SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
33-93970
(Commission File Number)
International Wire Group, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
43-1705942
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 726-1323
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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:
<TABLE>
<CAPTION>
Outstanding at
April 30, 1996
<S> <C>
International Wire Group, Inc.
Common Stock 1,000
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
INDEX
<CAPTION>
Page
<S> <C>
International Wire Group, Inc.
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 3
Consolidated Statement of Operations for the three months 4
ended March 31, 1996
Consolidated Statement of Cash Flows for the three months 5
ended March 31, 1996
Notes to Consolidated Financial Statements 6
Wirekraft Holdings Corp. (formerly WB Holdings Inc.)
Consolidated Statement of Operations for the three months 10
ended February 28, 1995
Consolidated Statement of Cash Flows for the three months 11
ended February 28, 1995
Notes to Consolidated Financial Statements 12
THL-Omega Holding Corporation
Consolidated Statement of Operations for the three months 13
ended March 31, 1995
Consolidated Statement of Cash Flows for the three months 14
ended March 31, 1995
Notes to Consolidated Financial Statements 15
Management's Discussion and Analysis of Financial Condition and Results 16
of Operations
PART II - OTHER INFORMATION 18
SIGNATURES 19
Exhibit 27.1 - Financial Data Schedule 20
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
March 31, December 31,
1996 1995
----------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents..................... $ 5,014 $ -
Accounts receivable, less allowance of $904
and $860, respectively...................... 78,103 47,180
Inventories................................... 62,175 57,777
Prepaid expenses and other.................... 3,498 2,858
--------- ---------
Total current assets........................ 148,790 107,815
Property, plant and equipment, net............. 116,666 82,259
Deferred financing costs, net.................. 22,565 16,688
Intangibles assets, net........................ 324,086 215,400
Other assets................................... 5,677 5,758
--------- ---------
Total assets................................ $617,784 $427,920
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations... $ 20,431 $ 12,662
Accounts payable.............................. 43,666 37,627
Accrued and other liabilities................. 33,448 26,011
Accrued interest.............................. 9,033 2,516
--------- ---------
Total current liabilities................... 106,578 78,816
Long-term obligations, less current maturities.. 449,546 326,015
Deferred income taxes........................... 8,194 8,194
Other long-term liabilities..................... 6,296 4,897
--------- ---------
Total liabilities........................... 570,614 417,922
Stockholders' equity:
Common stock, $.01 par value, 1,000 shares
authorized, issued and outstanding.......... 0 0
Series A Senior Cumulative Exchangeable
Redeemable Preferred Stock, $.01 par value,
400,000 shares authorized, issued and
outstanding................................. 4 -
Contributed capital........................... 125,113 81,051
Carryover of predecessor basis................ (67,762) (67,762)
Accumulated deficit........................... (10,185) (3,291)
--------- ---------
Total stockholders' equity.................. 47,170 9,998
--------- ---------
Total liabilities and stockholders' equity.. $617,784 $427,920
========= =========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996
<S> <C>
Net sales............................................ $118,807
Operating expenses:
Cost of goods sold................................. 93,475
Selling, general and administrative................ 9,721
Depreciation and amortization...................... 6,044
Inventory valuation adjustment..................... 2,000
Expenses related to plant closings................. 4,000
---------
Operating income..................................... 3,567
Other income (expense):
Interest expense................................... (9,572)
Amortization of deferred financing costs........... (723)
Other, net......................................... 89
---------
Loss before income tax provision..................... (6,639)
Income tax provision................................. 255
---------
Net loss............................................. $ (6,894)
=========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996
<S> <C>
Cash flows provided by (used in) operating
activities:
Net loss........................................... $ (6,894)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.................... 6,044
Amortization of deferred financing costs......... 723
Inventory valuation adjustment................... 2,000
Change in assets and liabilities, net of acquisitions:
Accounts receivable............................ (8,568)
Inventories.................................... 292
Prepaid expenses and other..................... (335)
Accounts payable............................... (3,150)
Accrued and other liabilities.................. 2,724
Accrued interest............................... 6,517
Income taxes payable/refundable................ 19
Other long-term liabilities.................... (101)
----------
Net cash from operating activities................... (729)
----------
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash.......................... (160,259)
Capital expenditures, net.......................... (2,537)
----------
Net cash from investing activities................... (162,796)
----------
Cash flows provided by (used in) financing
activities:
Equity proceeds.................................... 45,039
Proceeds from issuance of long-term obligations.... 128,200
Borrowing of long-term obligations............... 3,100
Financing fees and other......................... (7,800)
----------
Net cash from financing activities................... 168,539
----------
Net change in cash and cash equivalents.............. 5,014
Cash and cash equivalents at beginning of the period. -
----------
Cash and cash equivalents at end of the period....... $ 5,014
==========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
1. The Company
International Wire Group, Inc. ("Group" or the "Company"), a Delaware
corporation, was formed to participate in the transactions contemplated by
the IW Acquisition (as described below). On June 12, 1995, Wirekraft
Holdings Corp. ("Wirekraft"), Omega Wire Corp. ("Omega"), International Wire
Holding Company ("Holding", the parent company of Group), Group, Wirekraft
Acquisition Company and certain shareholders of Wirekraft and Omega entered
into a series of acquisitions and mergers (the "IW Acquisition") pursuant to
which Group acquired all of the common equity securities (and all securities
convertible into such securities) of Wirekraft and all of the common equity
securities of Omega. The Company through its two segments, the Wire segment
and the Harness segment, is engaged in the design, manufacture and marketing
of non-insulated and insulated copper wire and wire harnesses. The Company's
products are used by a wide variety of customers primarily in the appliance,
computer and data communications, automotive and industrial equipment
industries.
