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 June 30, 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
July 31, 1996
--------------
<S> <C>
International Wire Group, Inc.
Common Stock 1,000
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
INDEX
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
International Wire Group, Inc.
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the three and six months
ended June 30, 1996 and one month ended June 30, 1995 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and one month ended June 30, 1995 5
Notes to Consolidated Financial Statements 6
Wirekraft Holdings Corp. (formerly WB Holdings Inc.)
Consolidated Statements of Operations for the three and six months
ended May 31, 1995 8
Consolidated Statement of Cash Flows for the six months
ended May 31, 1995 9
Notes to Consolidated Financial Statements 10
Omega Wire Corp.
Consolidated Statement of Operations for the two months
ended May 31, 1995 11
Consolidated Statement of Cash Flows for the two months
ended May 31, 1995 12
Notes to Consolidated Financial Statements 13
THL - Omega Holding Corporation
Consolidated Statement of Operations for the three months
ended March 31, 1995 14
Consolidated Statement of Cash Flows for the three months
ended March 31, 1995 15
Notes to Consolidated Financial Statements 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations 17
PART II - OTHER INFORMATION 20
SIGNATURES 21
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
June 30, December 31,
1996 1995
-----------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,836 $ --
Accounts receivable, less allowance of $1,076
and $860, respectively 80,758 47,180
Inventories 50,612 57,777
Prepaid expenses and other 3,614 2,858
--------- ---------
Total current assets 137,820 107,815
Property, plant and equipment, net 116,591 82,259
Deferred financing costs, net 21,609 16,688
Intangible assets, net 320,398 215,400
Other assets 6,866 5,758
--------- ---------
Total assets $603,284 $427,920
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations $ 21,973 $ 12,662
Accounts payable 36,070 37,627
Accrued and other liabilities 35,974 26,011
Income taxes payable 3,286 --
Accrued interest 3,677 2,516
--------- ---------
Total current liabilities 100,980 78,816
Long-term obligations, less current maturities 444,568 326,015
Deferred income taxes 8,194 8,194
Other long-term liabilities 6,194 4,897
--------- ---------
Total liabilities 559,936 417,922
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 (14,007) (3,291)
--------- ---------
Total stockholders' equity 43,348 9,998
--------- ---------
Total liabilities and stockholders' equity $603,284 $427,920
========= =========
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Six Months One Month
Ended Ended Ended
June 30, June 30, June 30,
1996 1996 1995
--------------------------------------
<S> <C> <C> <C>
Net sales $147,309 $266,116 $ 36,263
Operating expenses:
Cost of goods sold 114,493 207,968 29,275
Selling, general and
administrative 10,857 20,578 2,537
Depreciation and amortization 6,902 12,946 1,474
Inventory valuation adjustment 6,500 8,500 --
Expenses related to plant
closings -- 4,000 1,750
--------- --------- ---------
Operating income 8,557 12,124 1,227
Other income (expense):
Interest expense (11,011) (20,583) (2,779)
Amortization of deferred
financing costs (1,091) (1,814) (245)
Other, net 43 132 (183)
--------- --------- ---------
Loss before income tax provision (3,502) (10,141) (1,980)
Income tax provision (benefit) 320 575 (70)
--------- --------- ---------
Net loss $ (3,822) $(10,716) $ (1,910)
========= ========= =========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months One Month
Ended Ended
June 30, June 30,
1996 1995
-----------------------
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net loss $(10,716) $ (1,910)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 12,946 1,474
Amortization of deferred financing costs 1,814 245
Inventory valuation adjustment 8,500 --
Change in assets and liabilities, net of
acquisitions:
Accounts receivable (11,380) 1,599
Inventories 5,541 (3,056)
Prepaid expenses and other (2,751) (265)
Accounts payable (8,546) 1,772
Accrued and other liabilities 3,111 4,521
Accrued interest 1,161 1,676
Income taxes payable/refundable 4,001 171
Other long-term liabilities (203) (33)
--------- ---------
Net cash from operating activities 3,478 6,194
--------- ---------
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash (160,259) (341,046)
Capital expenditures, net (5,486) (707)
--------- ---------
Net cash from investing activities (165,745) (341,753)
--------- ---------
Cash flows provided by (used in) financing
activities:
Equity proceeds 45,039 15,188
Proceeds from issuance of long-term
obligations 128,200 337,500
Repayment of long-term obligations (336) (3,009)
Financing fees and other (7,800) (14,000)
--------- ---------
Net cash from financing activities 165,103 335,679
--------- ---------
Net change in cash and cash equivalents 2,836 120
Cash and cash equivalents at beginning of the
period 0 0
--------- ---------
Cash and cash equivalents at end of the period $ 2,836 $ 120
========= =========
<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. 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 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 automotive, appliance,
computer and data communications 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 and six months
ended June 30, 1996, are not necessarily indicative of the results that may
be expected for a full fiscal year.
