primarily
reflected higher sales volume related expenses, such as transportation and
commissions and higher advertising costs, as well as increased salaries for
additional staffing to support sales growth and productivity improvement.
Selling, general and administrative expenses as a percentage of sales were 10.7%
in 1997, compared to 10.5% in 1996 and 10.6% in 1996 on a copper adjusted basis.
Net interest expense was $17.3 million in 1997 compared to $19.6 million in
1996. The reduction reflects the repayment of an $8.0 million related party note
during 1996, and the impact of refinancing the remaining related party debt in
May 1997 under a new credit facility at a lower effective interest rate.
The effective income tax rate for 1997 was 39% compared to 33% for 1996. The
lower 1996 effective tax rate reflected the impact of certain tax return
reconciliation adjustments.
18
<PAGE> 19
PRO FORMA RESULTS
The following pro forma results give effect to the refinancing of related party
debt as if it had occurred as of the beginning of the periods presented. The pro
forma financial data are for informational purposes only and may not necessarily
be indicative of the results of operations had the refinancing actually occurred
on such date.
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------
1997 1996
<S> <C> <C>
Pro forma net income (in millions) $54.6 $42.5
===== =====
Pro forma earnings per common share $2.24 $1.75
===== =====
Pro forma earnings per common share-
assuming dilution $2.22 $1.75
===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net sales for 1996 decreased $17.7 million, or 2%, to $1,043.6 million in 1996
from 1995 net sales of $1,061.3 million. The decrease reflects a decrease of
$36.1 million, or 5%, in the net sales of the Electrical Group, partially offset
by an increase of $18.4 million, or 5%, in the net sales of the Communications
Group. Such amounts reflect a $0.29 decrease in the weighted average monthly
COMEX price per pound of copper in 1996, partially offset by increased volume
and other factors as discussed in the following paragraph.
After adjusting 1995 net sales to reflect the $0.29 lower weighted average
monthly COMEX price per pound of copper sold by the Company in 1996, net sales
for 1996 represented an $80.6 million, or 8%, increase over 1995. The increase
in copper-adjusted net sales reflected a 13% increase in the net sales of the
Communications Group and a 6% increase in the net sales of the Electrical Group.
The growth in Communications Group sales was primarily due to increased volume
of sales of plastic insulated cable (PIC) to RBOCs and increased demand for
high-bandwidth twisted pair data cables. The growth in Electrical Group sales
reflected a 5% increase in copper-adjusted net sales of building wire primarily
due to more favorable pricing as market conditions improved in the second half
of 1996, and a 10% increase in copper-adjusted net sales of portable cord
principally due to increased volume.
Gross profit increased $49.6 million, or 36%, to $188.3 million in 1996 from
$138.7 million in 1995. General Cable's gross margin increased to 18.0% in 1996
from 13.1% in 1995. On a copper-adjusted basis (to 1996), the Company's gross
margin was 14.4% in 1995. The improvement in 1996 was primarily attributable to
manufacturing cost reductions and the increases in selling prices and sales
volumes discussed above.
The reduction in manufacturing costs in 1996 reflected (i) continued
rationalization of production facilities through the closing of two plants; (ii)
improvement of capacity utilization at remaining facilities, including the
conversion of four facilities from five day to seven day per week continuous
production schedules; (iii) improved production efficiencies resulting from
higher production levels; (iv) raw material cost reductions reflecting decreased
prices for resins and other non-copper raw materials and product redesigns to
lower material costs; and (v) capital investment and other improvements in
manufacturing processes to improve materials usage, reduce waste, reduce labor
and increase throughput.
19
<PAGE> 20
Selling, general and administrative expenses increased $15.6 million, or 17%, to
$109.8 million in 1996 from $94.2 million in 1995. Selling, general and
administrative expenses as a percentage of sales were 11% in 1996, compared to
10% of copper-adjusted (to 1996) sales in 1995. The increase primarily reflected
higher sales volume-related expenses such as transportation and higher salary
and related expenses attributable to increases in staff to support the expansion
of the Company's direct sales force and marketing function, the restructuring of
its distribution processes and new product development efforts. In addition,
expenses in 1996 included increases in incentive compensation and advertising
expenses.
The Company incurred net interest expense of $19.6 million in 1996 compared to
$20.7 million in 1995. The reduction in 1996 expense reflects the repayment of
an $8.0 million related party note.
The provision for income taxes was $19.7 million in 1996 compared to a benefit
of $1.5 million in 1995. Prior to 1995, General Cable recorded a full valuation
allowance against its net deferred tax asset because of uncertainties as to the
amount of taxable income that would be generated in future years. In 1995, the
Company determined that it was more likely than not that future taxable income
would be sufficient to enable General Cable to realize all of its deferred tax
assets. In accordance with the provisions of SFAS No. 109, "Accounting for
Income Taxes", the reversal of the valuation allowance resulted in a $63.0
million reduction of goodwill and a deferred tax benefit of $1.7 million in
1995.
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 and
initiated the program to achieve Year 2000 compliance. The Company believes that
these costs will not be material to General Cable and they will be expensed as
incurred during 1998 and 1999.
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. Based upon historical
experience and the expected availability of funds under the Credit Facility, the
Company expects that its sources of liquidity will be sufficient to enable it to
meet its cash requirements for working capital, capital expenditures, debt
repayment, interest and taxes in 1998.
Cash flow provided by operating activities in 1997 was $54.1 million. This
principally reflected net income before depreciation and deferred taxes of $72.5
million and an $11.3 million increase in accounts payable, accrued liabilities
and other long-term liabilities, partially offset by a $26.9 million increase in
accounts receivable and a $2.6 million increase in inventories. The increase in
accounts receivable was due to the 18% growth in net sales in the fourth quarter
of 1997 compared to the same period in 1996. The increase in inventory was due
to the sales growth, substantially offset by an improvement in inventory
turnover.
20
<PAGE> 21
Cash flow used in investing activities was $39.4 million in 1997, principally
reflecting $42.6 million of capital expenditures. Also included in cash flow
from investing activities was $5.2 million from the sale of excess real property
in 1997.
General Cable expended $42.6 million, $30.0 million and $26.2 million for
capital projects during 1997, 1996 and 1995, respectively. Capital expenditures
in 1997 consisted of projects to increase manufacturing productivity and to
selectively add production capacity. Capital expenditures in 1996 consisted of
projects to reduce product costs, increase capacity and modernize machinery and
equipment.
Cash flow used in financing activities in 1997 was $12.4 million, primarily
reflecting the repayment of intercompany and other debt and the payment of
dividends totaling $43.8 million, of which $42.6 million was paid to Wassall in
conjunction with the initial public offering of the Company in May 1997,
partially offset by proceeds of borrowings under General Cable's Credit
Facility. The initial borrowing of $268.0 million in May 1997 was reduced to
$230.0 million at December 31, 1997.
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 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.
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
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>
21
<PAGE> 22
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.
The Credit Facility restricts certain corporate acts and contains required
minimum financial ratios and other covenants. At December 31, 1997 the maximum
dividend allowable under the most restrictive debt covenant was $0.20 per share
per year.
ENVIRONMENTAL AND ASBESTOS-RELATED LITIGATION MATTERS
General Cable's expenditures for environmental compliance and remediation
amounted to approximately $1.2 million, $1.0 million and $2.0 million in 1997,
1996 and 1995, respectively. In addition, subsidiaries of the Company have been
named as PRPs in certain proceedings that involve environmental remediation.
General Cable had accrued $6.1 million at December 31, 1997 for all
environmental liabilities. In connection with Wassall PLC's acquisition of
General Cable from American Premier Underwriters, American Premier has agreed to
indemnify General Cable against certain environmental liabilities arising out of
General Cable's or its predecessors' ownership or operation of properties and
assets. While it is difficult to estimate future environmental liabilities,
General Cable does not currently anticipate any material adverse effect on its
results of operations, cash flows or financial position as a result of
compliance with federal, state, local or foreign environmental laws or
regulations or remediation costs.
General Cable's expenditures for asbestos litigation amounted to approximately
$0.1 million, $0.6 million and $0.5 million in 1997, 1996 and 1995, respectively
(before reimbursement of a substantial portion thereof under the settlement
agreement), all of which were for defense costs. General Cable had accrued
approximately $2.2 million for this litigation at December 31, 1997. General
Cable has entered into a settlement agreement with certain principal primary
insurers concerning liability for the costs of defense, judgments and
settlements, if any, in the asbestos litigation. Subject to the terms and
conditions of the settlement agreement, the insurers are responsible for a
substantial portion of the costs and expenses incurred in the defense or
resolution of such litigation. The Company does not believe that the outcome of
the litigation will have a material adverse effect on its results of operations,
cash flows or financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
22
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Independent Auditors' Report F-1
Consolidated Statements of Income For the Years Ended
December 31, 1997, 1996 and 1995 F-2
Consolidated Balance Sheets at December 31, 1997 and 1996 F-3
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1997, 1996 and 1995 F-4
Notes to Consolidated Financial Statements F-5
"Selected Quarterly Financial Data" has been included in Note 19 to the
Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
23
<PAGE> 24
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the persons who
served as executive officers of General Cable on March 2, 1998. All of the
executive officers were elected to their current offices in March 1997.
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS AFFILIATIONS
-------------------------------
NAME, AGE AND TITLE DURING PAST FIVE YEARS
------------------- ----------------------
<S> <C>
Gregory B. Kenny, 45 Mr. Kenny has served as Executive Vice President and
Executive Vice President and Chief Chief Operating Officer of General Cable since March
Operating Officer 1997. From June 1994 to March 1997, he was Executive
Vice President of the subsidiary of General Cable which
was General Cable's immediate predecessor. From April
1992 until June 1994, he served as Senior Vice President
of the predecessor company.
Stephen Rabinowitz, 54 Mr. Rabinowitz has served as Chairman, President and
Chairman, President and Chief Executive Officer Chief Executive Officer of General Cable since March
1997. From September 1994 until March 1997, he was
President and Chief Executive Officer of the predecessor
company. From March 1992 until August 1994, Mr.
Rabinowitz served as President and Group Executive for
AlliedSignal Friction Materials and President of
AlliedSignal Braking Systems Business. Mr. Rabinowitz is
also a director of JLG Industries, Inc.
Robert J. Siverd, 49 Mr. Siverd has served as Executive Vice President,
Executive Vice President, General Counsel and Secretary General Counsel and Secretary of General Cable since
March 1997. From July 1994 until March 1997, he was
Executive Vice President, General Counsel and Secretary
of the predecessor company. From April 1992 until July
1994, he was Senior Vice President, General Counsel and
Secretary of the predecessor company.
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C>
Christopher F. Virgulak, 42 Mr. Virgulak has served as Executive Vice President,
Executive Vice President, Chief Financial Officer and Chief Financial Officer and Treasurer of General Cable
Treasurer since March 1997. From October 1994 until March 1997,
he was Executive Vice President, Chief Financial Officer
and Treasurer of the predecessor company. From January
1993 until October 1994, he was Chief Financial Officer
of Wassall USA, Inc. From November 1990 until September
1992, he was Chief Financial Officer of Carol Cable
Company, Inc.
</TABLE>
Except as set forth above, the information required in this Part (Item 10.
Directors and Executive Officers of the Registrant), as well as the information
called for by Item 11. Executive Compensation, Item 12. Security Ownership of
Certain Beneficial Owners and Management; and Item 13. Certain Relationships and
Related Transactions, is incorporated by reference to the definitive Proxy
Statement which General Cable intends to file with the Securities and Exchange
Commission within 120 days after December 31, 1997.
25
<PAGE> 26
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of the Form 10-K:
1. Financial Statements are included in Part II, Item 8.
2. Financial Statement Schedules filed herewith for 1997, 1996 and
1995:
II. Valuation and Qualifying Accounts S-1
All other schedules for which provisions are made in the
applicable regulation of the Securities and Exchange
Commission have been omitted as they are not applicable, not
required, or the required information is included in the
consolidated financial statements or notes thereto.
3. Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 333-22961) of the Company filed
with the Securities and Exchange Commission on March 7, 1997, as
amended (the "Initial S-1").
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit 3.2 to the Initial S-1).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Initial S-1).
10.1 Credit Agreement between the Company, Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory thereto (
incorporated by reference to Exhibit 10.2 to the Initial S-1).
10.2 General Cable Corporation 1998 Annual Incentive Plan.
10.3 General Cable Corporation 1997 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to the Initial S-1).
10.4 General Cable Corporation 1997 Stock Incentive Plan, as amended.
10.5 Employment Agreement dated May 13, 1997, between Stephen
Rabinowitz and the Company (incorporated by reference to Exhibit
10.5 to the Initial S-1).