2. Basis of Presentation
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements reflect all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of financial
position and results of operations. The results for the three months ended
March 31, 1996, are not necessarily indicative of the results that may be
expected for a full fiscal year.
Statement of Cash Flows
Interest and taxes paid for the three months ended March 31, 1996 were
$3,055 and $236, respectively.
3. Inventories
Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out ("LIFO") method. As a result of a
decline in copper prices from the period December 31, 1995 to March 31, 1996
the Company wrote down the copper valuation in inventory, the effect of which
increased loss before income tax provision by approximately $2,000.
<TABLE>
The composition of inventories at March 31, 1996, is as follows:
<CAPTION>
<S> <C>
Raw materials ............................................ $ 22,894
Work-in-process .......................................... 16,974
Finished goods ........................................... 22,307
--------
Total.................................................... $ 62,175
========
</TABLE>
<PAGE>
4. Intangible Assets
The Company's management has begun a comprehensive review
of the strategic position of its individual business units. This analysis
included the closing of certain Wirekraft facilities and the recent DWT
Acquisition (discussed in Note 6). As a result, the Company is assessing the
carrying value of goodwill. While the Company has not yet completed this
assessment, a possible outcome may be a write-off of a portion of the
goodwill presently carried on its books. The Company expects to conclude on
this matter in the near term, but not later than the filing of its Form 10-K
for the current fiscal year.
5. Long-Term Obligations
The composition of long-term obligations at March 31, 1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Credit Agreement:
Revolving credit facility............................... $ 28,000
Term Facility........................................... 286,125
Senior Subordinated Notes................................. 150,000
Capital leases............................................ 4,875
Other..................................................... 977
----------
469,977
Less, current maturities.................................. (20,431)
----------
$ 449,546
==========
</TABLE>
<TABLE>
The schedule of principal payments for long-term obligations at March 31,
1996 is as follows:
<CAPTION>
<S> <C>
1996.................................................... $ 15,369
1997.................................................... 20,959
1998.................................................... 23,719
1999.................................................... 29,054
2000.................................................... 67,503
Thereafter.............................................. 313,373
---------
Total................................................. $ 469,977
=========
</TABLE>
Credit Agreement
In connection with the IW Acquisition, Group and Holding entered into a
Credit Agreement (the "Credit Agreement") dated as of June 12, 1995 with
certain financial institutions. The Credit Agreement was amended in
connection with the DWT Acquisition (discussed in Note 6) pursuant to an
Amendment to the Credit Agreement dated March 5, 1996 (the "Amended Credit
Agreement"). Borrowings under the Amended Credit Agreement are
collateralized by first priority mortgages and liens on all of the assets of
Group. In addition, borrowings under the Amended Credit Agreement are
guaranteed by Holding.
The Amended Credit Agreement provides senior secured financing of up to
$363,500 consisting of a $111,000 term loan (the "Term A Loan"), an $82,500
term loan (the "Term B Loan"), a $95,000 term loan (the "Term C Loan")
(collectively the "Term Facility") and a $75,000 revolving credit facility
(the "Revolver"). Mandatory principal payments of the Term Facility are due
in quarterly installments. The final installment on the Term A Loan is due
<PAGE>
on September 30, 2000 at which time the Revolver is also due. The final
installments on the Term B Loan and Term C Loan are due on September 30, 2002
and September 30, 2003, respectively.
