<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
Commission File No. 1-12983
GENERAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1398235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 Tesseneer Drive
Highland Heights, KY 41076
(Address of principal executive offices)
(606) 572-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1999
----- ------------------------------
Common Stock, $.01 Par Value 36,384,435
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PAGE 1
<PAGE> 2
GENERAL CABLE CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Statements of Income -
For the three months ended March 31, 1999 and 1998 3
Balance Sheets -
March 31, 1999 and December 31, 1998 4
Statements of Cash Flows -
For the three months ended March 31, 1999 and 1998 5
Statement of Changes in Shareholders' Equity -
For the three months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
</TABLE>
2
<PAGE> 3
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
------- -------
<S> <C> <C>
Net sales $ 262.8 $ 278.6
Cost of sales 216.0 221.6
------- -------
Gross profit 46.8 57.0
Selling, general and administrative expenses 29.5 31.3
------- -------
Operating income 17.3 25.7
------- -------
Interest income (expense):
Interest expense (4.5) (3.8)
Interest income 0.1 0.3
------- -------
(4.4) (3.5)
------- -------
Earnings before income taxes 12.9 22.2
Income tax provision (4.8) (8.7)
------- -------
Net income $ 8.1 $ 13.5
======= =======
Earnings per common share $ 0.22 $ 0.37
======= =======
Weighted average common shares 36.9 36.8
======= =======
Earnings per common share-assuming dilution $ 0.22 $ 0.36
======= =======
Weighted average common shares-assuming dilution 37.2 37.7
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
- ------ March 31, December 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Current Assets:
Cash $ 6.8 $ 3.4
Receivables, net 162.3 163.4
Inventories 219.5 198.5
Deferred income taxes 15.1 15.3
Prepaid expenses and other 13.5 9.7
------ ------
Total current assets 417.2 390.3
Property, plant and equipment, net 213.9 210.8
Deferred income taxes 24.1 24.2
Other non-current assets 26.8 25.7
------ ------
Total assets $682.0 $651.0
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 83.6 $ 99.6
Accrued liabilities 43.6 56.9
------ ------
Total current liabilities 127.2 156.5
Long-term debt 301.6 246.8
Other liabilities 69.2 70.5
------ ------
Total liabilities 498.0 473.8
------ ------
Shareholders' Equity:
Common stock, $0.01 par value:
Issued and outstanding shares:
March 31, 1999 - 37,019,949
December 31, 1998 - 36,815,340 0.4 0.4
Additional paid-in capital 89.4 84.8
Retained earnings 109.4 103.2
Accumulated other comprehensive loss (5.3) (5.2)
Other shareholders' equity (9.9) (6.0)
------ ------
Total shareholders' equity 184.0 177.2
------ ------
Total liabilities and shareholders' equity $682.0 $651.0
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows of operating activities:
Net income $ 8.1 $13.5
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 6.2 4.1
Deferred income taxes 0.1 0.6
Changes in operating assets and liabilities:
(Increase) decrease in receivables 1.1 (6.7)
Increase in inventories (21.0) (8.3)
Increase in other assets (4.9) (1.4)
Increase (decrease) in accounts payable,
accrued and other liabilities (30.3) 6.0
----- -----
Net cash flows of operating activities (40.7) 7.8
----- -----
Cash flows of investing activities:
Capital expenditures (9.2) (14.5)
Proceeds from the sale of property - 1.5
Other, net 0.3 0.1
----- -----
Net cash flows of investing activities (8.9) (12.9)
----- -----
Cash flows of financing activities:
Dividends paid (1.9) (1.2)
Net borrowings of revolving credit facility 57.0 10.0
Repayment of other long-term debt (2.1) (0.2)
----- -----
Net cash flows of financing activities 53.0 8.6
----- -----
Increase in cash 3.4 3.5
Cash-beginning of period 3.4 4.2
----- -----
Cash-end of period $ 6.8 $ 7.7
===== =====
SUPPLEMENTAL INFORMATION
Income taxes paid, net of refunds $ 9.4 $ 0.2
