<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 June 30, 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 July 30, 1999
----- ----------------------------
Common Stock, $.01 Par Value 36,043,628
<PAGE> 2
GENERAL CABLE CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements
Statements of Income -
For the three and six months ended June 30, 1999 and 1998 3
Balance Sheets -
June 30, 1999 and December 31, 1998 4
Statements of Cash Flows -
For the six months ended June 30, 1999 and 1998 5
Statements of Changes in Shareholders' Equity -
For the six months ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURE 21
</TABLE>
<PAGE> 3
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 438.6 $ 306.7 $ 701.4 $ 585.3
Cost of sales 357.9 239.8 573.9 461.4
------- ------- ------- -------
Gross profit 80.7 66.9 127.5 123.9
Selling, general and administrative expenses 51.4 33.3 80.9 64.6
------- ------- ------- -------
Operating income 29.3 33.6 46.6 59.3
------- ------- ------- -------
Interest income (expense):
Interest expense (8.7) (4.2) (13.2) (8.0)
Interest income 0.3 0.2 0.4 0.5
------- ------- ------- -------
(8.4) (4.0) (12.8) (7.5)
------- ------- ------- -------
Earnings before income taxes 20.9 29.6 33.8 51.8
Income tax provision (7.9) (11.5) (12.7) (20.2)
------- ------- ------- -------
Net income $ 13.0 $ 18.1 $ 21.1 $ 31.6
======= ======= ======= =======
Earnings per common share $ 0.36 $ 0.49 $ 0.57 $ 0.86
======= ======= ======= =======
Weighted average common shares 36.4 36.8 36.7 36.8
======= ======= ======= =======
Earnings per common share-assuming dilution $ 0.36 $ 0.48 $ 0.57 $ 0.84
======= ======= ======= =======
Weighted average common shares-assuming
dilution 36.5 37.7 36.8 37.6
======= ======= ======= =======
</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 June 30, December 31,
1999 1998
----------- -------------
Current Assets: (unaudited)
<S> <C> <C>
Cash $ 74.0 $ 3.4
Receivables, net 523.4 163.4
Inventories 442.8 198.5
Deferred income taxes 15.1 15.3
Prepaid expenses and other 18.3 9.7
-------- --------
Total current assets 1,073.6 390.3
Property, plant and equipment, net 361.1 210.8
Deferred income taxes 46.0 24.2
Prepaid pension cost 57.6 --
Other non-current assets 66.3 25.7
-------- --------
Total assets $1,604.6 $ 651.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 353.3 $ 99.6
Accrued liabilities 170.9 56.9
-------- --------
Total current liabilities 524.2 156.5
Long-term debt 785.7 246.8
Other liabilities 115.1 70.5
-------- --------
Total liabilities 1,425.0 473.8
-------- --------
Shareholders' Equity:
Common stock, $0.01 par value:
Issued and outstanding shares:
June 30, 1999 - 36,163,024
December 31, 1998 - 36,815,340 0.4 0.4
Additional paid-in capital 89.8 84.8
Retained earnings 120.7 103.2
Accumulated other comprehensive loss (10.2) (5.2)
Treasury stock - 858,400 shares in 1999 (11.7) --
Other shareholders' equity (9.4) (6.0)
-------- --------
Total shareholders' equity 179.6 177.2
-------- --------
Total liabilities and shareholders' equity $1,604.6 $ 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, AUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------
1999 1998
------ ------
<S> <C> <C>
Cash flows of operating activities:
Net income $ 21.1 $ 31.6
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 14.4 8.6
Deferred income taxes .3 1.6
Changes in operating assets and liabilities, net of effect of
acquisitions:
Increase in receivables (38.9) (12.8)
Increase in inventories (9.7) (19.7)
Increase in other assets (6.9) (1.1)
Increase (decrease) in accounts payable,
accrued and other liabilities (7.2) 11.2
------ ------
Net cash flows of operating activities (26.9) 19.4
------ ------
Cash flows of investing activities:
Capital expenditures (24.5) (32.0)
Acquisitions, net of cash acquired (366.0) --
Proceeds from the sale of property -- 1.6
Other, net (2.1) 0.2
------ ------
Net cash flows of investing activities (392.6) (30.2)
------ ------
Cash flows of financing activities:
Dividends paid (3.7) (2.4)
Net changes in revolving credit borrowings (239.0) 20.0
Issuance of long-term debt 747.0 --
Acquisition of treasury stock (11.7) --
Repayment of other long-term debt (2.5) (0.4)
------ ------
Net cash flows of financing activities 490.1 17.2
------ ------
Increase in cash 70.6 6.4
Cash-beginning of period 3.4 4.2