10.6 Amendment dated March 16, 1998 to Employment Agreement dated May
13, 1997, between Stephen Rabinowitz and the Company.
10.7 Employment Agreement dated May 13, 1997, between Gregory B.
Kenny and the Company (incorporated by reference to Exhibit 10.6
to the Initial S-1).
10.8 Amendment dated March 16, 1998 to Employment Agreement dated May
13, 1997, between Gregory B. Kenny and the Company.
10.9 Employment Agreement dated May 13, 1997, between Christopher F.
Virgulak and the Company (incorporated by reference to Exhibit
10.7 to the Initial S-1).
10.10 Employment Agreement dated May 13, 1997, between Robert J.
Siverd and the Company (incorporated by reference to Exhibit
10.8 to the Initial S-1).
26
<PAGE> 27
10.11 Change-in-Control Agreement dated May 13, 1997, between Stephen
Rabinowitz and the Company (incorporated by reference to Exhibit
10.9 to the Initial S-1).
10.12 Change-in-Control Agreement dated May 13, 1997, between Gregory
B. Kenny and the Company (incorporated by reference to Exhibit
10.10 to the Initial S-1).
10.13 Change-in-Control Agreement dated May 13, 1997, between
Christopher F. Virgulak and the Company (incorporated by
reference to Exhibit 10.11 to the Initial S-1).
10.14 Change-in-Control Agreement dated May 13, 1997, between Robert
J. Siverd and the Company (incorporated by reference to Exhibit
10.12 to the Initial S-1).
10.15 Form of Intercompany Agreement among Wassall PLC, Netherlands
Cable B.V. and the Company (incorporated by reference to Exhibit
10.14 to the Initial S-1).
10.16 Stock Purchase Agreement dated May 13, 1997, among Wassall PLC,
General Cable Industries Inc. and the Company (incorporated by
reference to Exhibit 10.15 to the Initial S-1).
21.1 List of Subsidiaries of General Cable.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 18, 1998
By: /s/ STEPHEN RABINOWITZ
----------------------------------------
Stephen Rabinowitz
Chairman, President and Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ GREGORY B. KENNY Executive Vice President, March 18, 1998
---------------- Chief Operating Officer and
Gregory B. Kenny Director
/s/ROBERT J. SIVERD Executive Vice President, General March 18, 1998
---------------- Counsel and Secretary
Robert J. Siverd
/s/CHRISTOPHER F. VIRGULAK Executive Vice President, Chief March 18, 1998
----------------------- Financial Officer and Treasurer
Christopher F. Virgulak (Chief Accounting Officer)
/s/GREGORY E. LAWTON Director March 18, 1998
---------------------
Gregory E. Lawton
/s/JEFFREY NODDLE Director March 18, 1998
---------------------
Jeffrey Noddle
/s/ROBERT L. SMIALEK Director March 18, 1998
---------------------
Robert L. Smialek
/s/JOHN E. WELSH Director March 18, 1998
---------------------
John E. Welsh
</TABLE>
28
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
General Cable Corporation:
We have audited the accompanying consolidated balance sheets of General
Cable Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of income and cash flows for each of
the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14.
These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of General Cable
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
January 28, 1998
F-1
<PAGE> 30
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
Net sales $ 1,134.5 $ 1,043.6 $ 1,061.3
Cost of sales 909.1 855.3 922.6
--------- --------- ---------
Gross profit 225.4 188.3 138.7
Selling, general and
administrative expenses 120.9 109.8 94.2
--------- --------- ---------
Operating income 104.5 78.5 44.5
--------- --------- ---------
Interest income (expense):
Interest expense (18.1) (20.7) (21.4)
Interest income 0.8 1.1 0.7
--------- --------- ---------
(17.3) (19.6) (20.7)
--------- --------- ---------
Earnings before income taxes 87.2 58.9 23.8
Income tax benefit (provision) (34.0) (19.7) 1.5
--------- --------- ---------
Net income $ 53.2 $ 39.2 $ 25.3
========= ========= =========
Earnings per common share $ 2.18 $ 1.62 $ 1.04
========= ========= =========
Weighted average common shares 24.4 24.3 24.3
========= ========= =========
Earnings per common share-assuming dilution $ 2.16 $ 1.62 $ 1.04
========= ========= =========
Weighted average common shares-assuming dilution 24.6 24.3 24.3
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-2
<PAGE> 31
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS December 31,
------ ----------------
1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash $ 4.2 $ 1.9
Receivables, net 162.4 135.5
Inventories 163.6 161.0
Deferred income taxes 20.9 23.7
Prepaid expenses and other 10.7 13.6
------ ------
Total current assets 361.8 335.7
Property, plant and equipment, net 155.6 128.8
Deferred income taxes 29.2 31.8
Other non-current assets 17.1 17.3
------ ------
Total assets $563.7 $513.6
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------
Current Liabilities:
Accounts payable $ 80.5 $ 69.3
Accrued liabilities 55.4 58.8
Short-term debt -- 2.0
------ ------
Total current liabilities 135.9 130.1
Long-term debt 238.5 9.3
Notes payable to related parties -- 195.8
Other liabilities 66.9 71.0
------ ------
Total liabilities 441.3 406.2
------ ------
Shareholders' Equity:
Common stock, $0.01 par value:
Issued and outstanding shares: 1997 - 24,515,426
1996 - 24,250,000 0.2 0.2
Additional paid-in capital 83.5 94.7
Retained earnings 38.7 12.5
------ ------
Total shareholders' equity 122.4 107.4
------ ------
Total liabilities and shareholders' equity $563.7 $513.6
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 32
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Cash flows of operating activities:
Net income $ 53.2 $ 39.2 $ 25.3
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 13.9 12.1 12.9
Deferred income taxes 5.4 9.3 (1.7)
Changes in operating assets and liabilities:
(Increase) decrease in receivables (26.9) 12.1 (4.9)
(Increase) decrease in inventories (2.6) 17.6 9.1
(Increase) decrease in other assets (0.2) 2.1 (3.4)
Increase (decrease) in accounts payable,
accrued and other liabilities 11.3 (11.6) (16.1)
------ ------ ------
Net cash flows of operating activities 54.1 80.8 21.2
------ ------ ------
Cash flows of investing activities:
Capital expenditures (42.6) (30.0) (26.2)
Proceeds from properties sold 5.2 -- --
Investment in joint venture -- (6.4) --
Other, net (2.0) 0.9 (0.5)
------ ------ ------
Net cash flows of investing activities (39.4) (35.5) (26.7)
------ ------ ------
Cash flows of financing activities:
Dividends paid (43.8) (55.1) --
Net borrowings of revolving credit facility 230.0 -- --
Proceeds from related party notes payable -- 4.8 8.0
Proceeds from other debt -- 2.0 --
Repayment of related party notes payable (195.8) (8.0) --
Repayment of short-term debt (2.0) -- --
Repayment of other long-term debt (0.8) (0.8) (0.7)
------ ------ ------
Net cash flows of financing activities (12.4) (57.1) 7.3
------ ------ ------
Increase (decrease) in cash 2.3 (11.8) 1.8
Cash - beginning of period 1.9 13.7 11.9
------ ------ ------
Cash - end of period $ 4.2 $ 1.9 $ 13.7
====== ====== ======
SUPPLEMENTAL INFORMATION
Income taxes paid (refunded) $ 22.7 $ (1.1) $ 4.2
====== ====== ======
Interest paid $ 16.7 $ 20.1 $ 21.3
====== ====== ======
NONCASH ACTIVITIES
Issuance of Restricted Stock $ 5.6 $ -- $ --
====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 33
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
-------
General Cable Corporation and subsidiaries (General Cable) are engaged in the
development, design, manufacture, marketing and distribution of copper wire and
cable products for the communications and electrical markets. As of December
31, 1997, General Cable operated 17 manufacturing facilities within the United
States in addition to the corporate headquarters in Highland Heights, Kentucky.
In June 1994, a subsidiary of Wassall PLC acquired all of the outstanding
common stock of General Cable (the Acquisition). On May 20, 1997, Wassall
completed an initial public offering of approximately 19,435,000 shares of
General Cable common stock at a price of $21 per share. This included 2,535,000
shares purchased under the U.S. Underwriters' over-allotment option. On August
22, 1997, a secondary offering of 4,815,000 shares of common stock at a price
of $31 per share was completed. These shares represented all of Wassall's
remaining holdings of General Cable common stock. General Cable did not receive
any proceeds from the sale of the shares of common stock in these offerings.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of General Cable Corporation and its wholly owned subsidiaries.
Investment in joint ventures is accounted for under the equity method of
accounting. Other non-current assets included investment in joint venture of
$5.5 million and $6.4 million at December 31, 1997 and 1996, respectively. 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.
REVENUE RECOGNITION Revenue is recognized when shipments are made to customers.
EARNINGS PER SHARE In the fourth quarter of 1997, General Cable implemented
Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share",
which was issued in February 1997. There was no effect of implementing this new
accounting standard on previously reported earnings per share.
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". General Cable will be
required to adopt these standards during 1998. Adoption of these standards 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.
INVENTORIES Inventories are stated at the lower of cost or market value. General
Cable values the copper component of its inventories using the last-in/first-out
(LIFO) method and values all remaining inventories using the first-in/first-out
(FIFO) method.
F-5
<PAGE> 34
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GOODWILL Goodwill recorded in the Acquisition was amortized using the
straight-line method over 40 years. In accordance with SFAS No. 109, "Accounting
for Income Taxes", the recognition in 1995 of the tax benefits of acquired
deductible temporary differences and carryforwards served to reduce goodwill to
zero.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost.
Costs assigned to property, plant and equipment relating to the Acquisition were
based on estimated fair values at that date. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. General
Cable implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of," on January 1, 1996. SFAS No.
121 requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. Management believes that amounts recorded as
assets are recoverable through normal operations. The implementation of SFAS No.
121 did not have a material effect on the consolidated financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments are defined as cash or
contracts relating to the receipt, delivery or exchange of financial
instruments. Except as otherwise noted, fair value approximates the carrying
value of such instruments.
FORWARD PRICING AGREEMENTS FOR PURCHASES OF COPPER In the normal course of
business, General Cable enters into forward pricing agreements for purchases of
copper to match certain sales transactions. At December 31, 1997 and 1996,
General Cable had $45.5 million and $16.9 million, respectively, of future
copper purchases that were under forward pricing agreements. The fair market
value of the forward pricing agreements was $39.3 million at December 31, 1997
and approximated the forward pricing agreement amount at December 31, 1996.
General Cable expects to recover the cost of copper under these agreements as a
result of firm sales price commitments with customers.
USE OF ESTIMATES The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK General Cable sells a broad range of products
throughout the United States, Canada and Europe. Concentrations of credit risk
with respect to trade receivables are limited due to the large number of
customers, including members of buying groups, comprising General Cable's
customer base. Ongoing credit evaluations of customers' financial condition are
performed, and generally, no collateral is required. General Cable maintains
reserves for potential credit losses and such losses, in the aggregate, have not
exceeded management's estimates. General Cable has one customer that accounted
for 10.4% of its net sales in 1996. Sales to a single customer did not exceed
10% in 1997 or 1995.
F-6
<PAGE> 35
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are
utilized to reduce interest rate risk. General Cable does not hold or issue
derivative financial instruments for trading purposes. General Cable has
entered into interest rate swap agreements designed to hedge underlying debt
obligations. Amounts to be paid or received under interest rate swap
agreements are accrued as interest and are recognized over the life of the
swap agreements as an adjustment to interest expense on the underlying debt
obligation.
STOCK-BASED COMPENSATION Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. General Cable has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock.
3. RECEIVABLES
-----------
Receivables are net of allowances of $7.3 million and $8.4 million at
December 31, 1997 and 1996, respectively.
4. INVENTORIES
-----------
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Raw materials $ 20.7 $ 20.8
Work-in-progress 28.4 28.6
Finished goods 114.5 111.6
------- -------
Total $163.6 $161.0
====== ======
</TABLE>
At December 31, 1997 and 1996, $70.7 million and $67.8 million, respectively,
of inventories were valued using the LIFO method. Approximate replacement
cost of inventories valued using the LIFO method totaled $59.3 million at
December 31, 1997 and $76.2 million at December 31, 1996. A reduction in
inventory quantities during 1996 and 1995 resulted in a liquidation of LIFO
inventory quantities carried at a lower cost as compared with the cost of
current purchases. The effect of this liquidation was to decrease cost of
goods sold by $1.6 million and $0.2 million, for the years ended December 31,
1996 and 1995, respectively.
