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 September 30,
1997
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, 1997
<S> <C>
International Wire Group, Inc.
Common Stock 1,000
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
<CAPTION>
INDEX
PART I - FINANCIAL INFORMATION Page
<S> <C>
International Wire Group, Inc.
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations for the three and nine months ended
September 30,1997 and the three and nine months ended September 30, 1996... 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and nine months ended September 30, 1996..................5
Notes to Consolidated Financial Statements....................................6
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,
------------------------ --------------------
1997 1996
------------------------ --------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents
$ 7,161 $ 0
Accounts receivable, less allowance of $ 1,417
and $1,363, respectively.......................... ......92,768 71,181
Inventories.....................................................66,949 60,362
Prepaid expenses and other......................................11,623 5,060
Deferred income 5,375 4,741
taxes...............................................
Total current assets.........................................183,876 141,344
Property, plant and equipment, net...............................158,352 118,551
Deferred financing costs, net.....................................23,956 21,222
Intangible assets, net...........................................243,160 244,655
Other assets.......................................................7,957 5,248
Total $ 617,301 $ 531,020
assets......................................................
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations................$.....4,450 $ 20,948
Accounts payable................................................30,245 45,832
Accrued and other liabilities...................................57,779 41,183
Accrued interest................................................13,247 4,648
Total current liabilities....................................105,721 112,611
Long-term obligations, less current maturities...................519,901 426,719
Deferred income taxes.............................................14,719 14,719
Other long-term liabilities.......................................19,280 2,162
Total liabilities............................................659,621 566,211
Stockholder's equity (deficit):
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,
$25 liquidation value, 0 and 400,000 shares
authorized, issued and outstanding, respectively.............
-- 4
Contributed capital............................................113,606 125,340
Carryover of predecessor basis.................................(67,762) (67,762)
Accumulated deficit............................................(88,164) (92,773)
Total stockholder's equity (deficit).........................(42,320) (35,191)
Total liabilities and stockholder's
equity (deficit).............................................$...617,301 $ 531,020
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ --------------- ------------------ -------------
1997 1996 1997 1996
------------------ --------------- ------------------ -------------
<S> <C> <C> <C> <C>
Net sales...................... $ 170,768 $ 133,496 $ 536,319 $ 399,612
Operating expenses:
Cost of goods sold........... 129,028 101,510 413,406 309,478
Selling, general and
administrative............. 14,863 10,485 42,582 31,063
Depreciation and
amortization................... 9,287 6,987 25,454 19,933
Inventory valuation
adjustment..................... -- -- -- 8,500
Expenses related to
plant closings................. -- 2,000 500 6,000
Operating income............... 17,590 12,514 54,377 24,638
Other income (expense):
Interest expense............. (12,901) (11,168) (38,281) (31,751)
Amortization of
deferred (935) (948) (2,992) (2,762)
financing costs............
Other, net................... (122) 30 (111) 162
Income (loss) before income
taxes and extraordinary 3,632 428 12,993 (9,713)
item...........................
Income tax provision........... 1,450 202 5,393 777
Income (loss) before
extraordinary item............. 2,182 226 7,600 (10,490)
Extraordinary item - loss
related to early
extinguishment of debt,
net of taxes of -- -- (2,991) --
$1,995.........................
Net income (loss).............. $ 2,182 $ 226 $ 4,609 $ (10,490)
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
----------------------- ------------------------
1997 1996
----------------------- ------------------------
Cash flows provided by operating activities:
<S> <C> <C>
Net income(loss)........................................$.....4,609 $ (10,490)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization..............................25,454 19,933
Amortization of deferred financing costs.............2,992 2,762
Extraordinary loss on early
extinguishment of debt..........................................4,986 --
Inventory valuation adjustment................................-- 8,500
Change in assets and liabilities, net of
acquisitions:
Accounts receivable......................................(6,115) (6,722)
Inventories..............................................18,599 12,299
Prepaid expenses and other...............................(4,569) (2,742)
Accounts payable........................................(29,656) (11,769)
Accrued and other liabilities............................10,322 2,203
Accrued interest..........................................8,599 5,353
Income taxes payable/refundable..............................-- 4,497
Other long-term liabilities...............................1,358 (428)
Net cash provided by operating 36,579 23,396
activities...........................