------ ------
Cash-end of period $ 74.0 $ 10.6
====== ======
SUPPLEMENTAL INFORMATION
Income taxes paid, net of refunds $ 14.0 $ 13.0
====== ======
Interest paid $ 8.1 $ 6.9
====== ======
NONCASH ACTIVITIES
Issuance of restricted stock, net of forfeitures $ 4.3 $ 0.8
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Accumulative
Common Stock Additional Other Other
------------------- Paid-In Retained Comprehensive Treasury Shareholders'
Shares Amount Capital Earnings Income(Loss) Stock Equity Total
------ ------ ------- -------- ------------ ----- ------ -----
<S> <C> <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 21.1 21.1
Foreign currency
translation
adjustment (5.0) (5.0)
------
Comprehensive 16.1
income
Dividends (3.7) (3.7)
Issuance of
restricted stock 205,315 4.3 (4.3) -
Amortization of
restricted stock
and other 0.6 0.7 1.3
Acquisition of
treasury stock (858,400) (11.7) (11.7)
Other 769 0.1 0.1 0.2 0.4
---------- ------- ------- ------- ------- ------- ------ ------
Balance, June 30, 36,163,024 $ 0.4 $ 89.8 $120.7 $(10.2) $(11.7) $(9.4) $179.6
1999 ========== ======= ======= ======= ======= ======= ====== ======
Balance, December 36,773,139 $ 0.4 $ 83.3 $ 38.2 $ 0.5 $ - $ - $122.4
31, 1997
Comprehensive
income:
Net income 31.6 31.6
------
Comprehensive 31.6
income
Dividends (2.4) (2.4)
Issuance of
restricted stock 34,365 0.8 0.8
Other (5,980) 0.1 (0.2) (0.1)
---------- ------- ------- ------- ------- ------ ------ ------
Balance, June 30, 36,801,524 $ 0.4 $ 84.2 $ 67.2 $ 0.5 $ - $ - $152.3
1998 ========== ======= ======= ======= ======= ====== ====== ======
</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 and six months ended June 30,
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, as amended, no later than January 1, 2001. Management has
not yet analyzed the impact of SFAS No. 133 on its consolidated financial
statements.
2. ACQUISITIONS
On May 28, 1999, General Cable completed the first phase of the transaction to
acquire BICC plc's worldwide energy cable and cable systems businesses for a
purchase price of $337.9 million in cash, subject to adjustment for changes in
certain balances. Phase one was comprised of all of the North America operations
and all of the operations in Spain, Italy, the United Kingdom, and New Zealand.
The acquisition was financed by a portion of the Company's new $1.05 billion
debt facility which was obtained to fund the acquisition, refinance existing
debt, provide working capital flexibility and allow for additional business
development activities. This acquisition has been accounted for under the
purchase method of accounting.
At the end of the second quarter, General Cable completed the second phase of
the transaction to acquire BICC plc's worldwide energy cable and cable systems
businesses including ownership interests in businesses in Fiji, Portugal,
Zimbabwe, Mozambique, Angola, Indonesia, Malaysia and Singapore for a cash
payment of $26 million, subject to adjustment. General Cable expects to complete
the third and final phase of the acquisition, which includes joint venture
businesses in Germany and the Middle East, by December 31, 1999.
7
<PAGE> 8
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The purchase price has been preliminarily allocated based on estimated fair
values of assets acquired and liabilities assumed at the date of acquisition,
subject to final adjustments. The results of the businesses acquired in phase
one of the transaction have been included in the consolidated financial
statements since the acquisition date. The estimated fair values of assets
acquired and liabilities assumed for both phase one and phase two of the
transaction were as follows (in millions):
<TABLE>
<S> <C>
Receivables $323.0
Inventories 232.8
Property, plant and equipment 179.1
Prepaid pension cost 57.6
Other assets 50.8
-------
Total 843.3
Accounts payable and accrued liabilities (439.2)
Long-term debt (21.8)
Other liabilities (18.4)
-------
Total net $363.9
======
</TABLE>
The allocation of purchase price will be finalized during 1999 upon completion
of certain valuations and studies related to among other things pension and
post-retirement benefit plans, fixed assets, restructuring reserves related to
certain duplicate facilities and other activities to integrate the acquired
operations.