Borrowings under the Term A Loan and Revolver bear interest, at the
option of Group, at a rate per annum equal to (a) the Alternate Base Rate (as
defined in the Amended Credit Agreement) plus 1.5% or (b) the Eurodollar Rate
(as defined) plus 2.5%. Borrowings under the Term B Loan bear interest, at
the option of Group, at a rate per annum equal to (a) the Alternate Base Rate
(as defined) plus 2.0% or (b) the Eurodollar Rate (as defined) plus 3.0%.
Borrowings under the Term C Loan bear interest at the option of Group, at a
rate per annum equal to (a) the Alternate Base Rate (as defined), plus 2.5%
or (b) the Eurodollar Rate (as defined) plus 3.5%. Interest payment dates
vary depending on the interest rate option to which the Term Facility and the
Revolver are tied, but generally interest is payable quarterly. The Amended
Credit Agreement contains several financial covenants which, among other
things, require Group to maintain certain financial ratios and restrict
Group's ability to incur indebtedness, make capital expenditures and pay
dividends.
Senior Subordinated Notes
The Senior Subordinated Notes due 2005 ("the Senior Notes") were issued
under an indenture, dated June 12, 1995 (the "Indenture") in connection with
the IW Acquisition. The Senior Notes represent unsecured general obligations
of Group and are subordinated to all Senior Debt (as defined in the
Indenture) of Group. The Senior Notes, which were originally sold pursuant
to an exemption from the registration requirements of the Securities Act of
1933, as amended, were exchanged for identical notes registered under such
Act in November, 1995.
The Senior Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured, senior subordinated basis by each
subsidiary of the company (the "Guarantor Subsidiairies") other than Electro
Componentes de Mexico, S.A. de C.V. and Wirekraft Industries de Mexico, S.A.
de C.V. (The "Non-Guarantor Subsidiaries"). Each of the Guarantor
Subsidiaries and Non-Guarantor Subsidiaries is wholly owned by the Company.
Separate financial statements for the respective Guarantor Subsidiaries are
not contained herein because such financial statements are not deemed to
provide material information and the aggregate net assets, liabilities,
earnings and equity of the Guarantor Subsidiaries is substantially equivalent
to the net assets, liabilities, earnings and equity of the Company on a
consolidated basis.
6. DWT Acquisition
On March 5, 1996, Wire Technologies, Inc. ("Wire Technologies"), a
wholly-owned subsidiary of the Company, acquired the businesses of Hoosier
Wire, Inc., Dekko Automotive Wire, Inc., Albion Wire, Inc. and Silicones,
Inc., a group of affiliated companies operating together under the tradename
Dekko Wire Technology Group (the "DWT Acquisition"). The total consideration
paid in connection with the DWT Acquisition, including fees and expenses,
consisted of (i) cash in the amount of $173,239, subject to final
adjustments, and (ii) warrants for the purchase of 2,000,000 shares of Common
Stock, par value $.01 per share, of Holding. The cash portion of the
consideration paid and the transaction fees and expenses incurred in
connection with the DWT Acquisition were funded with (i) $128,200 of senior
debt under the Amended Credit Agreement, (ii) $35,000 from the issuance of
35,000,000 shares of Common Stock, par value $.01 per share, of Holding,
(iii) $39 from the issuance of 3,888,889 shares of Class A Common Stock, par
value $.01 per share, of Holding, and (iv) $10,000 from the issuance of
400,000 shares of Series A Senior Cumulative Exchangeable Redeemable
Preferred Stock, par value $.01 per share, of the Company (sold in units
together with warrants for the purchase of shares of Common Stock, par value
$.01 per share, of Holding).
<PAGE>
The DWT Acquisition was accounted for using the purchase method of
accounting whereby the total acquisition cost has been preliminarily
allocated to the consolidated assets and liabilities based upon their
estimated respective fair values. The purchase price allocations are still
in process. It is not expected that the final allocation of the purchase
cost will result in a materially different allocation than is presented
herein. The total acquisition cost is preliminarily allocated to the
acquired net assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets........................................... $ 36,250
Property, plant and equipment............................ 35,819
Goodwill................................................. 110,337
Fees and costs........................................... 7,800
Current liabilities...................................... (15,467)
Other liabilities........................................ (1,500)
----------
$ 173,239
==========
</TABLE>
The results of operations of Wire Technologies have been included in the
consolidated financial statements since the date of the DWT Acquisition. Pro
forma data, which show condensed results of operations for the three months
ended March 31, 1996 and 1995 as though the DWT Acquisition and related
financing had occurred at the beginning of the respective periods, is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Three Months Ended
March 31,
1996 1995(1)
------------ ---------
<C>
Net sales.................................... $ 146,045 $166,805
Net income (loss)............................ (3,168) 2,824
<FN>
(1) Data gives effect to the IW Acquisition as though it occurred
as of January 1, 1995.