Cash flows used in investing activities:
Acquisitions, net of cash...................................(58,996) (160,259)
Capital expenditures........................................(15,320) (8,441)
Net cash used in investing activities.........................(74,316) (168,700)
Cash flows provided by (used in) financing
activities:
Equity proceeds..................................................-- 45,039
Proceeds from issuance of long-term
Obligations...............................................228,125 128,200
Borrowing (repayment) of long-term
obligations, net.............................................(175,738) (20,135)
Cash dividends paid on preferred stock and
repurchase of stock of Holdings................................(2,078) --
Financing fees and other.....................................(5,411) (7,800)
Net cash provided by financing activities......................44,898 145,304
Net change in cash and cash equivalents.........................7,161 --
Cash and cash equivalents at beginning of the Period..............
-- --
Cash and cash equivalents at end of the period.........$.....7,161 $ --
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(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"). On February 12, 1997, the Company
acquired all of the issued and outstanding common stock of Camden Wire Co.,
Inc.("Camden Wire")a wholly-owned subsidiary of Oneida LTD. (the "Camden
Acquisition"). See Note 3.
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 voice/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 of the Company. The results for the
nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for a full fiscal year. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1996.
Statements of Cash Flows
Interest and taxes paid for the nine months ended September 30, 1997 were
$29,682 and $2,620, respectively.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, is effective for years beginning after December 15,
1997. This statement requires that an enterprise classify items of other
comprehensive income by their nature in the financial statements and
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of the balance sheet.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information, is effective for years
beginning after December 15, 1997. This statement requires that a public
business enterprise report financial and descriptive information about its
reportable business segments.
The Company believes that the future adoption of these statements will not
have a significant impact on the results of operations or financial position
of the Company but will require the Company to make additional disclosures.
3. Camden Acquisition
On February 12, 1997, the Company completed the Camden Acquisition. The
total consideration of $65,000 paid in connection with the Camden
Acquisition, including fees and expenses, consisted of (i) cash and (ii) the
assumption of debt related to Industrial Revenue Bonds, a non-cash item.
The cash portion of the consideration paid and the transaction fees and
expenses incurred in connection with the Camden Acquisition were funded with
$65,000 of senior debt under the Amended and Restated Credit Agreement. See
Note 4.
The Camden 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>
<S> <C>
Current assets............................................$48,033
Property, plant & 42,041
equipment.........................................
Goodwill....................................................3,802
Other, non-current..........................................1,696
Fees and costs..............................................3,250
Current liabilities.......................................(28,062)
Other liabilities..........................................(5,760)
</TABLE>
$65,000
Unaudited pro forma results of operations of the Company for the nine months
ended September 30, 1997 and September 30, 1996 are included below.
Such pro forma presentation has been prepared assuming that the Camden
Acquisition and related financing had occurred as of January 1, 1997 and
January 1, 1996, respectively, and that the DWT Acquisition and related
financing had occurred as of January 1, 1996.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------ ------------------
1997 1996
------------------ ------------------
<S> <C> <C>
Net sales..................................................$555,559.... $527,480
Income (loss) before extraordinary item....................$..7,053.... $(13,000)
Net income (loss)..........................................$..4,062.... $(13,000)
</TABLE>
4. Inventories
Inventories are valued at the lower of cost or market. Cost
is determined using the last-in, first-out ("LIFO") method.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The composition of inventories at September 30, 1997 is as follows:
<TABLE>
<S> <C>
Raw materials..................................................$...27,402
Work-in-process ...................................................17,676
Finished goods ....................................................21,871
Total $ 66,949
</TABLE>
5. Long-Term Obligations
The composition of long-term obligations at September 30, 1997 is as
follows:
<TABLE>
<S> <C>
Credit Agreement:
Revolving credit facility....................................$.......--
Term facility ..................................................184,625
Senior Subordinated Notes.........................................150,000
Series B Senior Subordinated Notes................................150,000
Series B Senior Subordinated Notes Premium.........................12,764
Exchange notes......................................................5,000
Industrial revenue 15,500
bonds........................................................