The acquisition combines BICC's European, North American, Middle Eastern,
Asia/Pacific and African operations with General Cable's worldwide operations.
The operations 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, serving industrial,
utility, OEM, military/government and electrical and communications distributor
customers worldwide.
The following unaudited pro forma information presents a summary of General
Cable's consolidated statement of income and the acquired businesses of BICC as
if the acquisition, including phases one, two, and three, had occurred on
January 1, 1998 (in millions except per share data):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
-------- ---------
<S> <C> <C>
Net sales $1,527.2 $1,453.6
Net income (13.0) 22.8
Earnings per share of common stock
Basic $(0.35) $0.62
Diluted (0.35) 0.61
</TABLE>
8
<PAGE> 9
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These unaudited pro forma results have been prepared for informational purposes
only. They do not purport to be indicative of the results of operations that
actually would have resulted had the combination occurred on January 1, 1998, or
of future results of operations of the consolidated entities.
On June 30, 1999, General Cable purchased SpecTran Corporation's joint venture
interest in General Photonics for $2.3 million in cash. General Photonics, a
manufacturer of optical fiber cables, was formed by General Cable Corporation
and SpecTran in 1996.
3. INVENTORIES
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- --------------
<S> <C> <C>
Raw materials $ 52.2 $ 23.0
Work in process 60.5 25.2
Finished goods 330.1 150.3
-------- --------
Total $ 442.8 $ 198.5
======== ========
</TABLE>
General Cable values only the copper and aluminum component of its North
American inventories using the last-in/first-out (LIFO) method. At June 30, 1999
and December 31, 1998, $116.0 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 $107.6 million at June 30, 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.
4. LONG-TERM DEBT
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------- ----------
<S> <C> <C>
Term loans $ 760.4 $ --
Revolving Credit Facility -- 239.0
Other 25.3 7.8
-------- --------
$ 785.7 $ 246.8
======== ========
</TABLE>
In conjunction with the acquisition of BICC plc's worldwide energy cable and
cable systems businesses, General Cable entered into a new $1.05 billion credit
facility which consists of: 1) term loans in Sterling, Euros and Dollars in an
aggregate amount up to $125.0 million, 2) term loans in Dollars in an aggregate
amount up to $675.0 million and 3) revolving loans and letters of credit in
Dollars and Foreign Currencies in aggregate amount up to $250.0 million.
9
<PAGE> 10
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The new facility loan bears interest, at the Company'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 plus 1/2 of 1%.
A commitment fee accrues on half of the new facility, regardless of usage. The
commitment fee ranges between 35.0 and 50.0 basis points per annum and the
spread over LIBOR ranges between 175.0 and 325.0 basis points per annum. Both
the commitment fee and the spread over LIBOR are subject to periodic adjustment
depending upon the Company's Leverage Ratio. The new facility restricts certain
corporate acts and contains required minimum financial ratios and other
covenants.
Repayments under the term loans begin in September 2000 with the final maturity
varying between March 2005 and March 2007.
5. OTHER SHAREHOLDERS' EQUITY
Other shareholders' equity consisted of the following (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- -----------
<S> <C> <C>
Loans to shareholders $(5.8) $(6.0)
Unvested restricted stock, net of amortization (3.6) --
----- -----
$(9.4) $(6.0)
===== =====
</TABLE>
In the first six months of 1999, General Cable awarded 205,315 shares of
restricted stock, net of forfeitures. Restrictions on the majority of the shares
issued in 1999 will expire ratably over two years.
6. 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 June 30,
----------------------------------------------------------------------------------
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 $ 13.0 36.4 $0.36 $18.1 36.8 $0.49
===== =====
Dilutive effect of stock options - 0.1 - 0.9
------ ---- ----- ----- ---- -----
Earnings per common share -
Assuming dilution $ 13.0 36.5 $0.36 $18.1 37.7 $0.48
====== ==== ===== ===== ==== =====
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30,
-----------------------------------------------------------------------------
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 $ 21.1 36.7 $ 0.57 $ 31.6 36.8 $ 0.86
======== ========
Dilutive effect of stock options -- 0.1 -- 0.8
------- ---- ------- -----
Earnings per common share-
Assuming dilution $ 21.1 36.8 $ 0.57 $ 31.6 37.6 $ 0.84
======= ==== ======== ======= ===== ========
(1) Numerator
(2) Denominator
</TABLE>
7. SEGMENT INFORMATION
The Electrical Group manufactures and sells wire and cable products which
conduct electrical current for industrial, commercial and residential power and
control applications. The Communications Group manufacturers and sells wire and
cable products which transmit low voltage signals for voice, data, video and
control applications. The Energy Group, which was added with the Acquisition,
manufactures and sells wire and cable products which include low-medium-and
high-voltage power distribution and power transmission products for terrestrial
and subsea applications.