===== =====
Interest paid $ 4.3 $ 3.0
===== =====
NONCASH ACTIVITIES
Issuance of restricted stock, net of forfeitures $ 4.3 $ -
===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Other
----------------------- Paid-In Retained Comprehensive Shareholders'
Shares Amount Capital Earnings Income(Loss) Equity Total
------ ------ ------- -------- ------------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 36,815,340 $0.4 $84.8 $ 103.2 $ (5.2) $ (6.0) $177.2
Comprehensive income:
Net income 8.1 8.1
Foreign currency
translation
adjustment (0.1) (0.1)
Comprehensive income 8.0
Dividends (1.9) (1.9)
Issuance of restricted stock 205,870 4.3 (4.3) -
Amortization of restricted stock 0.2 0.2
Other (1,261) 0.3 0.2 0.5
---------- ---- ----- ------- ------ ------ ------
Balance, March 31, 1999 37,019,949 $0.4 $89.4 $ 109.4 $ (5.3) $ (9.9) $184.0
========== ==== ===== ======= ====== ====== ======
Balance, December 31, 1997 36,773,139 $0.4 $83.3 $ 38.2 $ 0.5 $ - $122.4
Comprehensive income:
Net income 13.5 13.5
Comprehensive income 13.5
Dividends ( 1.2) (1.2)
Issuance of restricted stock 32,541 0.9 0.9
Forfeiture of restricted stock (4,220) (0.1) (0.1)
---------- ---- ----- ------- ------ ------ ------
Balance, March 31, 1998 36,801,461 $0.4 $84.1 $ 50.5 $ 0.5 $ - $135.5
========== ==== ===== ======= ====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of General Cable Corporation and its wholly owned subsidiaries. All
transactions and balances among the consolidated companies have been eliminated.
Certain reclassifications have been made to the prior year to conform to the
current year's presentation.
BASIS OF PRESENTATION The accompanying unaudited consolidated financial
statements of General Cable Corporation and Subsidiaries have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Results of operations for the three months ended March 31, 1999
are not necessarily indicative of results that may be expected for the full
year. These financial statements should be read in conjunction with the audited
financial statements and notes thereto in General Cable's 1998 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 23, 1999.
NEW STANDARDS During 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". General Cable will be required
to adopt SFAS No. 133 no later than January 1, 2000. Management has not yet
analyzed the impact of SFAS No. 133 on its consolidated financial statements.
2. INVENTORIES
-----------
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Raw materials $ 23.6 $ 23.0
Work in process 23.2 25.2
Finished goods 172.7 150.3
------ -------
Total $219.5 $198.5
====== ======
</TABLE>
General Cable values only the copper component of its inventories
using the last-in/first-out (LIFO) method. At March 31, 1999 and December 31,
1998, $86.7 million and $75.9 million, respectively, of inventories were valued
using the LIFO method. Approximate replacement cost of inventories valued using
the LIFO method totaled $60.1 million at March 31, 1999 and $55.6 million at
December 31, 1998. An actual valuation of inventory under the LIFO method can be
made only at the end of each year based on the inventory levels and costs at
that time. Accordingly, interim LIFO calculations are necessarily based on
management's estimates of expected year-end inventory levels and costs. Because
these are subject to many variables beyond management's control, interim results
are subject to the final year-end LIFO inventory valuation.
7
<PAGE> 8
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. OTHER SHAREHOLDERS' EQUITY
--------------------------
Other shareholders' equity consisted of the following (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Loans to shareholders $ (5.8) $ (6.0)
Restricted stock (4.1) -
------ ------
$ (9.9) $ (6.0)
====== ======
</TABLE>
In the first quarter of 1999, General Cable awarded 205,870 shares of restricted
stock. Restrictions on the majority of the shares issued in 1999 will expire
ratably over two years.