Other 6,462
524,351
Less, current maturities............................................4,450
$ 519,901
</TABLE>
The schedule of principal payments for long-term obligations
at September 30, 1997 is as follows:
<TABLE>
<S> <C>
1997 $ 1,079
1998 4,499
1999 5,832
2000 7,132
2001 8,000
Thereafter.......................................................485,044.............
Total $ 511,586
</TABLE>
During the second quarter of 1997 the Company issued $150,000 of 11.75%
Series B Senior Subordinated Notes due June 2005, priced at 108.75% The
proceeds of this issuance were used to pay down the term facility of the
Credit Agreement.
Credit Agreement
In connection with the Series B Senior Subordinated Note issuance, the
Company amended the Amended and Restated Credit Agreement dated June 17,
1997, with certain financial institutions. This amendment to the Amended
and Restated Credit Agreement provides senior secured financing of up to
$260,500, consisting of a $25,000 Term A loan and a $160,500 Term B loan
(collectively called the "Term Facility") and a $75,000 revolving loan and
letter of 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 September 30, 2002 at which time the Revolver is
also due. The final installment on the Term B Loan is due September 30,
2003.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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 .5% or (b) the Eurodollar
Rate (as defined in the Amended Credit Agreement) plus 1.5%. 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 in the Amended Credit
Agreement) plus 1.0% or (b) the Eurodollar Rate (as defined in the Amended
Credit Agreement) plus 2.0%. The Alternate Base Rate and Eurodollar Rate
margins are established quarterly based on a formula as defined in the
Amended and Restated Credit Agreement. 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 and Restated 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 issued in connection with the Acquisitions and
the Series B Senior Subordinated Notes issued in connection with refinancing
of the Term Facility (collectively called the "Senior Notes") were issued
under similar indentures (the "Indentures") dated June 12, 1995 and June 17,
1997 respectively. 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 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. Wirekraft Industries de Mexico, S.A. de
C.V. and IWG-Philippines, Incorporated (newly formed with no operations)(the
"Non-Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries and
Non-Guarantor Subsidiaries is wholly owned by the Company.
Exchange Notes
In February 1997, the Company exchanged $10,000 of Series A Senior
Cumulative Exchangeable Redeemable Preferred Stock (the "Preferred Stock")
for 14.0% Senior Subordinated Notes due June 1, 2005 (the "Exchange
Notes")and paid all dividends in arrears related to the Preferred Stock. The
Exchange Notes were issued under an indenture dated February 12, 1997 (the
"Exchange Indenture"). The Exchange Notes represent unsecured general
obligations of Group, are subordinated to all Senior Indebtedness (as
defined in the Exchange Indenture)of Group and rank on equal terms with the
Senior Notes.
In June 1997, the Company offered to repurchase its Exchange Notes for a
cash price of 113% of the principal amount, plus accrued interest. As a
result of this offer, the Company acquired $5,000 principal amount of these
notes.
The Exchange Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured, senior subordinated basis by each
Guarantor Subsidiary other than the Non-Guarantor Subsidiaries.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Exchange Notes mature on June 1, 2005. Interest on the Exchange Notes
is payable semi-annually on each June 1 and December 1. The Exchange Notes
bear interest at the rate of 14.0% per annum. The Exchange Notes may not be
redeemed prior to June 1, 2000, except in the event of a Change of Control
(as defined) and at such applicable premium (as defined). The Exchange Notes
are redeemable, at the Company's option, at the redemption prices of
105.875% at June 1, 2000, and at decreasing prices to 100% at June 1, 2003,
and thereafter, with accrued interest.