</TABLE>
7. Plant Closing Expense
In March, 1996, the Company recorded a pretax charge to operations of
$4,000 to provide for plant closing costs. The plant closing costs include
provisions for shut-down costs from the period of plant closure to the date
of disposal, commitment costs for leased equipment and facilities and
severance related costs.
<PAGE>
<TABLE>
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
February 28,
1995
<S> <C>
Net sales............................................ $81,285
Operating expenses:
Cost of goods sold................................. 66,711
Selling, general and administrative................ 7,243
Depreciation and amortization...................... 2,464
--------
Operating income..................................... 4,867
Other income (expense):
Interest expense................................... (3,944)
Amortization of deferred financing costs........... (828)
--------
Income before income tax provision................... 95
Income tax provision................................. 47
--------
Net income........................................... $ 48
========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
February 28,
1995
<S> <C>
Cash flows provided by (used in) operating
activities:
Net income......................................... $ 48
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................... 2,464
Amortization of deferred financing costs......... 747
Accretion of debt discount....................... 81
Change in assets and liabilities, net of acquisitions:
Accounts receivable............................ (11,166)
Inventories.................................... (2,065)
Prepaid expenses and other..................... 666
Accounts payable............................... (318)
Accrued and other liabilities.................. (992)
Accrued interest............................... 882
Income taxes payable........................... (256)
Other long-term liabilities.................... (236)
---------
Net cash from operating activities................... (10,145)
---------
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash.......................... (44,973)
Capital expenditures, net.......................... (1,191)
---------
Net cash from investing activities................... (46,164)
---------
Cash flows provided by (used in) financing
activities:
Equity proceeds.................................... 25,750
Proceeds from issuance of long-term obligations.... 24,000
Borrowing of long-term obligations................. 19,639
Repayment of long-term obligations................. (11,519)
Financing fees and other........................... (3,500)
---------
Net cash from financing activities................... 54,370
---------
Net change in cash and cash equivalents.............. (1,939)
Cash and cash equivalents at beginning of the period. 2,053
---------
Cash and cash equivalents at end of the period....... $ 114
=========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. Basis of Presentation
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements reflect all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of financial
position and results of operations. The results for the three months ended
February 28, 1995, are not necessarily indicative of the results that may be
expected for a full fiscal year.
Statement of Cash Flows
Interest and taxes paid for the three months ended February 28, 1995 were
$3,062 and $303, respectively.
<PAGE>
<TABLE>
THL-OMEGA HOLDING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995
<S> <C>
Net sales............................................ $38,736
Operating expenses:
Cost of products sold.............................. 30,638
Selling expenses................................... 1,430
General and administrative expenses................ 1,443
Compensation expense............................... 9,715
Expenses related to sale........................... 1,689
--------
Loss from operations................................. (6,179)
Other income (expense):
Interest expense................................... (1,478)
Amortization of deferred financing costs........... (50)
Other, net......................................... 32
--------
Loss before income tax provision and
extraordinary item................................. (7,675)
Income tax provision................................. 484
--------
Loss before extraordinary item....................... (8,159)
Extraordinary item - loss due to early
extinguishment of debt, net of income
tax of $765........................................ (1,148)
--------
Net loss............................................. $(9,307)
========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
THL-OMEGA HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1995
<S> <C>
Cash flows provided by (used in) operating
activities:
Net loss........................................... $(9,307)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary item................................. 1,913
Compensation expense............................... 9,715
Depreciation and amortization...................... 1,509
Change in assets and liabilities:
Accounts receivable.............................. 1,222
Inventories...................................... 2,826
Prepaid expenses and other....................... (485)
Accounts payable................................. (3,714)
Accrued expenses................................. (90)
Income taxes payable............................. (5)
Deferred compensation............................ 20
--------
Net cash from operating activities................... 3,604
--------
Cash flows provided by (used in) investing
activities:
Capital expenditures, net.......................... (1,597)
--------
Net cash from investing activities................... (1,597)
--------
Cash flows provided by (used in) financing
activities:
Repayment of long-term obligations................. (1,500)
Net borrowing (repayment) under revolving
credit facility.................................. (656)
Issuance of notes payable, net..................... 678
Redemption of common stock......................... (58)
--------
Net cash from financing activities................... (1,536)
--------
Net change in cash................................... 471
Cash at beginning of period.......................... 339
--------
Cash at end of period................................ $ 810
========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
THL-OMEGA HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. Basis of Presentation
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements reflect all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of financial
position and results of operations. The results for the three months ended
March 31, 1995, are not necessarily indicative of the results that may be
expected for a full fiscal year.