Summarized financial information for the Company's operating segments for the
three months and six months ended June 30, is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended June 30
Electrical Communications Energy
Group Group Group Corporate Total
----- ----- ----- --------- -----
<S> <C> <C> <C> <C> <C>
Net Sales:
1999 $212.4 $135.9 $ 90.3 -- $438.6
1998 177.2 129.5 -- -- 306.7
Operating Profit:
1999 2.9 16.9 9.5 -- 29.3
1998 12.4 21.2 -- -- 33.6
Identifiable Assets:
June 30, 1999 452.8 279.5 683.3 $ 189.0 1,604.6
December 31, 1998 318.1 235.9 -- 97.0 651.0
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30
-------------------------
Electrical Communications Energy
Group Group Group Corporate Total
----- ----- ----- --------- -----
<S> <C> <C> <C> <C> <C>
Net Sales:
1999 $367.2 $243.9 $ 90.3 -- $701.4
1998 345.6 239.7 -- -- 585.3
Operating Profit:
1999 7.2 29.9 9.5 -- 46.6
1998 23.5 35.8 -- -- 59.3
</TABLE>
12
<PAGE> 13
GENERAL CABLE CORPORATION AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
General Cable, which does business as BICCGeneral ("the Company"), is a leader
in the development, design, manufacture, marketing and distribution of copper,
aluminum and fiber optic wire and cable products for the communications, energy
and electrical markets. Communications wire and cable products transmit low
voltage signals for voice, data, video and control applications. Energy cables
include low-, medium- and high-voltage power distribution and power transmission
products for aerial, terrestrial and subsea applications. Electrical wire and
cable products conduct electrical current for industrial, commercial and
residential power and control applications.
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: domestic and local country price
competition, particularly in certain segments of the Energy products, building
wire and cordset markets, and other competitive pressures; general economic
conditions, particularly those affecting the 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.
On April 6, 1999 the Company entered into an agreement to acquire BICC plc's
worldwide energy cable and cable systems businesses ("the Acquisition"). On May
28, 1999, the Company completed the first phase of the transaction with the
payment to BICC plc of $337.9 million. Phase one was comprised of all of the
United States and Canada operations, and all of the operations in Spain (and its
subsidiaries), Italy, the United Kingdom, and New Zealand. The Acquisition was
accounted for as a purchase, and accordingly, the results of operations include
periods after the closing date. At the end of the second quarter, the Company
completed the second phase of its acquisition including ownership interest in
businesses in Fiji, Portugal, Zimbabwe, Mozambique, Angola, Indonesia, Malaysia
and Singapore with a payment of $26 million. The Company expects to complete the
third and final phase of the acquisition, which includes joint venture
businesses in Germany and the Middle East, by December 31, 1999.
On June 30, 1999, the Company purchased SpecTran Corporation's joint venture
interest in General Photonics for $2.3 million in cash. General Photonics, a
manufacturer of optical fiber cables, was formed by General Cable Corporation
and SpecTran in 1996.
13
<PAGE> 14
GENERAL CABLE CORPORATION AND SUBSIDIARIES
The Company'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 $0.67 per pound during the second quarter of 1999 and $0.65
during the first six months of 1999, $0.78 per pound for the second quarter and
the first six months of 1998. 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. The
Company 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. The
Company 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.
The Company generally experiences certain seasonal trends in sales and cash
flow. Larger amounts of cash are generally required during the first and second
quarters of the year to build inventories in anticipation of higher demand
during the spring and summer, when construction activity increases. In general,
receivables related to higher sales activity during the spring and summer are
collected in the third and fourth quarters of the year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1998
Net income was $13.0 million for the second quarter of 1999 compared to $18.1
million in the second quarter of 1998. Fully diluted earnings per share were
$0.36 per share in the second quarter of 1999 compared to $0.48 per share in the
second quarter of 1998.