4. EARNINGS PER COMMON SHARE
-------------------------
A reconciliation of the numerator and denominator of earnings per common share
to earnings per common share assuming dilution is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------------------------
1999 1998
---------------------------------- ---------------------------------------
Per Share Per Share
Income(1) Shares(2) Amount Income(1) Shares(2) Amount
--------- --------- ------ --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share $ 8.1 36.9 $0.22 $13.5 36.8 $0.37
===== =====
Dilutive effect of stock options - 0.3 - 0.9
----- ---- ----- ----
Earnings per common share-
Assuming dilution $ 8.1 37.2 $0.22 $13.5 37.7 $0.36
===== ==== ===== ===== ==== =====
</TABLE>
(1) Numerator
(2) Denominator
8
<PAGE> 9
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SEGMENT INFORMATION
-------------------
Summarized financial information for the Company's operating segments for the
three months ended March 31, is as follows (in millions):
<TABLE>
<CAPTION>
Electrical Communications
Group Group Corporate Total
----- ----- --------- -----
<S> <C> <C> <C> <C> <C>
Net Sales:
1999 $154.8 $108.0 - $262.8
1998 168.4 110.2 - 278.6
Operating Profit:
1999 4.3 13.0 - 17.3
1998 11.1 14.6 - 25.7
Identifiable Assets:
March 31, 1999 324.5 259.9 $97.6 682.0
December 31, 1998 318.1 235.9 97.0 651.0
</TABLE>
6. SUBSEQUENT EVENTS
-----------------
On May 4, 1999, General Cable announced that BICC plc shareholders had approved
the sale of all the assets and certain liabilities of BICC's worldwide energy
cable and cable systems businesses for a purchase price of British Pound 275
million (approximately $440 million US), in cash, subject to adjustment. The
Chase Manhattan Corp. has agreed to provide $1.1 billion in financing to fund
the acquisition, refinance existing debt, provide working capital flexibility
and allow for additional business development activities. Consummation of the
transaction is subject to regulatory approvals. The parties intend to complete
the acquisition in the second quarter of 1999.
The acquisition is planned to combine BICC's European, North American, Middle
Eastern, Asia/Pacific and African operations with General Cable's worldwide
operations. The operations to be acquired include low-voltage, medium-voltage
and high-voltage power distribution and transmission cable products, and
control, signaling, electronic and data communications products and accessories,
to serve industrial, utility, OEM, military/government and electrical and
communications distributor customers worldwide.
On April 7, 1999, General Cable Board of Directors approved the repurchase of up
to $50 million of General Cable stock on the open market, as well as through
private transactions. As of April 30, 1999, the Company had repurchased
approximately 661,900 shares for $8.7 million. The final amount of stock
repurchased will be determined by overall financial and market conditions.
9
<PAGE> 10
GENERAL CABLE CORPORATION AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
General Cable is a leader in the development, design, manufacture,
marketing and distribution of copper, aluminum and optical fiber wire and cable
products for the communications and electrical markets. Communications wire and
cable transmits low voltage signals for voice, data, video and control
applications. Electrical wire and cable conducts electrical current for power
and control applications. General Cable believes that its principal competitive
strengths include its breadth of product line; brand recognition; distribution
and logistics; customer relationships, sales and service; and improved operating
efficiency.
All statements, other than statements of historical fact, included in this
report, including the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations", are, or may be considered,
forward-looking statements under Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Important factors that could
cause results to differ materially from those discussed in the forward-looking
statements (Forward Statements) include: price competition, particularly in
certain segments of the building wire and cordset markets, and other competitive
pressures; general economic conditions, particularly those affecting the
non-residential construction industry; the Company's ability to retain key
customers and distributors; the Company's ability to increase manufacturing
capacity; the cost of raw materials, including copper; the level of growth in
demand for products serving various segments of the communications markets; the
Company's ability to introduce successfully new or enhanced products; the impact
of qualified technological changes; the Company's ability to achieve
productivity improvements; and the impact of changes in industry standards and
the regulatory environment. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting for the Company are
qualified in their entirety by the Forward Statements.
General Cable's reported net sales are directly influenced by the price
of copper. Copper prices have been volatile, with the copper cathode daily
selling price on the COMEX averaging $0.78 per pound during the first quarter of
1998 and $0.64 per pound for the first quarter of 1999. However, as a result of
a number of practices intended to match copper purchases with sales, the
Company's overall profitability has not been significantly affected by changing
copper prices. General Cable generally passes changes in copper prices along to
its customers, although there are timing delays of varying lengths depending
upon the type of product, competitive conditions and particular customer
arrangements. General Cable does not engage in speculative metals trading or
other speculative activities. Also, the Company does not engage in activities to
hedge the underlying value of its copper inventory.
10
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
General Cable generally experiences certain seasonal trends in sales and
cash flow. Larger amounts of cash are generally required during the first and
second quarters of the year to build inventories in anticipation of higher
demand during the spring and summer, when construction activity increases. In
general, receivables related to higher sales activity during the spring and
summer are collected in the third and fourth quarters of the year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998
Net income was $8.1 million in the first quarter of 1999 compared to
$13.5 million in the first quarter of 1998. Fully diluted earnings per share
were $0.22 per share in the first quarter of 1999 compared to $0.36 per share in
the first quarter of 1998.