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 Subsidiaries") 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.
Statement of Cash Flows
Interest paid and taxes refunded, net of payments, for the six months ended
June 30, 1996 were $19,422 and $3,426, 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 March 31, 1996 to June 30, 1996 the
Company wrote down the copper valuation in inventory, the effect of which
increased the loss before income tax provision by approximately $6,500.
<TABLE>
The composition of inventories at June 30, 1996, is as follows:
<CAPTION>
<S> <C>
Raw materials $19,684
Work-in-process 12,997
Finished goods 17,931
----------
Total $50,612
==========
</TABLE>
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. 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. DWT Acquisition
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 six months
ended June 30, 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>
Six Months Ended
June 30,
------------------------------------
1996 1995(1)
----------------- -----------------
<S> <C> <C>
Net sales $293,964 $317,072
Net income (loss) (7,728) 3,060
<FN>
(1) Data gives effect to the IW Acquisition as though it occurred as
of January 1, 1995.
</TABLE>
<PAGE>
<TABLE>
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
May 31,
1995
-------------------
<S> <C> <C>
Net sales $ 86,768 $168,053
Operating expenses:
Cost of goods sold 72,140 138,851
Selling, general and administrative 6,058 13,301
Depreciation and amortization 4,010 6,474
Compensation expense 895 895
Expenses related to sale 501 501
Expenses related to plant closings 2,000 2,000
--------- ---------
Operating income 1,164 6,031
Other income (expense):
Interest expense (4,076) (8,020)
Amortization of deferred financing
costs (829) (1,657)
--------- ---------
Loss before income tax provision and
extraordinary item (3,741) (3,646)
Income tax benefit (2,161) (2,114)
--------- ---------
Loss before extraordinary item (1,580) (1,532)
Extraordinary item - loss due to
early extinguishment of debt, net
of income tax of $4,930 (7,835) (7,835)
--------- ---------
Net loss $ (9,415) $(9,367)
========= =========
<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>
Six Months Ended
May 31,
1995
----------------
<S> <C>
Cash flows provided by (used in) operating
activities:
Net loss $ (9,367)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary item 12,765
Depreciation and amortization 6,474
Amortization of deferred financing costs 1,493
Accretion of debt discount 164
Deferred income taxes (4,282)
Change in assets and liabilities, net of
acquisitions:
Accounts receivable (9,863)
Inventories (824)
Prepaid expenses and other (166)
Accounts payable (617)
Accrued and other liabilities 2,628
Accrued interest 1,276
Income taxes payable/refundable (3,366)
Other long-term liabilities (236)
-----------------
Net cash from operating activities (3,921)
-----------------
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash (44,973)
Capital expenditures, net (2,914)
-----------------
Net cash from investing activities (47,887)
-----------------
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 (14,226)
Financing fees and other (3,500)
-----------------
Net cash from financing activities 51,663
-----------------
Net change in cash and cash equivalents (145)
Cash and cash equivalents at beginning of the period 2,053
-----------------
Cash and cash equivalents at end of the period $ 1,908
=================
<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 and six months
ended May 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 six months ended May 31, 1995 were $6,744 and
$604, respectively.
<PAGE>
<TABLE>
OMEGA WIRE CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Two Months Ended
May 31,
1995
----------------
<S> <C>
Net sales $ 23,295
Operating expenses:
Cost of goods sold 17,512
Selling, general and administrative 1,639
Depreciation and amortization 1,233
----------------
Operating income 2,911
Other income (expense):
Interest expense (1,797)
Amortization of deferred financing costs (238)
----------------
Income before income tax provision and extraordinary item 876
Income tax provision 171
----------------
Income before extraordinary item 705
Extraordinary item - loss due to early extinguishment of (4,044)
----------------
debt, net of income tax of $2,082
Net loss $ (3,339)
================
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
OMEGA WIRE CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Two Months Ended
May 31,
1995
----------------
<S> <C>
Cash flows provided by (used) in operating activities:
Net loss $ (3,339)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Extraordinary item 6,126
Depreciation and amortization 1,233
Amortization of deferred financing costs 238
Deferred income taxes 120
Change in assets and liabilities, net of acquisitions:
Accounts receivable 1,528
Inventories (510)
Prepaid expenses and other (231)
Accounts payable 919
Accrued and other liabilities 10
Accrued interest 952
Income taxes payable/refundable (2,033)
Other long-term liabilities (26)
----------
Net cash from operating activities 4,987
----------
Cash flows provided by (used in) investing activities:
Acquisition, net of cash (159,080)
Capital expenditures, net (581)
----------
Net cash from investing activities (159,661)
----------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term obligations 135,000
Contributed capital 34,653
Repayment of long-term obligations (7,979)
Financing fees and other (7,000)
----------
Net cash from financing activities 154,674
----------
Net change in cash --
Cash at beginning of the period --
----------
Cash at end of the period $ --
==========
<FN>
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
OMEGA WIRE CORP.