F-7
<PAGE> 36
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
<S> <C> <C>
Land $ 6.9 $ 6.9
Buildings and leasehold improvements 40.4 38.5
Machinery, equipment and office furnishings 122.6 94.1
Construction in progress 28.5 18.1
------ ------
Total 198.4 157.6
Less-Accumulated depreciation and
amortization (42.8) (28.8)
------ ------
Total $155.6 $128.8
====== ======
</TABLE>
Depreciation expense totaled $13.9 million, $12.1 million and $11.7 million for
the years ended December 31, 1997, 1996 and 1995, respectively.
6. ACCRUED LIABILITIES
-------------------
Accrued liabilities consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
<S> <C> <C>
Customer rebates $ 9.7 $ 7.1
Payroll related accruals 9.6 9.4
Insurance claims and related expenses 9.2 10.1
Accrued restructuring costs 9.2 6.4
Payable to related party -- 4.8
Other accrued liabilities 17.7 21.0
----- -----
Total $55.4 $58.8
===== =====
</TABLE>
F-8
<PAGE> 37
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RESTRUCTURING PLAN
------------------
In connection with the Acquisition, accruals of approximately $46.5 million
were established for restructuring activities related to the reduction of
excess manufacturing and warehouse capacity and the reduction of excess
administrative overhead costs. These costs principally represented employee
separation costs and costs related to facility closings, including lease
payments for closed facilities and other premise costs. Facilities closed
include two manufacturing plants during 1996 and three manufacturing plants
and one warehouse in 1995. The restructuring plan is expected to be completed
during 1998. The total cost of these actions is expected to approximate the
original estimate.
Changes in accrued restructuring costs were as follows (in millions):
<TABLE>
<CAPTION>
Facility
Separation Closing
Costs Costs Total
-------- -------- -------
<S> <C> <C> <C>
Balance, December 31, 1994 $15.6 $28.1 $43.7
Utilization (7.9) (8.7) (16.6)
----- ----- -----
Balance, December 31, 1995 7.7 19.4 27.1
Utilization (4.7) (9.1) (13.8)
----- ----- -----
Balance, December 31, 1996 3.0 10.3 13.3
Utilization (0.7) (3.4) (4.1)
----- ----- -----
Balance, December 31, 1997 $ 2.3 $ 6.9 $ 9.2
===== ===== =====
</TABLE>
F-9
<PAGE> 38
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LONG-TERM DEBT
--------------
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Revolving Credit Facility $230.0 $ --
Other 8.5 9.3
------ ------
Total $238.5 $ 9.3
====== ======
</TABLE>
In May 1997, General Cable entered into a credit facility with The Chase
Manhattan Bank as administrative agent, and a syndicate of banks. The credit
facility consists of a five-year senior unsecured revolving credit and
competitive advance facility in an aggregate principal amount of $350 million
which expires in May 2002. Initial borrowings of $268 million were used in
part to repay the notes payable to Wassall and subsidiaries outstanding at the
time of the initial public offering. At December 31, 1997, $230 million of
revolving credit loans were outstanding, with a weighted average annual
interest rate of 6.1% and such amount approximates fair market value.
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.
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 defined in the
Credit Facility agreement.
The Credit Facility restricts certain corporate acts and contains required
minimum financial ratios and other covenants. At December 31, 1997 the maximum
dividend allowable under the most restrictive debt covenant was $0.20 per
share per year.
Other long-term debt, primarily Industrial Revenue Bonds, had a weighted
average annual interest rate of 5.1%. Maturities of such notes are as follows:
1998-$0.7 million, 1999-$2.7 million, 2000-$0.1 million, 2001-$0.1 million,
2002-$0.1 million and thereafter $4.8 million.
F-10
<PAGE> 39
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. NOTES PAYABLE TO RELATED PARTIES
At December 31, 1996 notes payable to related parties consisted of a $169.8
million, 9.98% subordinated note and a $26.0 million note payable bearing
interest at prime plus 3/4% payable to Wassall.
At December 31, 1996, the fair value of General Cable's notes payable to
related parties was $220.3 million compared to the carrying value of $195.8
million. The fair value was estimated by discounting the future cash flows
using an interest rate available to General Cable at that time.
10. INTEREST RATE SWAPS
General Cable utilizes interest rate swaps to manage its interest rate
exposure by fixing its interest rate on a portion of the Credit Facility.
Under the agreements, General Cable will pay or receive amounts equal to the
difference between the average fixed rate and the three month LIBOR rate.
In November 1997, General Cable entered into interest rate swaps which
effectively fix interest rates at an average rate of 6.0% 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>
At December 31, 1997, the net unrealized loss on the interest rate swap
transactions was $0.5 million, while the carrying value was zero.
F-11
<PAGE> 40
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCOME TAXES
The provision (benefit) for income taxes consisted of the following (in
millions):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current tax expense:
Federal $24.1 $ 6.8 $--
State 3.8 2.9 --
Foreign 0.7 0.7 0.2
Deferred tax expense (benefit):
Federal 4.3 8.4 (1.7)
State 1.1 0.9 --
----- ----- -----
$34.0 $19.7 $(1.5)
===== ===== =====
</TABLE>
The reconciliation of reported income tax expense to the amount of income tax
expense that would result from applying domestic federal statutory tax rates
to pretax income is as follows (in millions):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax $30.5 $20.6 $ 8.3
State income tax-net of federal benefit 3.2 1.7 -
Valuation allowance change - - (10.1)
Other, net 0.3 (2.6) 0.3
------- ------- -------
$34.0 $19.7 $ (1.5)
===== ===== ======
</TABLE>
The components of deferred tax assets and liabilities were as follows (in
millions):
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
---- ----
Deferred tax assets:
<S> <C> <C>
Net operating loss carryforward $26.5 $27.4
Pension and retiree benefits accruals 7.6 7.9
Asset and rationalization reserves 6.1 7.8
Inventory reserves 4.5 5.1
Alternative minimum tax credit 4.7 4.7
Other liabilities and reserves 13.6 14.4
----- ------
Total deferred tax assets $63.0 $67.3
===== =====
Deferred tax liabilities:
Depreciation and fixed assets $12.9 $11.8
===== =====
Net deferred tax assets $50.1 $55.5
===== =====
</TABLE>
F-12
<PAGE> 41
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. At December 31, 1994, a valuation allowance for the full amount of the
net deferred tax asset was recorded because of pre-1994 losses and uncertainties
as to the amount of taxable income that would be generated in future years. In
1995, management determined that it was more likely than not that future taxable
income would be sufficient to enable General Cable to realize all of its
deferred tax assets. Accordingly, the valuation allowance was eliminated in
1995. In accordance with SFAS No. 109, the recognition in 1995 of the tax
benefits of acquired deductible temporary differences and carryforwards served
to reduce goodwill to zero.
In accordance with the provisions of Internal Revenue Code Section 382,
utilization of the Company's net operating loss carryforward is estimated to be
limited to approximately $5.4 million per year. The net operating loss
carryforward expires in varying amounts from 2007 through 2012. Because of the
Section 382 limitation, the portion of the Company's total net operating loss
carryforward that may be utilized through expiration is estimated to be
approximately $75.7 million. General Cable also has $4.7 million of alternative
minimum tax (AMT) credit carryforwards that have no expiration date. The
utilization of the AMT credit carryforwards is also subject to Section 382
limitations.
12. PENSION PLANS
-------------
General Cable provides retirement benefits through contributory and
noncontributory pension plans for the majority of its regular full-time
employees.
Pension expense under the defined contribution plans sponsored by General Cable
equaled four percent of each eligible employee's covered compensation. In
addition, General Cable sponsors employee savings plans under which General
Cable may match a specified portion of contributions made by eligible employees.
Benefits provided under defined benefit pension plans sponsored by General Cable
are generally based on years of service multiplied by a specific fixed dollar
amount. Contributions to these pension plans are based on generally accepted
actuarial methods which may differ from the methods used to determine pension
expense. The amounts funded for any plan year are neither less than the minimum
required under federal law nor more than the maximum amount deductible for
federal income tax purposes.
F-13
<PAGE> 42
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net pension expense for plans included the following components (in
millions):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $ 1.4 $ 1.4 $ 1.1
Interest cost 6.3 6.0 6.1
Return on plan assets (16.7) (10.5) (14.3)
Net amortization and deferral 9.1 3.2 7.7
----- ----- -----
Net defined benefit pension expense 0.1 0.1 0.6
Net defined contribution pension expense 2.2 2.1 2.3
----- ----- -----
Total pension expense $ 2.3 $ 2.2 $ 2.9
===== ===== =====
</TABLE>
The table below sets forth the funded status of General Cable's defined
benefit pension plans and the amounts recognized in General Cable's balance
sheet at December 31, 1997 and 1996 related to those plans (in millions):
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $(83.7) $(75.9)
====== ======
Accumulated benefit obligation $(91.0) $(82.7)
====== ======
Projected benefit obligation $(92.1) $(84.0)
Plan assets at fair value 97.4 87.8
------ ------
Excess assets 5.3 3.8
Unrecognized net gain (10.2) (9.1)
Unrecognized prior service cost
3.7 2.8
------ ------
Accrued pension liability $(1.2) $(2.5)
====== ======
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7% for the year ended December 31,
1997 and 7.5% for the years ended December 31, 1996 and 1995. The rate of
compensation increase was 4.5% and the assumed long-term rate of return on plan
assets was 9.5% for each period presented. Pension plan assets consist of equity
securities and various fixed income investments.
F-14
<PAGE> 43
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
--------------------------------------------
General Cable has post-retirement benefit plans that provide medical and life
insurance for certain retirees and eligible dependents. General Cable funds the
plans as claims or insurance premiums are incurred. Net post-retirement benefit
expense included the following components (in millions):
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $ 0.4 $0.4 $ 0.3
Interest cost 1.1 1.1 1.1
---- ---- ----
Net post-retirement benefit expense $1.5 $1.5 $1.4
==== ==== ====
</TABLE>
The funded status of the plans and amounts recognized in General Cable's balance
sheet were as follows (in millions):
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees $ (4.4) $ (5.3)
Fully eligible active plan participants (3.1) (3.0)
Other active plan participants (7.9) (7.2)
Unrecognized net loss 0.1 --
----- -----
Accrued post-retirement benefit liability $(15.3) $(15.5)
===== =====
</TABLE>
The discount rate used in determining the accumulated post-retirement benefit
obligation was 7% for the year ended December 31, 1997 and 7.5% for the years
ended December 31, 1996 and 1995. The assumed health care cost trend rate used
in measuring the accumulated post-retirement benefit obligation was 9.5%
decreasing gradually to 5.0% in year 2005 and thereafter. Increasing the assumed
health care cost trend rate by 1% would result in an increase in the accumulated
post-retirement benefit obligation of $1.3 million for 1997. The effect of this
change would increase net post-retirement benefit expense by $0.2 million.
F-15
<PAGE> 44
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. STOCK OPTIONS
-------------
General Cable has a Stock Incentive Plan under which a maximum of 2,450,000
shares of Common Stock may be issued. Stock options are granted to employees at
prices which are not less than the closing market price at the date of grant.
All options granted during 1997 expire in ten years and vest and become fully
exercisable at the end of three years of continued employment. General Cable
applies APB Opinion 25 and related Interpretations in accounting for the plan.
Accordingly, no compensation cost has been recognized for grants under the stock
option plan. If compensation costs for General Cable's stock option plan had
been determined based on the fair value at the grant dates for awards under this
plan consistent with the method of SFAS No. 123 the pro forma net income would
have been $52.0 million or $2.13 per common share and $2.11 per common share
assuming dilution for 1997.
In determining the pro forma amounts above, the fair value of each option was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 1997: dividend
yield of 0.6%; expected volatility of 37%; risk-free interest rates of 6%; and
expected option lives of 6.5 years. The weighted average per share fair value of
options granted was $10.22 in 1997. These pro forma amounts may not be
representative of future disclosures because the estimated fair value of stock
options is amortized to expense over the vesting period, and additional options
may be granted in future years.