Industrial Revenue Bonds
In connection with the Camden Acquisition the company assumed debt related
to two Industrial Revenue Bonds (the "IRB's")totaling $15,500. The IRB's are
due in August, 2005 and March, 2016 in the amounts of $9,000 and $6,500,
respectively. The IRB's bear interest at a rate per annum which is tied to
the Tax Exempt Money Market Index. Rates change weekly and interest is paid
monthly.
6. Plant Closing Expense
In March 1997, the Company recorded a pre-tax charge to operations of $500
to provide for plant closing costs. The plant closing costs relate to
consolidating a wire segment facility and include provisions for certain
shut-down and severance related costs. A summary of activity related to
plant closing is as follows:
<TABLE>
<CAPTION>
Nine Nine
Months Ended Months
September 30, Ended
September 30,
------------------ ---------------
1997 1996
------------------ ---------------
<S> <C> <C>
Balance, beginning of period...............................$..2,462 $ 700
Charges to operations:
Facility shut-down costs......................................375 3,872
Lease commitments............................................. -- 773
Key personnel and severance costs........................_....125 1,355
500 6,000
Costs incurred:
Facility shut-down costs...................................(2,054) (1,514)
Lease commitments............................................(172) (67)
Key personnel and severance costs............................(486) (783)
(2,712) (2,364)
Balance, end of period.....................................$....250 $ 4,336
</TABLE>
7. Income Taxes
Wirekraft's U.S. income tax returns for the years 1993-1995 are being
reviewed by the Internal Revenue Service. The proposed settlement is being
reviewed by the Joint Tax Committee. The Company believes that final
settlement will not have a material adverse effect and that adequate
amounts of taxes and related interest, if any, have been provided.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
8. Extraordinary Items-Loss Related to Early Retirement of Debt
In June 1997, the Company refinanced debt under the Credit Agreement.
Accordingly, the Company recorded an extraordinary loss of $2,601, net of
income tax related to the write-off of deferred financing fees. In addition,
the Company repurchased $5,000 of the Exchange Notes. An extraordinary loss
of $390, net of income tax, was recognized related to a prepayment premium.
9. Guarantor Subsidiaries
The Senior Notes and Exchange Notes are fully and unconditionally (as well
as jointly and severally) guaranteed on an unsecured, senior subordinated
basis by each subsidiary of the Company (the "Guarantor Subsidiaries") other
than Electro Componetes de Mexico, S.A. de C.V., Wirekraft Industries de
Mexico, S.A. de C.V. and IWG-Philippines, Incorporated (newly formed with no
operations)(the "Non-Guarantor Subsidiaries"). Each of the Guarantor
Subsidiaries and Non-Guaranantor Subsidiaries is wholly owned by the Company.
The following condensed, consolidating financial statements of the Company
include the accounts of the Company, the combined accounts of the Guarantor
Subsidiaries and the combined accounts of the Non-Guarantor Subsidiaries.
Given the size of the Non-Guarantor Subsidiaries relative to the Company on
a consolidated basis, separate financial statements of the respective
Guarantor Subsidiaries are not presented because management has determined
that such information is not material in assessing the Guarantor
Subsidiaries.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
-------------- --------------- ----------------- ------------------ ---------------
BALANCE SHEET
AS OF SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............$ -- $ 5,997 $ 556 $ 608 $ 7,161
Accounts receivable................... -- 89,387 3,603 (222) 92,768
Inventories.......................... -- 66,949 -- -- 66,949
Other assets......................... -- 16,709 289 -- 16,998
Total current assets................. -- 179,042 4,448 386 183,876
Property, plant and
equipment, -- 149,066 9,286 -- 158,352
net.............................
Intangible assets, net............... 25,456 241,660 -- -- 267,116
Investment in 583,730 -- -- (583,730) --
subsidiaries.........................
Other assets ........................ -- 5,906 2,051 -- 7,957
Total assets.......................$.609,186 $ 575,674 $ 15,785 $(583,344) $ 617,301
</TABLE>
<TABLE>
LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT)
<S> <C> <C> <C> <C> <C>
Current liabilities..................$ 16,747 $ 86,222 $ 2,467 $ 285 $ 105,721
Long-term obligations, less
current maturities.... 498,889 21,012 -- -- 519,901
Other long-term -- 33,999 -- -- 33,999
liabilities..........................