Net earnings of $13.0 million for the second quarter of 1999 reflects
significant unit volume organic growth (up over seven percent in the quarter),
the immediate accretive impact of the Acquisition, strong sales and operating
performances by General Cable's industrial, power and control and specialty
retail business units, and another strong quarter of over five percent
manufacturing productivity. Compared to the second quarter of 1998, earnings per
share declined 12 cents or 25 percent, principally reflecting the negative
impact of lower prices for building wire products and some communications cables
partially offset by the acquisition and volume-related earnings growth,
principally in Communications cables, the positive impact of stepped up cost
reduction activities, and the share repurchase program begun in the quarter and
continuing.
Net sales on an as reported basis increased 43% from $306.7 million in the
second quarter of 1998 to $438.6 million in the second quarter of 1999. After
adjusting 1998 net sales to reflect the $0.11 decrease in the average monthly
Comex price per pound of copper in the second quarter of 1999, net sales
increased 49% to $438.6 million, up from $295.0 million for the same period in
1998. The increase in copper-adjusted net sales includes approximately $145
million of net sales related to the Acquisition for the month of June. The
increase in copper-adjusted net sales reflects a 26% increase in Electrical
products, an 8% increase in Communication products and $90.3 million of Energy
products sales from the Acquisition.
14
<PAGE> 15
GENERAL CABLE CORPORATION AND SUBSIDIARIES
The increase in Communication products copper-adjusted net sales included higher
sales volume of plastic insulated cable (PIC) to Regional Bell Operating Company
customers and sales growth of 22% in Category 5 and enhanced high-speed data
networking cables. The increase in Electrical products reflects the Acquisition
and an increase in sales volume of automotive aftermarket and consumer cordset
products, partially offset by lower selling prices for building wire products.
Net sales of automotive aftermarket products increased 30% on the strength of
higher sales to a leading automotive aftermarket retailer. Consumer cordset net
sales were up 52% in the second quarter with significant increases in sales to
the leading home center chain and a major hardware store retailer.
Selling, general and administrative expenses increased to $51.4 million in the
second quarter of 1999 from $33.3 million in the second quarter of 1998
primarily reflecting the Acquisition, partially offset by a reduction in
controllable spending in response to market conditions. Selling, general and
administrative expenses as a percentage of copper-adjusted net sales was 11.7%
in the second quarter of 1999, compared to 11.3% in the second quarter of 1998.
Selling, general and administrative expenses for the acquired businesses were
approximately 14% of net sales in the second quarter of 1999.
Operating income decreased to $29.3 million in the second quarter of 1999
compared to $33.6 million in the second quarter of 1998. The reduced operating
income reflects significantly lower building wire pricing and to a lesser extent
lower pricing for communication cables, partially offset by manufacturing cost
reductions and operating income related to the acquired businesses for the month
of June. In the second quarter of 1999, lower building wire pricing was
responsible for a $15 million reduction in operating income. The average
building wire price premium over the cost of copper was down 24% in the second
quarter of 1999 compared to the same period in 1998.
Selling prices for Communication products were lower for both PIC products and
certain data communication cables. Average selling prices for PIC products were
6% lower in the second quarter of 1999 compared to the same period in 1998
reflecting contractual price reductions resulting from lower raw material price
indices and lower pricing conditions in the commercial marketplace. Selling
prices for certain data communication cables were approximately 12% lower in the
second 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
agreements 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. During the quarter the
Company took action to reduce its salaried headcount by 70 people. This action
when combined with rationalizations in the BICC plc energy cables business will
further reduce costs in the second half.
Net interest expense was $8.4 million in the second quarter of 1999 compared to
$4.0 million in the second quarter of 1998. The increase reflects increased
borrowings related to the Acquisition and higher interest rates under the new
credit facility.
The effective income tax rate for the second quarter of 1999 was 37.5% compared
to 39% for the second quarter of 1998.
15
<PAGE> 16
GENERAL CABLE CORPORATION AND SUBSIDIARIES
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998
Net income was $21.1 million in the first six months of 1999 compared to $31.6
million in the first six months of 1998. Fully diluted earnings per share were
$0.57 per share for the first six months of 1999 compared to $0.84 per share for
the same period in 1998.