A summary of options information for the year ended December 31, 1997 follows:
<TABLE>
<CAPTION>
Weighted-Average
Shares Exercise Price
------ -----------------
<S> <C> <C>
Options granted 1,143,350 $ 21.03
Options cancelled (44,000) $ 21.00
----------
Outstanding at end of year 1,099,350 $ 21.03
==========
</TABLE>
Following the initial public offering in May 1997, 1.1 million options were
granted to General Cable's executive officers and key employees at an exercise
price of $21.00 per share. As of December 31, 1997, options outstanding have
exercise prices between $21.00 and $35.50 and a weighted average remaining
contractual life of 9.4 years. None of the outstanding options were exercisable
at December 31, 1997.
F-16
<PAGE> 45
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SHAREHOLDERS' EQUITY
General Cable is authorized to issue 75 million shares of common stock and 25
million shares of preferred stock. 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>
December 31, 1994 $ 0.2 $ 94.7 $ 2.7 $ 97.6
Net income -- -- 25.3 25.3
------ ------ ------ ------
December 31, 1995 0.2 94.7 28.0 122.9
Net income -- -- 39.2 39.2
Dividends -- -- (55.1) (55.1)
Other -- -- 0.4 0.4
------ ------ ------ ------
December 31, 1996 0.2 94.7 12.5 107.4
Net income -- 53.2 53.2
Dividends -- (16.7) (27.1) (43.8)
Issuance of restricted stock -- 5.6 -- 5.6
Other -- (0.1) 0.1 --
------ ------ ------ ------
December 31, 1997 $ 0.2 $ 83.5 $ 38.7 $122.4
====== ====== ====== ======
</TABLE>
Following consummation of the initial public offering, General Cable awarded
268,594 shares of restricted stock to executive officers and other key
employees. The awards of restricted stock were made in settlement of obligations
under existing long-term incentive arrangements. Restrictions on 149,547 shares
expire on December 31, 1998, while restrictions on the remaining 119,047 shares
expire in May 2000.
16. EARNINGS PER SHARE
------------------
A reconciliation of the numerator and denominator of earnings per common share
to earnings per common share assuming dilution for the year ended December 31,
1997 is as follows (in millions):
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Earnings per common share $53.2 24.4 $2.18
Dilutive effect of stock options -- 0.2
----- ----
Earnings per common share-assuming
dilution $53.2 24.6 $2.16
===== ===== =====
</TABLE>
Earnings per common share and earnings per common share assuming dilution for
1996 and 1995 were computed based on 24.3 million average shares outstanding.
There were no dilutive securities outstanding in 1996 and 1995.
F-17
<PAGE> 46
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. COMMITMENTS AND CONTINGENCIES
-----------------------------
Certain present and former operating sites, or portions thereof, currently or
previously owned or leased by current or former operating units of General Cable
are the subject of investigations, monitoring or remediation under the Federal
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or
superfund), the Federal Resource Conservation and Recovery Act or comparable
state statutes or agreements with the third parties. These proceedings are in
various stages ranging from initial investigations to active settlement
negotiations to implementation of the clean-up or remediation of sites.
Certain present and former operating units of General Cable have been named as
potentially responsible parties (PRPs) at several off-site disposal sites under
CERCLA or comparable state statutes in federal court proceedings. In each of
these matters, the operating unit of General Cable is working with the
governmental agencies involved and other PRPs to address environmental claims in
a responsible and appropriate manner.
At December 31, 1997, General Cable had an accrued liability of approximately
$6.1 million for various environmental related liabilities of which General
Cable is aware. In connection with the Acquisition, American Premier
Underwriter's Inc. agreed to indemnify General Cable against all environmental
liabilities arising out of General Cable's or its predecessors' ownership or
operation of the Indiana Steel & Wire Company and Marathon Manufacturing
Holdings, Inc. businesses (which were divested by General Cable prior to the
Acquisition), without limitation as to time or amount. American Premier also
agreed to indemnify General Cable against 66 2/3% of all other environmental
liabilities arising out of General Cable's or its predecessors' ownership or
operation of other properties and assets in excess of $10 million but not in
excess of $33 million which are identified during the seven year period ending
June 2001. While it is difficult to estimate future environmental liabilities
accurately, General Cable does not currently anticipate any material adverse
impact on its results of operations, financial position or cash flows as a
result of compliance with federal, state, local or foreign environmental laws or
regulations or cleanup costs of the sites discussed above.
In addition, subsidiaries of the Company have been named as defendants in
lawsuits alleging exposure to asbestos in products manufactured by the Company.
At December 31, 1997, General Cable had accrued approximately $2.2 million for
these lawsuits. The Company does not believe that the outcome of the litigation
will have a material adverse effect on its results of operations, cash flows or
financial position.
General Cable has entered into various operating lease agreements related
principally to certain administrative, manufacturing and distribution facilities
and transportation equipment. Future minimum rental payments required under
noncancelable lease agreements at December 31, 1997 were as follows: 1998-$7.2
million, 1999-$6.3 million, 2000-$5.8 million, 2001-$3.6 million and 2002-$0.9
million. Rental expense recorded under operating leases was $6.7 million, $4.2
million and $3.8 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
F-18
<PAGE> 47
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. RELATED PARTY TRANSACTIONS
--------------------------
A subsidiary of Wassall charged General Cable a fee for management services of
$0.9 million for the period January 1, 1997 to May 20, 1997, $1.6 million for
1996 and $1.4 million for 1995 which are included in selling, general and
administrative expenses in the accompanying consolidated statements of income.
19. QUARTERLY OPERATING RESULTS (UNAUDITED)
---------------------------------------
The interim financial information is unaudited. In the opinion of management,
the interim financial information reflects all adjustments necessary for a fair
presentation of quarterly financial information. Quarterly results have been
influenced by seasonal factors inherent in General Cable's businesses. The sum
of the quarters earnings per share amounts may not add to full year earnings per
share because each quarter is calculated independently. Summarized historical
quarterly financial data for 1997 and 1996 are set forth below (in millions,
except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1997
- ----
<S> <C> <C> <C> <C>
Net sales $ 251.0 $ 292.2 $ 306.1 $ 285.2
Gross profit 48.8 55.0 61.7 59.9
Net income 8.6 12.0 17.3 15.3
Earnings per share 0.35 0.49 0.71 0.62
Earnings per share-
Assuming dilution 0.35 0.49 0.69 0.61
1996
- -----
Net sales $ 258.0 $ 270.7 $ 272.2 $ 242.7
Gross profit 36.0 47.6 55.7 49.0
Net income 2.5 10.0 15.2 11.5
Earnings per share 0.10 0.41 0.63 0.48
Earnings per share-
assuming dilution 0.10 0.41 0.63 0.48
</TABLE>
F-19
<PAGE> 48
SCHEDULE II
GENERAL CABLE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
ACCOUNTS RECEIVABLE ALLOWANCES
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Accounts Receivable Allowances:
Beginning balance $ 8.4 $ 8.1 $10.7
Provision 1.3 1.3 .7
Write-offs (2.4) (1.0) (3.3)
----- ----- ------
Ending balance $ 7.3 $ 8.4 $ 8.1
===== ===== =====
</TABLE>
S-1
<PAGE> 49
GENERAL CABLE CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 333-22961) of the Company filed
with the Securities and Exchange Commission on March 7, 1997, as
amended (the Initial S-1).
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit 3.2 to the Initial S-1).
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Initial S-1).
10.1 Credit Agreement between the Company, Chase Manhattan Bank, as
Administrative Agent, and the lenders signatory thereto (
incorporated by reference to Exhibit 10.2 to the Initial S-1).
10.2 General Cable Corporation 1998 Annual Incentive Plan.
10.3 General Cable Corporation 1997 Stock Incentive Plan (incorporated
by reference to Exhibit 10.4 to the Initial S-1).
10.4 General Cable Corporation 1997 Stock Incentive Plan, as amended.
10.5 Employment Agreement dated May 13, 1997, between Stephen
Rabinowitz and the Company (incorporated by reference to Exhibit
10.5 to the Initial S-1).
10.6 Amendment dated March 16, 1998 to Employment Agreement dated May
13, 1997, between Stephen Rabinowitz and the Company.
10.7 Employment Agreement dated May 13, 1997, between Gregory B. Kenny
and the Company (incorporated by reference to Exhibit 10.6 to the
Initial S-1).
10.8 Amendment dated March 16, 1998 to Employment Agreement dated May
13, 1997, between Gregory B. Kenny and the Company.
10.9 Employment Agreement dated May 13, 1997, between Christopher F.
Virgulak and the Company (incorporated by reference to Exhibit
10.7 to the Initial S-1).
10.10 Employment Agreement dated May 13, 1997, between Robert J. Siverd
and the Company (incorporated by reference to Exhibit 10.8 to the
Initial S-1).
10.11 Change-in-Control Agreement dated May 13, 1997, between Stephen
Rabinowitz and the Company (incorporated by reference to Exhibit
10.9 to the Initial S-1).
10.12 Change-in-Control Agreement dated May 13, 1997, between Gregory
B. Kenny and the Company (incorporated by reference to Exhibit
10.10 to the Initial S-1).
10.13 Change-in-Control Agreement dated May 13, 1997, between
Christopher F. Virgulak and the Company (incorporated by
reference to Exhibit 10.11 to the Initial S-1).
10.14 Change-in-Control Agreement dated May 13, 1997, between Robert J.
Siverd and the Company (incorporated by reference to Exhibit
10.12 to the Initial S-1).
10.15 Form of Intercompany Agreement among Wassall PLC, Netherlands
Cable B.V. and the Company (incorporated by reference to Exhibit
10.14 to the Initial S-1).
10.16 Stock Purchase Agreement dated May 13, 1997, among Wassall PLC,
General Cable Industries Inc. and the Company (incorporated by
reference to Exhibit 10.15 to the Initial S-1).
21.1 List of Subsidiaries of General Cable.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
E-1
<PAGE> 1
EXHIBIT 10.2
GENERAL CABLE CORPORATION
1998 ANNUAL INCENTIVE PLAN
1. PURPOSE
The purpose of the General Cable Corporation 1998 Annual Incentive Plan
(the "Plan") is to provide annual incentive awards ("Awards") in order to
motivate certain executive officers and key employees of General Cable
Corporation, a Delaware corporation, and its subsidiaries (the "Company") to put
forth maximum efforts toward the growth, profitability and success of the
Company and its subsidiaries and to encourage such individuals to remain in the
employ of the Company or the applicable subsidiary.
2. ADMINISTRATION
a. The Plan shall be administered by a committee (the "Committee"),
which shall be a committee or subcommittee of the Board of Directors of the
Company (the "Board") appointed by the Board from among its members. Initially,
the Committee shall be the Board's Compensation Committee. Unless the Board
otherwise determines, the Committee shall be comprised solely of not less than
two members who each shall qualify, at the time of appointment, as an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder.
b. The Committee shall have all the powers vested in it by the terms of
the Plan, such powers to include authority (within the limitations described
herein) to select the persons to be granted Awards under the Plan, to determine
the time when Awards will be granted, to determine whether performance
objectives and other conditions for earning Awards have been met, to determine
whether Awards will be paid at the end of the performance period or deferred to
a later date, and to determine whether an Award or payment of an Award should be
reduced or eliminated. 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 made by the Committee shall be binding and conclusive on all
persons participating in the Plan and their legal representatives. 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 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
<PAGE> 2
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.
c. The Committee may delegate to one or more of its members, or to one
or more executive officers of the Company ("Executive Officers"), including to
the Chief Executive Officer of the Company, authority to select key employees
other than Executive Officers to be granted Awards under the Plan and to make
all other determinations in respect of such Awards. In addition, the Committee
may delegate to such persons such administrative duties as it deems advisable.
References herein to "Committee" shall include any such delegatee, except where
the context otherwise requires. The Committee, or any person to whom it has
delegated duties as aforesaid, may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under
the Plan including such legal or other counsel, consultants and agents as it may
deem desirable for the administration of the Plan and may rely upon any opinion
or computation received from any such counsel, consultant or agent. Expenses
incurred in the engagement of such counsel, consultant or agent shall be paid by
the Company.
3. ELIGIBILITY
Awards may be granted under the Plan to such Executive Officers and key
employees of the Company as shall be selected for participation pursuant to
Section 2 above.
