SSECURITIES 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 September 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) 719-1000
(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
Class October 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 September 30, 1996 and
December 31, 1995.................................................. 3
Consolidated Statements of Operations for the three and nine months
ended September 30, 1996 and three and four months ended
September 30, 1995................................................. 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and four months ended September 30, 1995........ 5
Notes to Consolidated Financial Statements........................... 6
Wirekraft Holdings Corp. (formerly WB Holdings Inc.)
Consolidated Statement of Operations for the 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>
September 30, December 31,
1996 1995
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ -- $ --
Accounts receivable, less allowance of $1,151
and $860, respectively...................... 76,100 47,180
Inventories................................... 43,854 57,777
Prepaid expenses and other.................... 2,746 2,858
-------------- --------------
Total current assets........................ 122,700 107,815
Property, plant and equipment, net............. 115,446 82,259
Deferred financing costs, net.................. 20,660 16,688
Intangible assets, net......................... 318,175 215,400
Other assets................................... 7,176 5,758
-------------- --------------
Total assets................................ $ 584,157 $ 427,920
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations... $ 20,230 $ 12,662
Accounts payable.............................. 32,847 37,627
Accrued and other liabilities................. 35,066 26,011
Income taxes payable.......................... 3,782 --
Accrued interest.............................. 7,869 2,516
-------------- --------------
Total current liabilities................... 99,794 78,816
Long-term obligations, less current maturities.. 426,512 326,015
Deferred income taxes........................... 8,194 8,194
Other long-term liabilities..................... 5,969 4,897
-------------- --------------
Total liabilities........................... 540,469 417,922
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........................... 125,227 81,051
Carryover of predecessor basis................ (67,762) (67,762)
Accumulated deficit........................... (13,781) (3,291)
-------------- --------------
Total stockholders' equity.................. 43,688 9,998
-------------- --------------
Total liabilities and stockholders' equity.. $ 584,157 $ 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 Three Months Nine Months Four Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales.............. $ 133,496 $ 105,301 $ 399,612 $ 141,564
Operating expenses:
Cost of goods sold... 101,510 83,562 309,478 112,837
Selling, general
and
administrative..... 10,485 8,433 31,063 10,970
Depreciation and
amortization....... 6,987 4,423 19,933 5,897
Inventory valuation
adjustment......... -- -- 8,500 --
Expenses related
to plant closings.. 2,000 -- 6,000 1,750
----------- ----------- ------------ ------------
Operating income....... 12,514 8,883 24,638 10,110
Other income (expense):
Interest expense..... (11,168) (8,285) (31,751) (11,064)
Amortization of
deferred financing
costs.............. (948) (619) (2,762) (864)
Other, net........... 30 10 162 (173)
----------- ----------- ------------ ------------
Income (loss) before
income tax
provision............ 428 (11) (9,713) (1,991)
Income tax provision... 202 1,341 777 1,271
----------- ----------- ------------ ------------
Net income (loss)...... $ 226 $ (1,352) $ (10,490) $ (3,262)
=========== =========== ============ ============
<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>
Nine Months Four Months
Ended Ended
September 30, September 30,
1996 1995
============================
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net loss........................................ $ (10,490) $ (3,262)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 19,933 5,897
Amortization of deferred financing costs...... 2,762 864
Inventory valuation adjustment................ 8,500 --
Change in assets and liabilities, net of......
acquisitions:
Accounts receivable......................... (6,722) (3,802)
Inventories................................. 12,299 (3,773)
Prepaid expenses and other.................. (2,742) (724)
Accounts payable............................ (11,769) 3,955
Accrued and other liabilities............... 2,203 1,175
Accrued interest............................ 5,353 6,218
Income taxes payable/refundable............. 4,497 554
Other long-term liabilities................. (428) (12)
------------- -------------
Net cash from operating activities................ 23,396 7,090
------------- -------------
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash....................... (160,259) (341,046)
Capital expenditures, net....................... (8,441) (3,204)
------------- -------------
Net cash from investing activities................ (168,700) (344,250)
------------- -------------
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.............. (20,135) (2,577)
Financing fees and other........................ (7,800) (14,000)
------------- -------------
Net cash from financing activities................ 145,304 336,111
------------- -------------
Net change in cash and cash equivalents........... -- (1,049)
Cash and cash equivalents at beginning of the
period.......................................... -- --
------------- -------------
Cash and cash equivalents at end of the period.... $ -- $ (1,049)
============= =============
<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 nine
months ended September 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 nine months
ended September 30, 1996 were $26,398 and $2,720, respectively.
3. Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out ("LIFO") method.
<TABLE>
The composition of inventories at September 30, 1996, is as follows:
<CAPTION>
<S> <C>
Raw materials.................................................. $17,803
Work-in-process................................................ 12,304
Finished goods................................................. 13,747
-------
Total........................................................ $43,854
=======
</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 before 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 nine
months ended September 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>
Nine Months Ended
September 30,
1996 1995(1)
---------------------
<S> <C> <C>
Net sales........................................... $ 427,460 $ 453,219
Net income (loss)................................... (7,502) 2,495
<FN>
(1) Data gives effect to the IW Acquisition as though it occurred as of
January 1, 1995.
</TABLE>
6. Plant Closing Expense
In September, 1996, the Company recorded a pretax charge to operations of
$2,000 to provide for plant closing costs. The plant closing costs relate
to consolidating certain wire segment facilities and include provisions for
certain shut-down and severance related costs.
<PAGE>
<TABLE>
WIREKRAFT HOLDINGS CORP.
(FORMERLY WB HOLDINGS INC.)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
May 31,
1995
------------------
<S> <C>
Net sales................................................... $ 168,053
Operating expenses:
Cost of goods sold........................................ 138,851
Selling, general and administrative....................... 13,301
Depreciation and amortization............................. 6,474
Compensation expense...................................... 895
Expenses related to sale.................................. 501
Expenses related to plant closings........................ 2,000
-----------
Operating income............................................ 6,031
Other income (expense):
Interest expense.......................................... (8,020)
Amortization of deferred financing costs.................. (1,657)
-----------
Loss before income tax benefit and extraordinary item....... (3,646)
Income tax benefit.......................................... (2,114)
-----------
Loss before extraordinary item.............................. (1,532)
Extraordinary item - loss due to early extinguishment.......
of debt, net of income tax of $4,930...................... (7,835)
-----------
Net loss.................................................... $ (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 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
debt, net of income tax of $2,082......................... (4,044)
----------
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 nine months ended September 30, 1996 compared to the three and
nine months ended September 30, 1995. Included in the three months ended
September 30, 1995 is the three months ended September 30, 1995 of
International Wire Group, Inc. (the "Company"). Included in the nine months
ended September 30, 1995 is the four months ended September 30, 1995 of the
Company, the 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 nine months ended September 30,
1996 is the three and nine months ended September 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 nine months ended September 30, 1995 reflect the
elimination of sales and cost of goods sold by and among THL-Omega, Omega and
Wirekraft in the amount of $989.
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995(1)
--------------------------------------
<S> <C> <C> <C> <C>
Wire sales......................... $ 92,310 $ 67,187 $276,541 $222,848
Harness sales...................... 41,186 38,114 123,071 127,826
-------- -------- -------- --------
Net sales........................ 133,496 105,301 399,612 350,674
Cost of goods sold................. 101,510 83,562 309,478 280,293
Selling, general and administrative 10,485 8,433 31,063 26,684
Depreciation and amortization...... 6,987 4,423 19,933 14,210
Inventory valuation adjustment..... -- -- 8,500 --
Compensation expense............... -- -- -- 10,610
Expenses related to sale........... -- -- -- 2,190
Expenses related to plant closings. 2,000 -- 6,000 3,750
-------- -------- -------- --------
Operating income................... $ 12,514 $ 8,883 $ 24,638 $ 12,937
======== ======== ======== ========
<FN>
(1) The results of operations data related to Wirekraft for the nine months
ended September 30, 1995 exclude the one month period ended December 31,
1994. Loss from operations for this period was $64.
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
=====================
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales for the three months ended September 30, 1996 were $133.5 million,
which represented a $28.2 million or 26.8% increase compared to the same
period in 1995. The wire segment accounted for the majority of this increase
as wire sales grew by $25.1 million or 37.4% in the third quarter of 1996 as
compared to the third quarter of 1995. This increase reflected $37.1 million
of net sales from Wire Technologies as well as continued growth in the
Company's automotive and control signal market accounts. These increases were
partially offset by 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 $.91 per pound over the three months ended September 30, 1996 from
$1.36 per pound over the three months ended September 30, 1995. Within the
harness segment, sales increased $3.1 million or 8.1% during the quarter ended
September 30, 1996 compared to the same quarter in 1995. This growth
represented strong sales from most 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 76.0% for the three
months ended September 30, 1996 from 79.4% for the three months ended
September 30, 1995. This decrease was due to 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 both the wire and harness segments resulting from plant consolidation
actions taken in 1995 and 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 $2.0 million pretax charge to operations was recorded in September, 1996,
representing plant consolidation costs. These costs relate to consolidating
wire segment facilities.