Net sales on an as reported basis increased 20% to $701.4 million in the first
six months of 1999 from $585.3 million for the same period in 1998. After
adjusting 1998 net sales to reflect the $0.13 decrease in the average monthly
Comex price per pound of copper in the first six months of 1999, net sales
increased $140.9 million or 25%, up from $560.5 million for the first six months
of 1998. The increase in copper-adjusted net sales reflects a 12% increase in
Electrical products and a 5% increase in Communication products and $90.3
million of Energy products sales from the Acquisition.
The increase in Electrical products net sales includes net sales related to the
Acquisition and increased sales volume of consumer cordset and automotive
aftermarket products, partially offset by lower sales volume and selling prices
for building wire products. Net sales of consumer cordset products were up 44%
in the first six months of 1999 with significant increases in net sales to the
leading home center chain and a major hardware store retailer. Automotive
aftermarket product net sales increased 23% during the first six months of 1999
reflecting sales growth with a leading automotive aftermarket retailer.
Selling, general and administrative expenses increased to $80.9 million in the
first six months of 1999 from $64.6 million in the first six months of 1998. The
increase reflects selling, general and administrative expenses for June 1999
related to the acquired businesses, partially offset by a reduction in
controllable spending in response to market conditions. Selling, general and
administrative expenses as a percentage of copper-adjusted net sales were 11.5%
for both the first six months of 1999 and 1998. The 11.5% for the first six
months of 1999 include June selling, general and administrative expenses for the
acquired businesses at a rate of 14% of net sales.
Operating income was $46.6 million for the first six months of 1999 compared to
$59.3 million for the same period in 1998. The decrease in operating income
reflects lower building wire pricing and to a lesser extent lower pricing for
PIC products and certain data communications cables. The average building wire
price premium over the cost of copper was down 20% in the first six months of
1999, which amounted to an operating profit reduction of approximately $24.0
million. These reductions in operating profit were partially offset by
manufacturing cost reductions and operating income related to the acquired
businesses for June 1999. Manufacturing cost reductions included savings related
to materials, cycle-time reductions and process improvements.
Net interest expense was $12.8 million for the first six months of 1999 compared
to $7.5 million in the same period of 1998. The increase reflects increased
borrowings related to the Acquisition and higher interest rates under the new
credit facility effective June 1, 1999.
The effective income tax rate for the first six months of 1999 was 37.5%
compared to 39% for the first six months of 1998.
16
<PAGE> 17
GENERAL CABLE CORPORATION AND SUBSIDIARIES
------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
In general, the Company requires cash for working capital, capital expenditures,
debt repayment, interest and taxes. The Company'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 six months of 1999 was $26.9
million. Net income before depreciation and deferred taxes of $35.8 million was
more than offset by a $38.9 million increase in receivables, a $6.9 million
increase in other assets, a $9.7 million increase in inventories and a $7.2
million decrease in accounts payable, accrued liabilities and other long-term
liabilities, all excluding the impact of the net assets acquired in the
Acquisition. The increase in accounts receivable reflects the normal increase in
activity during the spring and summer months of the second quarter versus the
period prior to the year-end.
Cash flow used in investing activities was $392.6 million in the first six
months of 1999, principally consisting of the phase I and phase II completions
of the Acquisition (net of cash). Capital expenditures during the period were
$24.5 million.
Cash flow provided by financing activities in the first six months of 1999 was
$490.1 million, primarily reflecting net proceeds of borrowings of $747.0
million under the Company's new $1.05 billion credit facility ("the new
facility"). The borrowings were used primarily to fund the phase I and phase II
completion of the Acquisition and to pay down the existing revolving credit
facility of $335.7 million as of May 28, 1999. In the period $11.7 million was
spent on purchasing 858,400 General Cable common shares pursuant to a Board of
Directors approved plan to repurchase up to $50 million of General Cable stock.
The final amount of stock repurchased will be determined by overall financial
and market conditions. Also in the period $3.7 million of dividends were paid to
shareholders of common stock.
The new facility replaced the $350.0 million credit facility originally
established as part of the initial public offering of General Cable common stock
in May 1997. Both facilities were entered into with The Chase Manhattan Bank as
administrative agent, and a syndicate of banks. The new facility consists of: 1)
term loans in Sterling, Euros and Dollars in an aggregate amount up to $125.0
million, 2) term loans in Dollars in an aggregate amount up to $675.0 million
and 3) revolving loans and letters of credit in Dollars and Foreign Currencies
in aggregate amount up to $250.0 million. Borrowings are secured by assets
of the Company's North American operations and a portion of the stock of its
non-North American subsidiaries and are also guaranteed by the Company's
principal operating subsidiaries.