After adjusting 1998 net sales to reflect the $0.14 decrease in the
average monthly Comex price per pound of copper in the first quarter of 1999,
net sales decreased 1% to $262.8 million, down from $265.5 million for the same
period in 1998. The decrease in copper-adjusted net sales reflected a 3%
decrease in the copper-adjusted net sales of Electrical products and a 1%
increase in the copper-adjusted net sales of Communication products. Net sales
on an as reported basis decreased from $278.6 million in the first quarter of
1998 to $262.8 million in the first quarter of 1999 reflecting the lower average
price per pound of copper in the first quarter of 1999.
The increase in Communication products copper-adjusted net sales included
higher sales of plastic insulated cable to regional bell operating company
customers and sales growth of 38 percent in Category 5 and enhanced high-speed
data networking cables, partially offset by lower sales to three OEM assembly
customers and lower selling prices for certain data communications cables. The
decrease in copper-adjusted Electrical product net sales reflects lower sales
volume and selling prices for building wire products, partially offset by
increased sales volume for automotive aftermarket, cordsets and industrial power
and control products. The decrease in building wire sales volume reflects the
Company's decision in late January to lead a price increase which the other
major competitors in the market did not follow. The situation resulted in a
reduction in sales volume in February to 60% of the prior year's level. Net
sales of Automotive aftermarket products increased 15% on the strength of higher
sales to a leading automotive aftermarket retailer. Consumer cordset net sales
were up 33% in the first quarter of 1999 with significant increases in sales to
the leading home center chain and a major hardware store retailer.
Selling, general and administrative expenses decreased to $29.5 million
in the first quarter of 1999 from $31.3 million in the first quarter of 1998
primarily reflecting a reduction in controllable spending in response to market
conditions and lower costs associated with Year 2000 compliance. Selling,
general and administrative expenses as a percentage of copper-adjusted net sales
declined from 11.8% in the first quarter of 1998, to 11.2% in the first quarter
of 1999.
11
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Operating income decreased to $17.3 million in the first quarter of 1999
compared to $25.7 million in the first quarter of 1998. The reduced operating
income reflects significantly lower building wire pricing and to a lesser extent
lower pricing for certain data communication cables, partially offset by
manufacturing cost reductions. In the first quarter of 1999, lower building wire
pricing was responsible for more than 100% of the reduction in operating income.
The average building wire price premium over the cost of copper was down 16% in
the first quarter of 1999 compared to the same period in 1998. Selling prices
for certain data communications cables were approximately 10% lower in the first
quarter of 1999 compared to the same period in 1998.
Manufacturing productivity included savings related to materials,
cycle-time reductions and process improvements. Material productivity resulted
from partnering with suppliers to reduce the total delivered costs of raw
materials, sourcing in-house certain compounds previously purchased outside the
Company and enhanced process controls that reduced material usage.
Net interest expense was $4.4 million in the first quarter of 1999
compared to $3.5 million in the first quarter of 1998. The increase reflects
increased borrowing levels during the first quarter of 1999 compared to the
first quarter of 1998 as the Company increased inventory levels during the first
quarter in response to new business awards which are scheduled to begin shipment
in the second quarter.
The effective income tax rate for the first quarter of 1999 was 37.5%
compared to 39% for the first quarter of 1998.
12
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
In general, General Cable requires cash for working capital, capital
expenditures, debt repayment, interest and taxes. General Cable's working
capital requirements increase when it experiences strong incremental demand for
products and/or significant copper price increases.
Cash used by operating activities in the first three months of 1999
was $40.7 million. Net income before depreciation, amortization and
deferred taxes of $14.4 million and a $1.1 million decrease in accounts
receivable were more than offset by a $4.9 million increase in other
assets, a $21.0 million increase in inventories and a $30.3 million
decrease in accounts payable, accrued liabilities and other long-term
liabilities. The increase in inventories resulted from shipments of
products beginning in the second quarter of 1999 from new business awards
and lower than expected sales of building wire in the first quarter of
1999. In response to the lower than anticipated building wire sales in the
first quarter, production of building wire at two locations was curtailed
during the first half of April 1999 to reduce inventories. The decrease in
accounts payable, accrued liabilities and other long-term liabilities
includes the payment of 1998 rebates, incentive compensation and income
taxes in the first quarter of 1999.
Cash flow used in investing activities was $8.9 million in the first three
months of 1999, principally reflecting $9.2 million of capital expenditures.