4. AWARDS AND AWARD POOL; LIMITATIONS ON AWARDS
a. Each Award granted under the Plan shall represent an amount payable
in cash by the Company to the Executive Officer or key employee (a
"Participant") upon accomplishment of one or more or a combination of
performance objectives ("Performance Objectives") in a specified fiscal year (a
"Performance Year"), subject to all other terms and conditions of the Plan and
such other terms and conditions as may be specified by the Committee. The
Performance Objectives for an Award to an Executive Officer shall consist of
specific Performance Objectives approved by the Committee. Performance
Objectives for an Award to a key employee other than an Executive Officer may
consist of any measure of performance the Committee may determine in its
discretion. The grant of Awards under the Plan shall be evidenced by Award
letters in a form approved by the Committee from time to time which shall
contain the terms and conditions, as determined by the Committee, of a
Participant's Award; provided, however, that in the event of any conflict
between the provisions of the Plan and any Award letters, the provisions of the
Plan shall prevail. An Award shall be determined by multiplying the
Participant's target percentage of base salary with respect to a Performance
Year by applicable factors and percentages based on the achievement of
Performance Objectives.
-2-
<PAGE> 3
b. Awards payable in respect of a given Performance Year may be settled
only if and to the extent the total amount of Awards (the "Award Pool") has been
accrued on the books of the Company as of the end of such Performance Year. The
Award Pool is designated only for purposes of accounting within the Plan and
does not authorize any segregation of assets or the creation of a trust. The
maximum amount of an Award granted to any one Participant in respect of a
Performance Year shall not exceed $3.0 million. This maximum amount limitation
shall be measured at the time of settlement of an Award under Section 6.
c. Annual Performance Objectives shall be based on the performance of
the Company, one or more of its subsidiaries or affiliates, one or more of its
units or divisions and/or the individual for the Performance Year. Performance
Objectives shall include the following performance measures individually or in
any combination: net sales; pretax income before allocation of corporate
overhead and bonus; budget; earnings per share; net income; division, group or
corporate financial goals; return on stockholders' equity; return on assets;
attainment of strategic and operational initiatives; appreciation in or
maintenance of the price of the Common Stock or any other publicly-traded
securities of the Company; market share; gross profits; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
economic value-added models; comparisons with various stock market indices; or
reductions in costs.
5. GRANT OF AWARDS
a. The Committee shall select those Executive Officers who it
determines are to be Participants for a given Performance Year and grant Awards
to such Participants not later than 90 days after the commencement of the
Performance Year, and shall select other key employees for participation and
grant Awards to such Participants at such times as the Committee may determine.
In granting an Award, the Committee shall establish the amount of the Award in
accordance with Section 4 and other terms of such Award. Other provisions of the
Plan notwithstanding, in the case of any Participant who initially becomes
employed by the Company as an Executive Officer after the commencement of a
Performance Year, the Participant may be granted an Award for that Performance
Year prior to the date at which 25% of the period remaining in the year from the
date of hiring of such Executive Officer has elapsed.
b. After the end of each Performance Year, the Committee shall
determine the extent to which the Award Pool shall be funded based on
achievement of Performance Objectives for such Performance Year. The Committee
shall also determine the maximum amount payable to any Participant in respect of
an Award for the Performance Year and the amount payable to each Participant in
settlement of the Participant's Award for the Performance Year. The Committee,
in its discretion, may determine that the amount payable to any Participant in
settlement of an Award shall be reduced, including a determination to make no
final Award whatsoever, and, in the case
-3-
<PAGE> 4
of a Participant who is not an Executive Officer, may determine that such amount
shall be increased. The Committee shall certify in writing, in a manner
conforming to applicable regulations under Section 162(m) of the Code, prior to
settlement of each Award granted to an Executive Officer, that the Performance
Objectives and other material terms of the Award upon which settlement of the
Award was conditioned have been satisfied.
c. The Committee may adjust or modify Awards or terms of Awards (1) in
recognition of unusual or nonrecurring events affecting the Company or any
business unit, or the financial statements or results thereof, or in response to
changes in applicable laws (including tax, disclosure, and other laws),
regulations, accounting principles, or other circumstances deemed relevant by
the Committee, (2) with respect to any Participant whose position or duties with
the Company change during a Performance Year, or (3) with respect to any person
who first becomes a Participant after the first day of the Performance Year;
provided, however, that no adjustment to an Award granted to an Executive
Officer shall be authorized or made if and to the extent that such authorization
or the making of such adjustment would contravene the requirements applicable to
"performance-based compensation" under Section 162(m) of the Code and
regulations thereunder.
6. SETTLEMENT OF AWARDS
Except as provided in this Section 6, each Participant shall receive
payment of a cash lump sum in settlement of his or her Award, in the amount
determined in accordance with Section 5 as promptly as practicable following the
time such determination in respect thereof has been reached by the Committee.
a. The Committee may specify that up to fifty (50) percent of any Award
shall be settled by issuance of shares of the Company's Common Stock or other
awards pursuant to the Company's 1997 Stock Incentive Plan (the "1997 Plan")
having a fair market value, as determined by the Committee in accordance with
the 1997 Plan, equal to the cash value of an Award at the date of grant or equal
to the cash amount of the Award that would otherwise have been payable in
settlement of the Award at the end of the Performance Year or the date of
settlement. Such shares shall be subject to such conditions, including deferral
of delivery for up to five years, restrictions on transferability, mandatory
reinvestment of dividends in additional shares or awards, and other terms and
conditions as shall be specified by the Committee.
b. Each Participant shall have the right to defer his or her receipt of
part or all of any payment due in settlement of an Award under and in accordance
with the terms and conditions of any deferred compensation plan or arrangement
of the Company unless otherwise specified by the Committee.
-4-
<PAGE> 5
7. TERMINATION OF EMPLOYMENT
Except as otherwise provided in any written agreement between the
Company and a Participant, if a Participant ceases to be employed by the Company
prior to settlement of an Award for any reason other than death, disability (as
determined by the Committee), normal retirement, or early retirement with the
approval of the Committee, such Award shall be forfeited. If such cessation of
employment results from such Participant's death, disability (as determined by
the Committee), normal retirement, or early retirement with the approval of the
Committee, the Committee shall determine, in its sole discretion and in such
manner as it may deem reasonable (subject to Section 8), the extent to which the
Performance Objectives for the Performance Year or portion thereof completed at
the date of cessation of employment have been achieved, and the amount payable
in settlement of the Award based on such determinations. The Committee may base
such determination on the performance achieved for the full year, in which case
its determination may be deferred until following the Performance Year. Such
determinations shall be set forth in a written certification, as specified in
Section 5. Such Participant or his or her beneficiary shall be entitled to
receive settlement of such Award at the earliest time such payment may be made
without causing the payment to fail to be deductible by the Company under
Section 162(m) of the Code.
8. STATUS OF AWARDS UNDER SECTION 162(M)
It is the intent of the Company that Awards granted to Executive
Officers shall constitute "performance-based compensation" within the meaning of
Section 162(m) of the Code and regulations thereunder, if at the time of
settlement the Participant remains an Executive Officer. Accordingly, the Plan
shall be interpreted in a manner consistent with Section 162(m) of the Code and
regulations thereunder. If any provision of the Plan relating to Executive
Officers or any Award letter evidencing an Award to an Executive Officer does
not comply or is inconsistent with the provisions of Section 162(m)(4)(C) of the
Code or regulations thereunder (including Treasury Regulation 1.162-27(e))
required to be met in order that compensation (other than post-termination
compensation) shall constitute "performance-based compensation," such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements, and no post-termination settlement shall be authorized or made
under Section 7 if and to the extent that such authorization or settlement would
contravene such requirements.
9. TRANSFERABILITY
Awards and any other benefit payable under, or interest in, this Plan
are not transferable by a Participant except upon a Participant's death by will
or the laws of descent and distribution, and shall not be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any such attempted action shall be void.
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10. WITHHOLDING
All payments relating to an Award, whether at settlement or resulting
from any further deferral or issuance of an Award under another plan of the
Company in settlement of the Award, shall be net of any amounts required to be
withheld pursuant to applicable federal, state and local tax withholding
requirements. In any case in which payments will be in a form other than cash,
the Company shall have the right to withhold the amount of such taxes from any
other sums due or to become due from the Company to the Participant as the
Committee shall prescribe.
11. TENURE
A Participant's right, if any, to continue to serve the Company as an
Executive Officer, officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a Participant or any other event
under the Plan.
12. NO RIGHTS TO SETTLEMENT OR TO PARTICIPATE
Until the Committee has determined to settle an Award under Section 6,
a Participant's selection to participate, the grant of an Award, and other
events under the Plan shall not be construed as a commitment that any Award will
be settled under the Plan. Nothing in the Plan shall be deemed to give any
eligible employee any right to participate in the Plan except upon determination
of the Committee under Section 4. The foregoing notwithstanding, the Committee
may authorize legal commitments with respect to Awards under the terms of an
employment agreement or other agreement with a Participant, to the extent of the
Committee's authority under the Plan, including commitments that limit the
Committee's future discretion under the Plan, but in all cases subject to
Section 8.
13. UNFUNDED PLAN
Participants shall have no right, title, or interest whatsoever in or
to any specific assets of the Company or investments which the Company may make
to aid in meeting its obligations under the plan. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any Participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts. The Plan is not intended to be subject to the Employee Retirement
Income Security Act of 1974, as amended.
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14. OTHER COMPENSATORY PLANS AND ARRANGEMENTS
Nothing in the Plan shall preclude any Participant from participation
in any other compensation or benefit plan of the Company or its subsidiaries.
The adoption of the Plan and the grant of Awards hereunder shall not preclude
the Company or any subsidiary from paying any other compensation apart from the
Plan, including compensation for services or in respect of performance in a
Performance Year for which an Award has been made.
15. DURATION, AMENDMENT AND TERMINATION OF PLAN
No Award may be granted in respect of any Performance Year after 2007.
The Board may amend the Plan from time to time or suspend or terminate the Plan
at any time, provided that any such action shall be subject to stockholder
approval if and to the extent required by law or regulation, or to ensure that
compensation under the Plan will qualify as "performance-based compensation"
under Section 162(m) and the regulations thereunder.
16. GOVERNING LAW
The Plan, Awards granted hereunder, and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
Commonwealth of Kentucky (regardless of the law that might otherwise govern
under applicable Kentucky principles of conflict of laws).
17. EFFECTIVE DATE
The Plan shall be effective as of January 1, 1998; provided, however,
that the Plan shall be subject to approval of the stockholders of the Company at
an annual meeting or any special meeting of stockholders of the Company before
settlement of Awards for the 1998 Performance Year so that compensation will
qualify as "performance-based compensation" under Section 162(m) of the Code and
regulations thereunder. In addition, the Board may determine to submit the Plan
to stockholders for reapproval at such times, if any, required in order that
compensation under the Plan shall qualify as performance-based compensation.
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EXHIBIT 10.4
GENERAL CABLE CORPORATION
1997 STOCK INCENTIVE PLAN
(as amended and restated effective as of March 16, 1998)
1. PURPOSE
The General Cable Corporation 1997 Stock Incentive Plan (the "Plan") is
intended to provide incentives which will attract, retain and motivate highly
competent persons as non-employee directors and key employees of General Cable
Corporation (the "Company") and any of its subsidiary corporations, limited
liability companies or other forms of business entities now existing or
hereafter formed or acquired ("Subsidiaries"), by providing them opportunities
to acquire shares of the common stock, par value $.01 per share, of the Company
("Common Stock") or to receive monetary payments based on the value of such
shares pursuant to the Awards (as defined in Section 4 below) described herein.
Furthermore, the Plan is intended to assist in aligning the interests of the
Company's non-employee directors and key employees with those of its
stockholders.
2. ADMINISTRATION
a. The Plan generally shall be administered by a committee (the
"Committee"), which shall be the Board of Directors of the Company (the
"Board"), or, once established, a committee or subcommittee of the Board of
Directors appointed by the Board from among its members. The Committee may be
the Board's Compensation Committee. Unless the Board determines otherwise, the
Committee shall be comprised solely of not less than two members who each shall
qualify as a (i) "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
(or any successor rule) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and (ii) an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder. 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 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 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
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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.
b. The Committee shall have authority to grant Awards to non-employee
directors and to the executive officers of the Company ("Executive Officers").
The Chief Executive Officer shall have the authority to determine and grant
Awards to key employees of the Company and its Subsidiaries who are not
Executive Officers and to take all necessary administrative actions required to
implement his actions under the Plan. With respect to Awards proposed for groups
of key employees, the Chief Executive Officer shall make recommendations to the
Committee on the aggregate amount of Awards and the eligible participants and
the Committee shall have the authority to change or modify the aggregate amount
of such Awards.
c. The Committee may delegate to one or more of its members, or to one
or more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the Subsidiaries or affiliate whose employees have benefited
from the Plan, as determined by the Committee. The Chief Executive Officer in
administering the Plan may obtain and rely upon opinions or computations from
counsel, consultants or agents and the Company will pay all expenses incurred in
connection with such consultations, advice or computations.