17
<PAGE> 18
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Borrowings under the new facility were $760.4 million at June 30, 1999.
The new facility loans bear interest, at the Company'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 plus 1/2 of 1%.
A commitment fee accrues on the full amount of the new facility, regardless of
usage. The commitment fee ranges between 35.0 and 50.0 basis points per annum
and the spread over LIBOR ranges between 175.0 and 325.0 basis points per annum.
Both the commitment fee and the spread over LIBOR are subject to periodic
adjustment depending upon the Company's Leverage Ratio. The new facility
restricts certain corporate acts and contains required minimum financial ratios
and other covenants.
In November 1997, General Cable entered into interest rate swap agreements with
three banks which effectively fix interest rates for specific amounts borrowed
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>
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.
General Cable 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. It is expected that as of
September 30, 1999, all primary business systems will have been made Year 2000
compliant. As of June 30, 1999, more than 97% of plant machinery has been
evaluated, with 93% of the machinery already Year 2000 compliant. The remaining
machinery will be Year 2000 ready by the third quarter of 1999.
18
<PAGE> 19
GENERAL CABLE CORPORATION AND SUBSIDIARIES
General Cable has contacted the majority of its key customers and suppliers
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 acquired BICC businesses began a Year 2000 readiness program in early 1997.
Key financial and operational systems including equipment with embedded systems
have been inventoried and assessed for Year 2000 Compliance. All key business
systems should be compliant by September 30, 1999. Overall approximately 84% of
the systems, processes and equipment have been evaluated, with 82% already
compliant. The remainder are planned to be compliant at various times during the
remainder of 1999.
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 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.
The Company's total cost of the Year 2000 project, which includes the acquired
BICC businesses after May 28, 1999, is estimated to be $4.0 million including
$2.6 million of estimated expense and $1.4 million of capital expenditures.
19
<PAGE> 20
GENERAL CABLE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
---------------------------
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
General Cable's Annual Meeting of Shareholders was held on May 13, 1999.
Proxies were solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934 and each of the following matters was voted upon and
approved by the shareholders as indicated below. Of the 37,428,060 shares
outstanding, 4,095,729 were not voted.
<TABLE>
<CAPTION>
a) Election of Directors:
For Against
--- -------
<S> <C> <C>
Gregory B. Kenny 32,914,654 417,677
Robert L. Smialek 32,915,266 417,065
</TABLE>
The following Directors are continuing in office after the date of the Annual
Meeting: Gregory E. Lawton, Jeffrey Noddle, Stephen Rabinowitz and John E.
Welsh, III.
b) Ratification of appointment of Deloitte & Touche LLP to
audit the 1999 consolidated financial statements of
General Cable. Votes for - 33,311,452; votes against -
13,650; and abstentions - 7,229.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
(i) Form 8-K for the acquisition of the worldwide energy
cable and cable systems businesses of BICC plc and its
subsidiaries filed on June 14, 1999.
(ii) Form 8-K/A including the financial statements and pro
forma financial information required to be filed with
respect to the acquisition of the worldwide energy
cable and cable systems businesses of BICC plc and its
subsidiaries filed on August 13, 1999.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, General
Cable Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENERAL CABLE CORPORATION
Signed: August 16, 1999 By: s/CHRISTOPHER F. VIRGULAK
--------------------------
Christopher F. Virgulak
Executive Vice President, Chief
Financial Officer and Treasurer
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1999 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 74,000
<SECURITIES> 0
<RECEIVABLES> 543,000
<ALLOWANCES> 19,600
<INVENTORY> 442,800
<CURRENT-ASSETS> 1,073,600
<PP&E> 917,300
<DEPRECIATION> 556,200
<TOTAL-ASSETS> 1,604,600
<CURRENT-LIABILITIES> 524,200
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 179,200
<TOTAL-LIABILITY-AND-EQUITY> 1,604,600
<SALES> 701,400
<TOTAL-REVENUES> 701,400
<CGS> 573,900
<TOTAL-COSTS> 573,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,200
<INCOME-PRETAX> 33,800
<INCOME-TAX> 12,700
<INCOME-CONTINUING> 21,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,100
<EPS-BASIC> 0.57
<EPS-DILUTED> 0.57
</TABLE>