Cash flow provided by financing activities in the first three months of
1999 was $53.0 million, primarily reflecting proceeds of borrowings of $57.0
million under General Cable's revolving credit line, partially offset by $1.9
million of dividends paid during the quarter and $2.1 million repayment of other
debt.
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. Borrowings under the Credit Facility were $296.0 million
at March 31, 1999.
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.
13
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
In November 1997, General Cable entered into interest rate swap agreements
with the three banks which effectively fix interest rates for specific amounts
borrowed under the Credit Facility as follows (dollars in millions):
<TABLE>
<CAPTION>
Fixed
Notional Interest
Period Amounts Rate
------ ------- ----
<S> <C> <C>
November 1997 to November 1998 $180.0 5.9%
November 1998 to November 1999 125.0 6.2%
November 1999 to November 2000 75.0 6.2%
November 2000 to November 2001 25.0 6.2%
</TABLE>
A facility fee accrues on the full amount of the Credit Facility,
regardless of usage. The facility fee ranges between 8.0 and 20.0 basis points
per annum and the spread over LIBOR ranges between 17.0 and 42.5 basis points
per annum. Both the facility fee and the spread over LIBOR are subject to
periodic adjustment depending upon General Cable's Leverage Ratio. As a result
of the Company's strong financial performance, both the facility fee and the
spread over LIBOR were adjusted down effective March 31, 1998 to the minimum
amount provided under the Credit Facility. The Credit Facility restricts certain
corporate acts and contains required minimum financial ratios and other
covenants.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Absent corrective
actions, a computer program that has date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions to various activities and
operations.
The Company began a Year 2000 readiness program in 1997. Key financial and
operational systems including equipment with embedded systems have been
inventoried and assessed for Year 2000 compliance. As of March 31, 1999, all
primary business systems have been made Year 2000 compliant. Approximately 97%
of plant machinery has been evaluated, with 91% of the machinery already Year
2000 compliant. The remaining machinery will be Year 2000 ready by the third
quarter of 1999.
The Company has contacted the majority of its key customers and vendors
regarding their plans for Year 2000 readiness. The key customers indicate they
will be ready by the third quarter of 1999, while the key suppliers anticipate
readiness by the fourth quarter of 1999. The effect, if any, on the Company's
results of operation from failure of third parties to be Year 2000 ready is not
reasonably estimable.
The Company currently believes that the most reasonably likely worst case
scenario with respect to the Year 2000 issue is the failure of a supplier,
including utility suppliers, to become Year 2000 compliant, which could result
in the temporary interruption of the supply of necessary products or services to
a manufacturing facility. This could result in interruptions in production for a
period of time, which in turn
14
<PAGE> 15
GENERAL CABLE CORPORATION AND SUBSIDIARIES
could result in potential lost sales and profits. Additionally, marketing and
administrative expense could increase if automated functions would need to be
performed manually.
Contingency plans to protect the business from Year 2000-related
interruptions are being developed and will address the recovery procedures in
the event of a failure of critical business systems, including supplier and
customer relationships. These plans will encompass, but not be limited to,
alternate sourcing, procedural alternatives and remediation resource
availability. Contingency plans are anticipated to be completed by the third
quarter of 1999.
General Cable's total cost of the Year 2000 project is estimated to be
$2.5 million including $1.4 million of estimated expense and $1.1 million of
capital expenditures. Approximately $0.8 million has been expensed and $1.1
million has been capitalized through March 31, 1999.
15
<PAGE> 16
GENERAL CABLE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K - None
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, General
Cable Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENERAL CABLE CORPORATION
Signed: May 12, 1998 By: s/CHRISTOPHER F. VIRGULAK
------------------------------------
Christopher F. Virgulak
Executive Vice President, Chief
Financial Officer and Treasurer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1999 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,800
<SECURITIES> 0
<RECEIVABLES> 168,800
<ALLOWANCES> 6,500
<INVENTORY> 219,500
<CURRENT-ASSETS> 417,200
<PP&E> 276,800
<DEPRECIATION> 62,900
<TOTAL-ASSETS> 682,000
<CURRENT-LIABILITIES> 127,200
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 183,600
<TOTAL-LIABILITY-AND-EQUITY> 682,000
<SALES> 262,800
<TOTAL-REVENUES> 262,800
<CGS> 216,000
<TOTAL-COSTS> 216,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,500
<INCOME-PRETAX> 12,900
<INCOME-TAX> 4,800
<INCOME-CONTINUING> 8,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,100
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