3. PARTICIPANTS
Participants shall consist of (i) such non-employee directors and such
key employees who are Executive Officers of the Company as the Committee in its
sole discretion determines to be significantly responsible for the success and
future growth and profitability of the Company and whom the Committee may
designate from time to time to receive awards under the Plan, and (ii) such key
employees of the Company and any of its Subsidiaries who are not Executive
Officers as the Chief Executive Officer in his discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and designates to receive Awards under the Plan. Designation of a
participant in any year shall not require the Committee or the Chief Executive
Officer as applicable to designate such person to receive an Award in any other
year or, once designated, to receive the same type or amount of Award as granted
to the participant in any other year. The Committee or the Chief Executive
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Officer as applicable shall consider such factors as they deem pertinent in
selecting participants and in determining the type and amount of their
respective Awards.
4. TYPE OF AWARDS
Awards under the Plan may be granted in any one or a combination of (1)
Stock Options, (2) Stock Appreciation Rights, (3) Stock Awards, (4) Performance
Awards and (5) Stock Units (each as described below, and collectively, the
"Awards"). Stock Awards, Performance Awards and Stock Units may, as determined
by the Committee or the Chief Executive Officer, in their discretion, constitute
Performance-Based Awards, as described in Section 11 below. Awards shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee or the Chief Executive Officer may from time to time approve;
provided, however, that in the event of any conflict between the provisions of
the Plan and any such agreements, the provisions of the Plan shall prevail.
5. COMMON STOCK AVAILABLE UNDER THE PLAN
a. Shares Available. The aggregate number of shares of Common Stock
that may be subject to Awards, including Stock Options, granted under this Plan
shall be 3,150,000 shares of Common Stock, which may be authorized and unissued
or treasury shares, subject to any adjustments made in accordance with Section
12 below.
b. Maximum Individual Limit. The maximum number of shares of Common
Stock with respect to which Awards may be granted or measured to any individual
participant under the Plan during the term of the Plan shall not exceed
1,000,000 shares, provided, however, that the maximum number of shares of Common
Stock with respect to which Stock Options and Stock Appreciation Rights may be
granted to an individual participant under the Plan during the term of the Plan
shall not exceed 750,000 shares (in each case, subject to adjustments made in
accordance with Section 12 below).
c. Shares Underlying Awards That Again Become Available. Any shares of
Common Stock subject to a Stock Option, Stock Appreciation Right, Stock Award,
Performance Award, or Stock Unit which for any reason are cancelled, terminated
without having been exercised, forfeited, settled in cash or delivered to the
Company as part or full payment for the exercise of a Stock Option, shall again
be available for Awards under the Plan. The preceding sentence shall apply only
for purposes of determining the aggregate number of shares of Common Stock
subject to Awards but shall not apply for purposes of determining the maximum
number of shares of Common Stock subject to Awards (including the maximum number
of shares of Common Stock subject to Stock Options and Stock Appreciation
Rights) that any individual participant may receive.
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6. STOCK OPTIONS
a. In General. The Committee is authorized to grant Stock Options to
non-employee directors and key employees of the Company who are Executive
Officers and shall, in its sole discretion, determine such non-employee
directors and Executive Officers who will receive Stock Options and the number
of shares of Common Stock underlying each Stock Option. The Chief Executive
Officer is authorized to grant Stock Options to key employees of the Company and
any of its Subsidiaries who are not Executive Officers and shall in his
discretion determine such persons and the number of shares of Common Stock
underlying each Stock Option. Stock Options may be (i) "incentive stock options"
("Incentive Stock Options"), within the meaning of Section 422 of the Code, or
(ii) Stock Options which do not qualify as Incentive Stock Options
("Nonqualified Stock Options"). The Committee or the Chief Executive Officer may
grant to any participant one or more Incentive Stock Options, Nonqualified Stock
Options, or both types of Stock Options. Each Stock Option shall be subject to
such terms and conditions consistent with the Plan as the Committee or the Chief
Executive Officer may impose from time to time. In addition, each Stock Option
shall be subject to the following limitations set forth in this Section 6.
b. Exercise Price. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine on the date of grant;
provided, however, subject to Section 6(e) below, that the per-share exercise
price shall not be less than 100 percent of the Fair Market Value (as defined in
Section 17 below) of the Common Stock on the date the option is granted.
c. Payment of Exercise Price. The Stock Option exercise price may be
paid in cash or, in the discretion of the Committee or the Chief Executive
Officer, by the delivery of shares of Common Stock then owned by the participant
for at least six months, by the withholding of shares of Common Stock for which
a Stock Option is exercisable, or by a combination of these methods. In the
discretion of the Committee or the Chief Executive Officer, a payment may also
be made by delivering a properly executed exercise notice to the Company
together with a copy of irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the exercise price. To
facilitate the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms. The Committee or the Chief
Executive Officer may prescribe any other method of paying the exercise price
that it determines to be consistent with applicable law and the purpose of the
Plan, including, without limitation, in lieu of the exercise of a Stock Option
by delivery of shares of Common Stock then owned by a participant for at least
six months, providing the Company with a notarized statement attesting to the
number of shares owned, where upon verification by the Company, the Company
would issue to the participant only the number of incremental shares to which
the participant is entitled upon exercise of the Stock Option. In determining
which methods a participant may
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utilize to pay the exercise price, the Committee or the Chief Executive Officer
may consider such factors as they determine are appropriate; provided, however,
that with respect to Incentive Stock Options, all such discretionary
determinations shall be made at the time of grant and specified in the Stock
Option agreement.
d. Exercise Period. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee or the Chief Executive Officer; provided,
however, that no Stock Option shall be exercisable later than ten years after
the date it is granted. All Stock Options shall terminate at such earlier times
and upon such conditions or circumstances as the Committee or the Chief
Executive Officer shall, in their discretion, set forth in such option agreement
on the date of grant.
e. Limitations on Incentive Stock Options. Incentive Stock Options may
be granted only to participants who are key employees of the Company or any of
its Subsidiaries on the date of grant. The aggregate market value (determined as
of the time the Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options (under all option plans of the Company) are
exercisable for the first time by a participant during any calendar year shall
not exceed $100,000. For purposes of the preceding sentence, (i) Stock Incentive
Options shall be taken into account in the order in which they are granted and
(ii) Incentive Stock Options granted before 1987 shall not be taken into
account. Incentive Stock Options may not be granted to any participant who, at
the time of grant, owns stock possessing (after the application of the
attribution rules of Section 424(d) of the Code) more than 10 percent of the
total combined voting power of all outstanding classes of stock of the Company
or any of its Subsidiaries, unless the option price is fixed at not less than
110 percent of the Fair Market Value of the Common Stock on the date of grant
and the exercise of such option is prohibited by its terms after the expiration
of 5 years from the date of grant of such option. In addition, no Incentive
Stock Option shall be issued to a participant in tandem with a Nonqualified
Stock Option.
7. STOCK APPRECIATION RIGHTS
The Committee is authorized to grant Stock Appreciation Rights to key
employees of the Company who are Executive Officers and shall, in its sole
discretion, determine such Executive Officers who will receive Stock
Appreciation Rights and the number of shares of Common Stock with respect to
each Stock Appreciation Right. The Chief Executive Officer is authorized to
grant Stock Appreciation Rights to key employees of the Company and any of its
Subsidiaries who are not Executive Officers and shall in his discretion
determine the key employees who will receive Stock Appreciation Rights and the
number of shares of Common Stock with respect to each Stock Appreciation Right.
A "Stock Appreciation Right" shall mean a right to receive a payment, in cash,
Common Stock or a combination thereof, in an amount equal to the excess of (x)
the Fair Market Value, or other specified valuation, of a specified number
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of shares of Common Stock on the date the right is exercised over (y) the Fair
Market Value, or other specified valuation (which shall be no less than the Fair
Market Value), of such shares of Common Stock on the date the right is granted,
all as determined by the Committee or the Chief Executive Officer; provided,
however, that if a Stock Appreciation Right is granted retroactively in tandem
with or in substitution for a Stock Option, the designated Fair Market Value in
the Stock Appreciation Right agreement may be the Fair Market Value on the date
such Stock Option was granted. Each Stock Appreciation Right shall be subject to
such terms and conditions as the Committee or the Chief Executive Officer shall
impose from time to time.
8. STOCK AWARDS
The Committee is authorized to grant Stock Awards to non-employee
directors and key employees of the Company who are Executive Officers and shall,
in its sole discretion, determine such non-employee directors and Executive
Officers who will receive Stock Awards and the number of shares of Common Stock
underlying each Stock Award. The Chief Executive Officer is authorized to grant
Stock Awards to key employees of the Company and its Subsidiaries who are not
Executive Officers and in his discretion to determine the key employees who will
receive Stock Awards and the number of shares of Common Stock underlying each
Stock Award. Stock Awards may be subject to such terms and conditions as the
Committee or the Chief Executive Officer determines appropriate, including,
without limitation, restrictions on the sale or other disposition of such
shares, and the right of the Company to reacquire such shares for no
consideration upon termination of the participant's employment within specified
periods. The Committee or the Chief Executive Officer may require the
participant to deliver a duly signed stock power, endorsed in blank, relating to
the Common Stock covered by such Stock Award and/or that the stock certificates
evidencing such shares be held in custody or bear restrictive legends until the
restrictions thereon shall have lapsed. The Stock Award agreement shall specify
whether the participant shall have, with respect to the shares of Common Stock
subject to a Stock Award, all of the rights of a holder of shares of Common
Stock, including the right to receive dividends and to vote the shares.
9. PERFORMANCE AWARDS
a. In General. The Committee is authorized to grant Performance Awards
to key employees of the Company who are Executive Officers and shall, in its
sole discretion, determine the Executive Officers who will receive Performance
Awards and the number of shares of Common Stock or Stock Units (as described in
Section 10 below) that may be subject to each Performance Award. The Chief
Executive Officer is authorized to grant Performance Awards to key employees of
the Company and any of its Subsidiaries who are not Executive Officers and shall
in his discretion determine the key employees who will receive Performance
Awards and the number of shares of Common Stock or Stock Units (as described in
Section 10 below) that may be subject
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to each Performance Award. Each Performance Award shall be subject to such terms
and conditions consistent with the Plan as the Committee or the Chief Executive
Officer may impose from time to time. The Committee or the Chief Executive
Officer shall set performance targets at their discretion which, depending on
the extent to which they are met, will determine the number and/or value of
Performance Awards that will be paid out to the participants, and may attach to
such Performance Awards one or more restrictions. Performance targets may be
based upon, without limitation, Company-wide, divisional and/or individual
performance.
b. Adjustment of Performance Targets. With respect to those Performance
Awards that are not intended to qualify as Performance-Based Awards (as
described in Section 11 below), the Committee or the Chief Executive Officer
shall have the authority at any time to make adjustments to performance targets
for any outstanding Performance Awards which the Committee or the Chief
Executive Officer deems necessary or desirable unless at the time of
establishment of goals the Committee or the Chief Executive Officer shall have
precluded its authority to make such adjustments.
c. Payout. Payment of earned Performance Awards may be made in shares
of Common Stock or in cash and shall be made in accordance with the terms and
conditions prescribed or authorized by the Committee or the Chief Executive
Officer. The participant may elect to defer, or the Committee or the Chief
Executive Officer may require or permit the deferral of, the receipt of
Performance Awards upon such terms as the Committee or the Chief Executive
Officer deems appropriate.
10. STOCK UNITS
a. In General. The Committee is authorized to grant Stock Units to key
employees of the Company who are Executive Officers and shall, in its sole
discretion, determine the Executive Officers who will receive Stock Units and
the number of shares of Common Stock with respect to each Stock Unit. The Chief
Executive Officer is authorized to grant Stock Units to key employees of the
Company and its Subsidiaries who are not Executive Officers and shall in his
discretion determine the key employees who will receive Stock Units and the
number of shares of Common Stock with respect to each Stock Unit. The Committee
or the Chief Executive Officer shall determine the criteria for the vesting of
Stock Units. A Stock Unit granted by the Committee or the Chief Executive
Officer shall provide payment in shares of Common Stock at such time as the
award agreement shall specify. Shares of Common Stock issued pursuant to this
Section 10 may be issued with or without other payments therefor as may be
required by applicable law or such other consideration as may be determined by
the Committee or the Chief Executive Officer. The Committee or the Chief
Executive Officer shall determine whether a participant granted a Stock Unit
shall be entitled to a Dividend Equivalent Right (as defined below).