Statement of Cash Flows
Interest and taxes paid for the three months ended March 31, 1995 were
$1,548 and $33, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis includes the results of operations for
the three months ended March 31, 1996 compared to the three months ended March
31, 1995. Included in the three months ended March 31, 1995 is the three
months ended March 31, 1995 of Wirekraft Holdings Corp. ("Wirekraft") and the
three months ended March 31, 1995 of THL-Omega Holding Corporation
("THL-Omega"). Included in the three months ended March 31, 1996 is the three
months ended March 31, 1996 of International Wire Group, Inc. (the "Company"),
which includes the results of operations of Wire Technologies Inc. ("Wire
Technologies") from March 5, 1996, the date of acquisition. The results
of operations for the three months ended March 31, 1995 reflect the
elimination of sales and cost of goods sold by and among THL-Omega and
Wirekraft in the amount of $589.
The Company conducts its operations through two segments: wire products, which
includes both non-insulated and insulated wire, and wire harness products.
The following table sets forth the major components of the results of
operations on a historical combined and consolidated basis and should be used
in reviewing the discussion and analysis of results of operations and
liquidity and capital resources.
<TABLE>
RESULTS OF OPERATIONS
(In thousands)
<CAPTION>
Three Months Ended
March 31,
1996 1995(1)
------- --------
<S> <C> <C>
Wire sales....................................... $ 77,868 $ 81,204
Harness sales.................................... 40,939 49,758
-------- --------
Net sales...................................... 118,807 130,962
Cost of goods sold............................... 93,475 104,183
Selling, general and administrative.............. 9,721 9,752
Depreciation and amortization.................... 6,044 3,905
Inventory valuation adjustment................... 2,000 -
Compensation expense............................. - 9,715
Expenses related to sale......................... - 1,689
Expenses related to plant closings............... 4,000 -
-------- --------
Operating income................................. $ 3,567 $ 1,718
======== ========
- ------------
<FN>
(1) The results of operations data related to Wirekraft for the three months
ended March 31, 1995 excludes the one month period ended December 31, 1994 and
includes the one month period ended March 31, 1995. Income (loss) from
operations was ($64) and $2,966 for the one month period ended December 31,
1994 and the one month period ended March 31, 1995, respectively.
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months ended March 31,
1995
Net sales for the three months ended March 31, 1996 were $118.8 million,
representing a $12.2 million or 9.3% decrease compared to the first three
months of 1995. Wire segment sales decreased $3.3 million, or 4.1% in the
three months ended March 31, 1996 as compared to the three months ended March
31, 1995. This decrease was primarily the result of a decline in copper
prices. In general, the Company prices its products based upon a spread over
the cost of copper, which results in a decreased dollar value of sales when
copper prices decrease. The average price of copper based upon the New York
Commodity Exchange, Inc. ("COMEX") declined to $1.18 per pound over the three
months ended March 31, 1996 from $1.38 per pound over the
<PAGE>
three months ended March 31, 1995. The decrease in wire segment sales also
reflected softness in the Company's industrial market segment. This softness
was due to overall market factors combined with the impact of a computer
system conversion which affected several industrial accounts. Partially
offsetting these decreases were growth in both automotive and computer
accounts and $7.4 million of net sales from Wire Technologies. Within the
harness segment, sales decreased by $8.8 million or 17.7% for the three months
ended March 31, 1996 as compared to the same period in 1995. This decrease
was due to a reduction in sales to Whirlpool pursuant to the expiration of a
transition supply agreement in October, 1995. Sales of harnesses to General
Electric Company increased during this period while sales to all other major
harness customers remained essentially the same.