Selling, general and administrative expenses were $10.5 million in the third
quarter of 1996 as compared to $8.4 million for the third quarter of 1995.
This increase primarily reflected expenses related to Wire Technologies for
the three months ended September 30, 1996. Expressed as a percent of sales,
selling, general and administrative expenses, decreased to 7.9% for the
three-month period ended September 30, 1996 from 8.0% for the comparable
period in 1995. This decrease, as a percent of sales, was due mainly to lower
current period costs achieved within both the wire and harness segments, which
resulted from plant consolidation actions taken in 1995 and 1996. Partially
offsetting this decrease was the effect on net sales of higher copper costs in
the third quarter of 1995 as compared to the same period in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Net sales for the nine months ended September 30, 1996 were $399.6 million,
which represented a $48.9 million or 13.9% increase compared to the same
period in 1995. Wire segment sales increased $53.7 million or 24.1% in the
nine-month period ended September 30, 1996 as compared to the nine-month
period ended September 30, 1995. This increase represented growth in
automotive, control signal, and computer accounts and included $82.8 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 $1.08 per pound over the nine months ended
September 30, 1996, from $1.36 per pound over the nine months ended September
30, 1995. Within the harness segment, net sales decreased by $4.8 million or
3.7% for the nine months ended September 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 most other major harness customers have partially
offset this reduction.
Cost of goods sold as a percent of sales decreased to 77.4% for the nine
months ended September 30, 1996 from 79.9% during the comparable period in
1995. This decrease was due to 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 both the wire and harness segments resulting
from plant consolidation actions taken in 1995 and 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
nine-month period ended September 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 September 30,
1996. In addition, a $6.0 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 $31.1 million for the nine
months ended September 30, 1996 compared to $26.7 million during the same
period in 1995. Expressed as a percent of sales, selling, general and
administrative expenses increased from 7.6% during the nine months ended
September 30, 1995 to 7.8% 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 three quarters of 1995 as compared to
the same period in 1996. Partially offsetting this increase was lower period
costs achieved within both the wire and harness segments which resulted from
plant consolidation actions.
LIQUIDITY AND CAPITAL RESOURCES
===============================
Cash flow information is discussed on a combined basis for the nine months
ended September 30, 1995. Net cash provided by operating activities was $23.4
million for the nine months ended September 30, 1996, compared to $18.9
million provided by operating activities for the comparable period in 1995.
The fluctuation is primarily due to changes in working capital.
For the nine months ended September 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
$8.4 million on capital projects, made net repayments on long-term obligations
of $20.1 million and used $7.8 million to pay financing fees.
For the nine months ended September 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
that period, the Company spent $7.9 million on capital projects, made net
repayments on long-term obligations of $15.1 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 during the three months
ended September 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: November 12, 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.)
<TABLE> <S> <C>
<PAGE>
<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>
<C> <S>
<CIK> 0000947429
<NAME> International Wire Group, Inc.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> $ 0
<SECURITIES> 0
<RECEIVABLES> 77,251
<ALLOWANCES> 1,151
<INVENTORY> 43,854
<CURRENT-ASSETS> 122,700
<PP&E> 149,667
<DEPRECIATION> 34,221
<TOTAL-ASSETS> 584,157
<CURRENT-LIABILITIES> 99,794
<BONDS> 446,742
0
4
<COMMON> 0
<OTHER-SE> 43,684
<TOTAL-LIABILITY-AND-EQUITY> 584,157
<SALES> 399,612
<TOTAL-REVENUES> 399,612
<CGS> 309,478
<TOTAL-COSTS> 329,411
<OTHER-EXPENSES> 14,500
<LOSS-PROVISION> 106
<INTEREST-EXPENSE> 34,513
<INCOME-PRETAX> (9,713)
<INCOME-TAX> 777
<INCOME-CONTINUING> (10,490)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,490)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