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 two months ended May
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 two months ended May 31, 1995 were $845 and
$2, 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)
Repayments 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 and six months ended June 30, 1996 compared to the three and six
months ended June 30, 1995. Included in the three and six months ended June
30, 1995 is the one month ended June 30, 1995 of International Wire Group,
Inc. (the "Company"), the two and five months ended May 31, 1995 of Wirekraft
Holdings Corp. ("Wirekraft"), the three months ended March 31, 1995 of
THL-Omega Holding Corporation ("THL-Omega") and the two months ended May 31,
1995 of Omega Wire Corp. ("Omega"). Included in the three and six months
ended June 30, 1996 is the three and six months ended June 30, 1996 of 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 and six months ended June 30, 1995 reflect
the elimination of sales and cost of goods sold by and among THL-Omega, Omega
and Wirekraft in the amount of $400 and $989, respectively.
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 Six Months Ended
June 30, June 30,
1996 1995 (1) 1996 1995 (1)
--------------------------------------
<S> <C> <C> <C> <C>
Wire sales $106,363 $ 74,457 $184,231 $155,661
Harness sales 40,946 39,954 81,885 89,712
-------- -------- -------- --------
Net sales 147,309 114,411 266,116 245,373
Cost of goods sold 114,493 92,548 207,968 196,731
Selling, general and administrative 10,857 8,499 20,578 18,251
Depreciation and amortization 6,902 5,882 12,946 9,787
Inventory valuation adjustment 6,500 -- 8,500 --
Compensation expense -- 895 -- 10,610
Expenses related to sale -- 501 -- 2,190
Expenses related to plant closings -- 3,750 4,000 3,750
-------- -------- -------- --------
Operating income $ 8,557 $ 2,336 $ 12,124 $ 4,054
======== ======== ======== ========
</TABLE>
(1) The results of operations data related to Wirekraft for the three and
six months ended June 30, 1995 excludes the one month period ended March
31, 1995 and December 31, 1994, respectively. Income (loss) from
operations for these two periods was $2,966 and ($64), respectively.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net sales for the three months ended June 30, 1996 were $147.3 million, which
represented a $32.9 million or 28.8% increase compared to the same period in
1995. The wire segment accounted for the majority of this increase as wire
sales grew by $31.9 million or 42.9% in the second quarter of 1996 as compared
to the second quarter of 1995. This increase reflected $38.3 million of net
sales from Wire Technologies as well as continued growth in the Company's
automotive market accounts. The impact of declining copper prices, however,
partially offset these increases. 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 $1.16 per pound over the three months ended June 30, 1996 from
$1.33 per pound over the three months ended June 30, 1995. Within the harness
segment, sales increased $1.0 million or 2.5% during the quarter ended June
30, 1996 compared to the same quarter in 1995. This growth represented strong
sales from all major harness customers other than Whirlpool. Sales to
Whirlpool declined during this period due to the expiration of a transition
supply agreement in October, 1995.
Cost of goods sold as a percent of sales decreased to 77.7% for the three
months ended June 30, 1996 from 80.9% for the three months ended June 30,
1995. This decrease was primarily the result of negotiated price reductions
for certain purchased materials, the elimination of substantially all
outside purchases of non-insulated wire and cost reductions achieved
within the harness segment resulting from plant consolidation actions
taken in 1995 and the first quarter of 1996. The decline in copper
prices also contributed to this decrease, as lower copper prices lead to a
higher gross margin percentage but generally have no impact on gross margin
dollars.
A $6.5 million pretax inventory valuation charge was recorded in the second
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 March
31, 1996 to June 30, 1996.