Cost of goods sold as a percent of sales decreased to 78.7% for the three
months ended March 31, 1996 from 79.6% for the three months ended March 31,
1995. This decrease was primarily the result of negotiated price reductions
for certain purchased materials and the elimination of certain fabrication
costs pertaining to outside purchases of non-insulated wire. Subsequent to
the acquisition of Omega Wire Corp. ("Omega" the successor of THL-Omega) in
1995, Wirekraft's purchases of non-insulated wire from outside suppliers
declined as Omega's non-insulated wire production for Wirekraft increased. In
addition, the change in cost of goods sold as a percent of sales reflected
lower current-period costs achieved within the harness segment resulting from
plant consolidation actions taken in 1995, as well as the impact of declining
copper prices. Because the Company's products are typically priced at a
spread over the cost of copper, a lower copper price leads to a higher gross
margin percentage but generally has no impact on gross margin dollars.
A $2.0 million pretax inventory valuation charge was recorded in the first
quarter. This was the result of an adjustment to the LIFO valuation of copper
in inventory reflecting the decrease in the copper cost per pound from
December 31, 1995 to March 31, 1996. A $4.0 million pretax charge to
operations was recorded in March, 1996, representing plant closing costs. The
plant closing costs relate to shutting down and consolidating wire segment
facilities. These closings are scheduled to take place during the second
quarter of 1996.
Selling, general and administrative expenses were $9.7 million in the first
quarter of 1996 as compared to $9.8 million for the first quarter of 1995.
Expressed as a percent of sales, selling, general and administrative expenses
increased from 7.4% for the three-month period ended March 31, 1995 to 8.2%
for the three-month period ended March 31, 1996. This increase, as a percent
of sales, was primarily attributable to the effect on net sales of higher
copper costs in the first three months of 1995 as compared to the same period
in 1996. Partially offsetting this increase was lower current-period costs
achieved within the domestic harness segment, which resulted from plant
consolidation actions taken in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow information is discussed on a combined basis for the three months
ended March 31, 1995. Net cash used in operating activities was $.7 million
for the three months ended March 31, 1996, which compares to $1.6 million
provided by operating activities for the comparable period in 1995. The
fluctuation is primarily due to changes in working capital.
Net cash used in investing activities was $162.8 million for the first quarter
of 1996 and includes (i) acquisition costs of $160.3, related to the
acquisition of Dekko Wire Technology Group and (ii) capital expenditures of
$2.5 million. Net cash used in investing activities was $2.6 million for the
first quarter of 1995 and represents capital expenditures.
Net cash provided by financing activities was $168.5 million for the three
months ended March 31, 1996 and includes (i) proceeds of $173.2 million from
the issuance of equity securities and long-term obligations, (ii) net
borrowings of $3.1 million under debt obligations and (iii) payments of $7.8
related to financing fees. Net cash used in financing activities was $1.7
million for the three months ended March 31, 1995 and primarily represents net
repayments made under debt obligations.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibits 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
1. International Wire Group, Inc. Current Report on Form 8-K filing
dated March 5, 1996 as filed with the Securities and Exchange
Commission ("SEC") on March 19, 1996. -- Item 2. - Acquisition
or Disposition of Assets.
2. International Wire Group, Inc. Current Report on Form 8-K/A filing
dated March 5, 1996 as filed with the SEC on May 2, 1996 amending the
Current Report on Form 8-K as filed with the SEC on March 19, 1996
to include Item 7. - Financial Statements and Exhibits.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL WIRE GROUP, INC.
Dated: May 14, 1996 By: /s/ JAMES N. MILLS
____________________________________
Name: James N. Mills
Title: Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer of
International Wire Group, Inc.)
By: /s/ DAVID M. SINDELAR
____________________________________
Name: David M. Sindelar
Title: Senior Vice President
(Principal Financial and
Accounting Officer of
International Wire Group, Inc.)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<CIK> 0000947429
<NAME> International Wire Group, Inc.
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 5,014
<SECURITIES> 0
<RECEIVABLES> 79,007
<ALLOWANCES> 904
<INVENTORY> 62,175
<CURRENT-ASSETS> 148,790
<PP&E> 143,931
<DEPRECIATION> 27,265
<TOTAL-ASSETS> 617,784
<CURRENT-LIABILITIES> 106,578
<BONDS> 449,546
0
4
<COMMON> 0
<OTHER-SE> 47,166
<TOTAL-LIABILITY-AND-EQUITY> 617,784
<SALES> 118,807
<TOTAL-REVENUES> 118,807
<CGS> 93,475
<TOTAL-COSTS> 115,240
<OTHER-EXPENSES> 634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,572
<INCOME-PRETAX> (6,639)
<INCOME-TAX> 255
<INCOME-CONTINUING> (6,894)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,894)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