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b. Payout. Upon vesting of a Stock Unit, unless the Committee or the
Chief Executive Officer has determined to defer payment with respect to such
unit or a Participant has elected to defer payment under Section 10(c) below,
shares of Common Stock representing the Stock Units shall be distributed to the
participant unless the Committee or the Chief Executive Officer, with the
consent of the participant, provides for the payment of the Stock Units in cash
or partly in cash and partly in shares of Common Stock equal to the value of the
shares of Common Stock which would otherwise be distributed to the participant.
c. Deferral. Prior to the year with respect to which a Stock Unit may
vest, the participant may elect not to receive Common Stock upon the vesting of
such Stock Unit and for the Company to continue to maintain the Stock Unit on
its books of account. In such event, the value of a Stock Unit shall be payable
in shares of Common Stock pursuant to the agreement of deferral.
d. Definitions. A "Stock Unit" shall mean a notional account
representing one share of Common Stock. A "Dividend Equivalent Right" shall mean
the right to receive the amount of any dividend paid on the share of Common
Stock underlying a Stock Unit, which shall be payable in cash or in the form of
additional Stock Units.
11. PERFORMANCE-BASED AWARDS
a. In General. All Stock Options and Stock Appreciation Rights granted
under the Plan, and certain Stock Awards, Performance Awards, and Stock Units
granted under the Plan, and the compensation attributable to such Awards, are
intended to (i) qualify as Performance-Based Awards (as described in the next
sentence) or (ii) be otherwise exempt from the deduction limitation imposed by
Section 162(m) of the Code. Certain Awards granted under the Plan may be granted
in a manner such that the Awards qualify as "performance-based compensation" (as
such term is used in Section 162(m) of the Code and the regulations thereunder)
and thus be exempt from the deduction limitation imposed by Section 162(m) of
the Code ("Performance-Based Awards"). Awards shall only qualify as
Performance-Based Awards if at the time of grant the Committee is comprised
solely of two or more "outside directors" (as such term is used in Section
162(m) of the Code and the regulations thereunder).
b. Stock Options and Stock Appreciation Rights. Stock Options and Stock
Appreciation Rights granted under the Plan with an exercise price at or above
the Fair Market Value of the Common Stock on the date of grant should qualify as
Performance-Based Awards.
c. Other Awards. Stock Awards, Performance Awards, and Stock Units
granted under the Plan should qualify as Performance-Based Awards if, as
determined by the Committee or the Chief Executive Officer in their sole
discretion, either the
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granting or vesting of such Award is subject to the achievement of a performance
target or targets based on one or more of the performance measures specified in
Section 11(d) below. With respect to such Awards intended to qualify as
Performance-Based Awards:
(1) the Committee or the Chief Executive Officer shall
establish in writing (x) the objective
performance-based goals applicable to a given period
and (y) the individual employees or class of
employees to which such performance-based goals apply
no later than 90 days after the commencement of such
period (but in no event after 25 percent of such
period has elapsed);
(2) no Performance-Based Awards shall be payable to or
vest with respect to, as the case may be, any
participant for a given period until the Committee or
the Chief Executive Officer certifies in writing that
the objective performance goals (and any other
material terms) applicable to such period have been
satisfied; and
(3) after the establishment of a performance goal, the
Committee or the Chief Executive Officer shall not
revise such performance goal or increase the amount
of compensation payable thereunder (as determined in
accordance with Section 162(m) of the Code) upon the
attainment of such performance goal.
d. Performance Measures. The Committee or the Chief Executive Officer
may use the following performance measures (either individually or in any
combination) to set performance targets with respect to Awards intended to
qualify as Performance-Based Awards: net sales; pretax income before allocation
of corporate overhead and bonus; budget; earnings per share; net income;
division, group or corporate financial goals; return on stockholders' equity;
return on assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Common Stock or any other
publicly-traded securities of the Company; market share; gross profits; earnings
before interest and taxes; earnings before interest, taxes, depreciation and
amortization; economic value-added models; comparisons with various stock market
indices; and/or reductions in costs.
12. ADJUSTMENT PROVISIONS
If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spinoff, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such
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securities, cash and/or other property as would have been received in respect of
the Common Stock subject to such Stock Option or Stock Appreciation Right had
such Stock Option or Stock Appreciation Right been exercised in full immediately
prior to such change or distribution, and such an adjustment shall be made
successively each time any such change shall occur. In addition, in the event of
any such change or distribution, in order to prevent dilution or enlargement of
participants' rights under the Plan, the Committee or the Chief Executive
Officer shall have the authority to adjust, in an equitable manner, the number
and kind of shares that may be issued under the Plan, the number and kind of
shares subject to outstanding Awards, the exercise price applicable to
outstanding Awards, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Awards. Appropriate adjustments
may also be made by the Committee or the Chief Executive Officer in the terms of
any Awards under the Plan to reflect such changes or distributions and to modify
any other terms of outstanding Awards on an equitable basis, including
modifications of performance targets and changes in the length of performance
periods. In addition, other than with respect to Stock Options, Stock
Appreciation Rights and other awards intended to constitute Performance-Based
Awards, the Committee or the Chief Executive Officer is authorized to make
adjustments to the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles. Notwithstanding the foregoing, (i)
any adjustment with respect to an Incentive Stock Option shall comply with the
rules of Section 424(a) of the Code, and (ii) in no event shall any adjustment
be made which would render any Incentive Stock Option granted hereunder other
than an incentive stock option for purposes of Section 422 of the Code.
13. CHANGE IN CONTROL
a. Accelerated Vesting. Notwithstanding any other provision of this
Plan, if there is a Change in Control of the Company (as defined in Section
13(b) below), the Committee or the Chief Executive Officer, in their discretion,
may take such actions as they deem appropriate with respect to outstanding
Awards, including, without limitation, accelerating the exercisability, vesting
and/or payout of such Awards.
b. Definition. For purposes of this Section 13, (i) if there is an
employment agreement or a change-in-control agreement between the participant
and the Company or any of its Subsidiaries in effect, "Change in Control" shall
have the same definition as the definition of "change in control" contained in
such employment agreement or change-in-control agreement, or (ii) if "Change in
Control" is not defined in such employment agreement or change-in-control
agreement, or if there is no employment agreement or change-in-control agreement
between the participant and the Company or any of its Subsidiaries in effect, a
"Change in Control" of the Company shall be deemed to have occurred upon any of
the following events:
-10-
<PAGE> 11
(1) any person or other entity (other than any of the
Company's Subsidiaries or any employee benefit plan
sponsored by the Company or any of its Subsidiaries)
including any person as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), becomes the beneficial owner,
as defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of more than 35 percent of
the total combined voting power of all classes of
capital stock of the Company normally entitled to
vote for the election of directors of the Company
(the "Voting Stock");
(2) the stockholders of the Company approve the sale of
all or substantially all of the property or assets of
the Company and such sale occurs;
(3) the Company's Common Stock shall cease to be publicly
traded (other than a suspension of trading that lasts
for a short period of time);
(4) the stockholders of the Company approve a
consolidation or merger of the Company with another
corporation (other than with any of the Company's
Subsidiaries), the consummation of which would result
in the shareholders of the Company immediately before
the occurrence of the consolidation or merger owning,
in the aggregate, less than 60 percent of the Voting
Stock of the surviving entity, and such consolidation
or merger occurs; or
(5) a change in the Company's Board occurs with the
result that the members of the Board on the Effective
Dated (as defined in Section 24(a) below) of the Plan
(the "Incumbent Directors") no longer constitute a
majority of such Board, provided that any person
becoming a director (other than a director whose
initial assumption of office is in connection with an
actual or threatened election contest or the
settlement thereof, including but not limited to a
consent solicitation, relating to the election of
directors of the Company) whose election or
nomination for election was supported by two-thirds
(2/3) of the then Incumbent Directors shall be
considered an Incumbent Director for purposes hereof.
Notwithstanding anything contained in the Plan to the contrary, a Change in
Control of the Company shall not include an initial public offering of the
Company.
c. Cashout. The Committee or the Chief Executive Officer, in their
discretion, may determine that, upon the occurrence of a Change in Control of
the Company, each Stock Option and Stock Appreciation Right outstanding
hereunder shall
-11-
<PAGE> 12
terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each share of Common
Stock subject to such Stock Option or Stock Appreciation Right, an amount equal
to the excess of the Fair Market Value of such shares of Common Stock
immediately prior to the occurrence of such Change in Control over the exercise
price per share of such Stock Option or Stock Appreciation Right; such amount to
be payable in cash, in one or more kinds of property (including the property, if
any, payable in the transaction) or in a combination thereof, as the Committee
or the Chief Executive Officer, in their discretion, shall determine.
14. TERMINATION OF EMPLOYMENT
a. Subject to any written agreement between the participant and the
Company or any of its Subsidiaries, if a participant's employment is terminated
due to death or disability:
(1) all unvested Stock Awards and all unvested Stock
Units held by the participant on the date of the
participant's death or the date of the termination of
his or her employment as the case may be, shall
immediately become vested as of such date;
(2) all unexercisable Stock Options and all unexercisable
Stock Appreciation Rights held by the participant on
the date of the participant's death or the date of
the termination of his or her employment, as the case
may be, shall immediately become exercisable as of
such date and shall remain exercisable until the
earlier of (i) the end of the one-year period
following the date of the participant's death or the
date of the termination of his or her employment, as
the case may be, or (ii) the date the Stock Option or
Stock Appreciation Right would otherwise expire;
(3) all exercisable Stock Options and all exercisable
Stock Appreciation Rights held by the participant on
the date of the participant's death or the date of
the termination of his or her employment, as the case
may be, shall remain exercisable until the earlier of
(i) the end of the one-year period following the date
of the participant's death or the date of the
termination of his or her employment, as the case may
be, or (ii) the date the Stock Option or Stock
Appreciation Right would otherwise expire; and
(4) all unearned and/or unvested Performance Awards held
by the participant on the date of the participant's
death or the date of the termination of his or her
employment, as the case may be, shall immediately be
forfeited by such participant as of such date.
-12-
<PAGE> 13
b. Subject to any written agreement between the participant and the
Company or any of its Subsidiaries, if a participant's employment is terminated
by the Company for Cause (as defined in Section 14(f) below), all exercisable
and all unexercisable Stock Options, all exercisable and all unexercisable Stock
Appreciation Rights, all unvested Stock Awards, all unearned and/or unvested
Performance Units, and all unvested Stock Units held by the participant on the
date of the termination of his or her employment for Cause shall immediately be
forfeited by such participant as of such date.
c. Subject to any written agreement between the participant and the
Company or any of its Subsidiaries, if a participant's employment is terminated
for any reason other than for Cause or other than due to death or disability:
(1) all unexercisable Stock Options, all unexercisable
Stock Appreciation Rights, all unvested Stock Awards,
all unearned and/or unvested Performance Units, and
all unvested Stock Units held by the participant on
the date of the termination of his or her employment
shall immediately be forfeited by such participant as
of such date; and
(2) all exercisable Stock Options and all exercisable
Stock Appreciation Rights held by the participant on
the date of the termination of his or her employment
shall remain exercisable until the earlier of (i) the
end of the 90-day period following the date of the
termination of the participant's employment or (ii)
the date the Stock Option or Stock Appreciation Right
would otherwise expire.
d. Notwithstanding anything contained in the Plan to the contrary, the
Committee or the Chief Executive Officer may, in their sole discretion, provide
that:
(1) any or all unvested Stock Awards and/or any or all
unvested Stock Units held by the participant on the
date of the participant's death and/or the date of
the termination of the participant's employment shall
immediately become vested as of such date;
(2) any or all unexercisable Stock Options and/or any or
all unexercisable Stock Appreciation Rights held by
the participant on the date of the participant's
death and/or the date of the termination of his or
her employment shall immediately become exercisable
as of such date and shall remain exercisable until a
date that occurs on or prior to the date the Stock
Option or Stock Appreciation Right is scheduled to
expire, provided, however, that Incentive Stock
Options shall remain exercisable not longer than the
end of the 90-day period following the date of the
termination of the participant's employment;
-13-
<PAGE> 14
(3) any or all exercisable Stock Options and/or any or
all exercisable Stock Appreciation Rights held by the
participant on the date of the participant's death
and/or the date of the termination of his or her
employment shall remain exercisable until a date that
occurs on or prior to the date the Stock Option or
Stock Appreciation Right is scheduled to expire,
provided, however, that Incentive Stock Options shall
remain exercisable not longer than the end of the
90-day period following the date of the termination
of the participant's employment; and/or
(4) a participant shall immediately become vested in all
or a portion of any earned Performance Unit held by
such participant on the date of the termination of
the participant's employment, and such vested
Performance Unit (or portion thereof) and/or any
unearned Performance Unit (or portion thereof) held
by such participant on the date of the termination of
his or her employment shall immediately become
payable to such participant as if all performance
goals had been met as of the date of the termination
of his or her employment.