Selling, general and administrative expenses were $ 10.9 million in the second
quarter of 1996 as compared to $8.5 million for the second quarter of 1995.
This increase primarily reflected expenses related to Wire Technologies for
the three months ended June 30, 1996. Expressed as a percent of sales,
selling, general and administrative expenses, were 7.4% for both the three-
month period ended June 30, 1996 and the three-month period ended June 30,
1995.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net sales for the six months ended June 30, 1996 were $266.1 million, which
represented a $20.7 million or 8.5% increase compared to the same period
in 1995. Wire segment sales increased $28.5 million or 18.4% in the six-
month period ended June 30, 1996 as compared to the six month period ended
June 30, 1995. This increase represented growth in both automotive and
computer accounts and included $45.7 million of net sales from Wire
Technologies. These increases were partially offset by softness in the
Company's industrial market accounts and the impact of declining 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 COMEX
declined to $1.17 per pound over the six months ended June 30, 1996, from
$1.35 per pound over the six months ended June 30, 1995. Within the harness
segment, net sales decreased by $7.8 million or 8.7% for the six months ended
June 30, 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. Increased harness sales
to all other major harness customers have partially offset this reduction.
Cost of goods sold as a percent of sales decreased to 78.1% for the six
months ended June 30, 1996 from 80.2% during the comparable period in 1995.
This decrease was primarily the result of negotiated price reductions for
certain purchased materials and the elimination of the majority of outside
purchases of non-insulated wire. Subsequent to the acquisition of 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
cost reductions achieved within the harness segment resulting from plant
consolidation actions taken in 1995 and the first quarter of 1996, 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.
An $8.5 million pretax inventory valuation charge was recorded during the six-
month period ended June 30, 1996. This charge 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 June 30, 1996. In addition,
a $4.0 million pretax charge to operations was recorded during this
period representing plant closing costs. The plant closing costs relate to
shutting down and consolidating wire segment facilities.
Selling, general and administrative expenses were $20.6 million for the six
months ended June 30, 1996 compared to $18.3 million during the same period
in 1995. Expressed as a percent of sales, selling, general and administrative
expenses increased from 7.4% during the six months ended June 30, 1995 to 7.7%
for the comparable period in 1996. This increase, as a percent of sales, was
primarily attributable to the effect on net sales of higher copper costs over
the first two quarters of 1995 as compared to the same period in 1996.
Partially offsetting this increase was lower period costs achieved within
the harness segment which resulted from plant consolidation actions.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow information is discussed on a combined basis for the six months
ended June 30, 1995. Net cash provided by operating activities was $3.5
million for the six months ended June 30, 1996, which compares to $18.1
million provided by operating activities for the comparable period in 1995.
The fluctuation is primarily the result of a decrease in accounts payable
which reflected lower copper prices. Lower copper prices result in a
corresponding decrease in accounts receivable, however, this effect was offset
by the timing of sales over the last two months of the second quarter of 1996
compared to the same period in 1995.
For the six months ended June 30, 1996 the Company generated $13.0 million of
net proceeds from the issuance of equity securities and long-term obligations
related to acquisitions. During this period, the Company spent $5.5 million
on capital projects, made net repayments of $0.3 million and used $7.8 million
to pay financing fees.
For the six months ended June 30, 1995, on a historical combined basis, the
Company generated $23.0 million of net proceeds from the issuance of equity
securities and long-term obligations related to acquisitions. During this
period, the Company spent $5.5 million on capital projects, made net
repayments of $15.5 million and used $21.0 million to pay financing fees.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed for the three months ended
June 30, 1996.
<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: August 13, 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
<CAPTION>
<S> <C>
<CIK> 0000947429
<NAME> International Wire Group, Inc.
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> $2,836
<SECURITIES> 0
<RECEIVABLES> 81,834
<ALLOWANCES> 1,076
<INVENTORY> 50,612
<CURRENT-ASSETS> 137,820
<PP&E> 146,712
<DEPRECIATION> 30,121
<TOTAL-ASSETS> 603,284
<CURRENT-LIABILITIES> 100,980
<BONDS> 466,541
0
4
<COMMON> 0
<OTHER-SE> 43,344
<TOTAL-LIABILITY-AND-EQUITY> 603,284
<SALES> 266,116
<TOTAL-REVENUES> 266,116
<CGS> 207,968
<TOTAL-COSTS> 220,914
<OTHER-EXPENSES> 12,500
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 22,397
<INCOME-PRETAX> (10,141)
<INCOME-TAX> 575
<INCOME-CONTINUING> (10,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,716)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