e. Notwithstanding anything contained in the Plan to the contrary, (i)
the provisions contained in this Section 14 shall be applied to an Incentive
Stock Option only if the application of such provision maintains the treatment
of such Incentive Stock Option as an Incentive Stock Option and (ii) the
exercise period of an Incentive Stock Option in the event of a termination due
to disability provided in Section 14(a)(3) above shall only apply if the
participant's disability satisfies the requirement of "permanent and total
disability" as defined in Section 22(e)(3) of the Code.
f. For purposes of this Section 14, (i) if there is an employment
agreement between the participant and the Company or any of its Subsidiaries in
effect, "Cause" shall have the same definition as the definition of "cause"
contained in such employment agreement; or (ii) if "Cause" is not defined in
such employment agreement or if there is no employment agreement between the
participant and the Company or any of its Subsidiaries in effect, "Cause" shall
include, but is not limited to:
(1) any willful and continuous neglect of or refusal to
perform the employee's duties or responsibilities
with respect to the Company or any of its
Subsidiaries, insubordination, dishonesty, gross
neglect or willful malfeasance by the participant in
the performance of such duties and responsibilities,
or the willful taking of actions which materially
impair the participant's ability to perform such
duties and responsibilities, or any serious violation
of the rules or regulations of the Company;
-14-
<PAGE> 15
(2) the violation of any local, state or federal criminal
statute, including, without limitation, an act of
dishonesty such as embezzlement, theft or larceny;
(3) intentional provision of services in competition with
the Company or any of its Subsidiaries, or
intentional disclosure to a competitor of the Company
or any of its Subsidiaries of any confidential or
proprietary information of the Company or any of its
Subsidiaries; or
(4) any similar conduct by the participant with respect
to which the Company determines in its discretion
that the participant has terminated employment under
circumstances such that the payment of any
compensation attributable to any Award granted under
the Plan would not be in the best interest of the
Company or any of its Subsidiaries.
15. TRANSFERABILITY
Each Award granted under the Plan to a participant which is subject to
restrictions on transferability and/or exercisability shall not be transferable
otherwise than by will or the laws of descent and distribution, and/or shall be
exercisable, during the participant's lifetime, only by the participant. In the
event of the death of a participant, each Stock Option or Stock Appreciation
Right theretofore granted to him or her shall be exercisable during such period
after his or her death as the Committee or the Chief Executive Officer shall, in
their discretion, set forth in such option or right on the date of grant and
then only by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Stock Option or Stock Appreciation Right shall pass by will or the
laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee or the Chief Executive Officer, an Award (other than
an Incentive Stock Option) may permit the transferability of such Award by a
participant solely to members of the participant's immediate family or trusts or
family partnerships for the benefit of such persons, subject to any restriction
included in the Award agreement.
16. OTHER PROVISIONS
Awards granted under the Plan may also be subject to such other
provisions (whether or not applicable to the Award granted to any other
participant) as the Committee or the Chief Executive Officer determines on the
date of grant to be appropriate, including, without limitation, for the
installment purchase of Common Stock under Stock Options, for the installment
exercise of Stock Appreciation Rights, to assist the participant in financing
the acquisition of Common Stock, for the forfeiture of, or restrictions on
resale or other disposition of, Common Stock acquired under any form of
-15-
<PAGE> 16
Award, for the acceleration of exercisability or vesting of Awards in the event
of a change in control of the Company, for the payment of the value of Awards to
participants in the event of a change in control of the Company, or to comply
with federal and state securities laws, or understandings or conditions as to
the participant's employment in addition to those specifically provided for
under the Plan.
17. FAIR MARKET VALUE
For purposes of this Plan and any Awards granted hereunder, Fair Market
Value shall be (i) the closing price of the Common Stock on the date of
calculation (or on the last preceding trading date if Common Stock was not
traded on such date) if the Common Stock is readily tradeable on a national
securities exchange or other market system or (ii) if the Common Stock is not
readily tradeable, the amount determined in good faith by the Committee or the
Chief Executive Officer as the fair market value of the Common Stock.
18. WITHHOLDING
All payments or distributions of Awards made pursuant to the Plan shall
be net of any amounts required to be withheld pursuant to applicable federal,
state and local tax withholding requirements. If the Company proposes or is
required to distribute Common Stock pursuant to the Plan, it may require the
recipient to remit to it or to the corporation that employs such recipient an
amount sufficient to satisfy such tax withholding requirements prior to the
delivery of any certificates for such Common Stock. In lieu thereof, the Company
or the employing corporation shall have the right to withhold the amount of such
taxes from any other sums due or to become due from such corporation to the
recipient as the Committee or the Chief Executive Officer shall prescribe. The
Committee or the Chief Executive Officer may, in their discretion, and subject
to such rules as it may adopt (including any as may be required to satisfy
applicable tax and/or non-tax regulatory requirements), permit an optionee or
award or right holder to pay all or a portion of the federal, state and local
withholding taxes arising in connection with any Award consisting of shares of
Common Stock by electing to have the Company withhold shares of Common Stock
having a Fair Market Value equal to the amount of tax to be withheld, such tax
calculated at rates required by statute or regulation.
19. TENURE
A participant's right, if any, to continue to serve the Company as a
director, officer, employee, or otherwise, shall not be enlarged or otherwise
affected by his or her designation as a participant under the Plan.
-16-
<PAGE> 17
20. UNFUNDED PLAN
Participants shall have no right, title, or interest whatsoever in or
to any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and any participant,
beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan. The Plan is not intended to be subject to the
Employee Retirement Income Security Act of 1974, as amended.
21. NO FRACTIONAL SHARES
No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Chief Executive Officer
shall determine whether cash, or Awards, or other property shall be issued or
paid in lieu of fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
22. DURATION, AMENDMENT AND TERMINATION
No Award shall be granted more than ten years after the Effective Date;
provided, however, that the terms and conditions applicable to any Award granted
prior to such date may thereafter be amended or modified by mutual agreement
between the Company and the participant or such other persons as may then have
an interest therein. Also, by mutual agreement between the Company and a
participant hereunder, under this Plan or under any other present or future plan
of the Company, Awards may be granted to such participant in substitution and
exchange for, and in cancellation of, any Awards previously granted such
participant under this Plan, or any other present or future plan of the Company.
The Board may amend the Plan from time to time or suspend or terminate the Plan
at any time. However, no action authorized by this Section 22 shall reduce the
amount of any existing Award or change the terms and conditions thereof without
the participant's consent. No amendment of the Plan shall, without approval of
the stockholders of the Company, (i) increase the total number of shares which
may be issued under the Plan or the maximum number of shares with respect to
Stock Options, Stock Appreciation Rights and other Awards that may be granted to
any individual under the Plan or (ii) modify the requirements as to eligibility
for Awards under the Plan; provided, however, that no amendment may be made
without approval of the stockholders of the Company if the amendment will
disqualify any Incentive Stock Options granted hereunder.
-17-
<PAGE> 18
23. GOVERNING LAW
This Plan, Awards granted hereunder and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
Commonwealth of Kentucky (regardless of the law that might otherwise govern
under applicable Kentucky principles of conflict of laws).
24. EFFECTIVE DATE
a. The Plan shall be effective as of the date on which the Plan is
adopted by the Board (the "Effective Date"); provided, however, that the Plan
shall be approved by the stockholders of the Company at an annual meeting or any
special meeting of stockholders of the Company within 12 months before or after
the Effective Date, and such approval of stockholders shall be a condition to
the right of each participant to receive Awards hereunder. Any Award granted
under the Plan prior to such approval of stockholders shall be effective as of
the date of grant (unless, with respect to any Award, the Committee or the Chief
Executive Officer as applicable specifies otherwise at the time of grant), but
no such Award may be exercised or settled and no restrictions relating to any
Award may lapse prior to such stockholder approval, and if stockholders fail to
approve the Plan as specified hereunder, any such Award shall be cancelled.
b. This Plan shall terminate on the 10th anniversary of the Effective
Date (unless sooner terminated by the Board).
-18-
<PAGE> 1
EXHIBIT 10.6
AMENDMENT TO
EMPLOYMENT AGREEMENT
This is an amendment to the Employment Agreement (the "Agreement")
entered into on May 13, 1997, by and between General Cable Corporation, a
Delaware corporation (the "Company"), GCC Corporation, and Stephen Rabinowitz
(the "Executive").
The Company, in its own right and as successor by merger to GCC
Corporation, and the Executive, in consideration of their mutual agreements,
agree as follows:
Paragraph 3(b) of the Agreement is amended by deleting the
phrase "which is not less favorable than the opportunity
provided pursuant to the 1997 Incentive Bonus" from lines 20
and 21 of that paragraph.
The parties have caused this amendment to be duly executed by them this
16th day of March 1998.
GENERAL CABLE CORPORATION
/s/ Robert J. Siverd
- ------------------------
Robert J. Siverd
Executive Vice President, General Counsel and Secretary
/s/ Stephen Rabinowitz
----------------------------
Stephen Rabinowitz
<PAGE> 1
EXHIBIT 10.8
AMENDMENT TO
EMPLOYMENT AGREEMENT
This is an amendment to the Employment Agreement (the "Agreement")
entered into on May 13, 1997, by and between General Cable Corporation, a
Delaware corporation (the "Company"), GCC Corporation, and Gregory B. Kenny (the
"Executive").
The Company, in its own right and as successor by merger to GCC
Corporation, and the Executive, in consideration of their mutual agreements,
agree as follows:
Paragraph 3(b) of the Agreement is amended by deleting the
phrase "which is not less favorable than the opportunity
provided pursuant to the 1997 Incentive Bonus" from lines 15
and 16 of that paragraph.
The parties have caused this amendment to be duly executed by them this
16th day of March 1998.
GENERAL CABLE CORPORATION
/s/ Stephen Rabinowitz
- ------------------------------
Stephen Rabinowitz
Chairman, Chief Executive Officer and
President
/s/ Gregory B. Kenny
------------------------------
Gregory B. Kenny
<PAGE> 1
EXHIBIT 21.1
GENERAL CABLE CORPORATION AND SUBSIDIARIES
LIST OF SUBSIDIARIES
JURISDICTION
NAME OF INCORPORATION
GK Technologies, Inc. New Jersey
General Cable Industries, Inc. Delaware
General Cable de Mexico del Norte Mexico
Genca Corporation Delaware
Marathon Manufacturing Holdings, Inc. Delaware
General Cable Company Canada, Ltd. Ontario, Canada
General Cable IP Corp Delaware
General Cable Export Sales Corp. Barbados
Carol Cable, Ltd. England
Carol Cable Europe, Ltd. England
General Photonics L.L.C. (50% owned) Delaware
Diversified Contractors, Inc. Delaware
MLTC Company Delaware
Marathon Steel Co. Arizona
E-2
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
GENERAL CABLE CORPORATION
We consent to the incorporation by reference in Registration Statements
No. 333-28965, 333-31865, 333-31867, 333-31869, and 333-31871 of General Cable
Corporation on Forms S-8 of our report dated January 28, 1998 appearing in this
Annual Report on Form 10-K of General Cable Corporation for the year ended
December 31, 1997.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
March 27, 1998
E-3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,200
<SECURITIES> 0
<RECEIVABLES> 169,700
<ALLOWANCES> 7,300
<INVENTORY> 163,600
<CURRENT-ASSETS> 361,800
<PP&E> 198,400
<DEPRECIATION> 42,800
<TOTAL-ASSETS> 563,700
<CURRENT-LIABILITIES> 135,900
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> 122,200
<TOTAL-LIABILITY-AND-EQUITY> 563,700
<SALES> 1,134,500
<TOTAL-REVENUES> 1,134,500
<CGS> 909,100
<TOTAL-COSTS> 909,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,100
<INCOME-PRETAX> 87,200
<INCOME-TAX> 34,000
<INCOME-CONTINUING> 53,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,200
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.16
</TABLE>