Intercompany (receivable) payable....
68,108 (76,236) 8,027 101 --
Total liabilities.................... 583,744 64,997 10,494 386 659,621
Stockholder's equity
(deficit)
Common stock........................ 0 0 0 0 0
Contributed capital................. 113,606 571,892 138 (572,030) 113,606
Carryover of
predecessor basis........... -- (67,762) -- -- (67,762)
Accumulated deficit................ (88,164) 6,547 5,153 (11,700) (88,164)
Total stockholder's equity
(deficit).......................... 25,442 510,677 5,291 (583,730) (42,320)
Total liabilities and
stockholder's equity
(deficit)........................... $609,186 $ 575,674 $ 15,785 $(583,344) $ 617,301
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
--------------- --------------- ---------------- ------------------- ---------------
BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash $ -- $ (138) $ 138 $ -- $ --
equivalents....................
Accounts receivable............ -- 70,010 1,902 (731) 71,181
Inventories.................... -- 59,648 714 -- 60,362
Other assets.................. 5,375 4,314 112 -- 9,801
Total current assets.......... 5,375 133,834 2,866 (731) 141,344
Property, plant and
equipment,.................... -- 109,774 8,777 -- 118,551
net
Intangible assets, net......... 19,722 246,155 -- -- 265,877
Investment in 534,857 -- -- (534,857) --
subsidiaries...................
Other assets ................ -- 4,368 880 -- 5,248
Total assets..................... .$559,954 $ 494,131 $ 12,523 $(535,588) $531,020
</TABLE>
<TABLE>
LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT)
<S> <C> <C> <C> <C> <C>
Current liabilities...............$ 24,620 $ 85,866 $ 2,856 $ (731) $112,611
Long-term obligations, less
current maturities.............
420,422 6,297 -- -- 426,719
Other long-term
liabilities.................... 6,081 20,790 10 -- 26,881
Intercompany
(receivable) payable.......... 76,260 (85,366) 9,106 -- --
Total liabilities............ 527,383 27,587 11,972 (731) 566,211
Stockholder's equity
(deficit)
Common stock................. 0 0 0 0 0
Preferred stock............... 4 -- -- -- 4
Contributed capital........... 125,340 572,012 18 (572,030) 125,340
Carryover of
predecessor basis............. -- (67,762) -- -- (67,762)
Accumulated deficit...........
(92,773) (37,706) 533 37,173 (92,773)
Total stockholder's
equity (deficit).......... 32,571 466,544 551 (534,857) (35,191)
Total liabilities
and stockholder's
equity $ 559,954 $ 494,131 $ 12,523 $(535,588) $531,020
(deficit)..................
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
------------- --------------- --------------- ------------------ -------------
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C>
Net sales........................... $ -- $ 170,768 $ 10,101 $(10,101) $170,768
Operating expenses
Cost of goods sold................. -- 135,278 3,851 (10,101) 129,028
Selling, general and
administrative.................... -- 11,752 3,111 -- 14,863
Depreciation and
amortization..................... -- 8,262 1,025 -- 9,287
Operating income (loss) -- 15,476 2,114 -- 17,590
Other income (expense):
Interest expense............... (12,901) -- -- -- (12,901)
Amortization of deferred
financing costs................. (935) -- -- -- (935)
Equity in net income (loss)
of
subsidiaries................ 16,018 -- -- (16,018) --
Other, net....................... -- (123) 1 -- (122)
Income (loss) before income tax
provision........................ 2,182 15,353 2,115 (16,018) 3,632
Income tax provision........... -- 1,202 248 -- 1,450
Net income (loss) $ 2,182 $ 14,151 $ 1,867 $ (16,018) $ 2,182
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
------------- --------------- --------------- ------------------ -----------------
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
<S> <C> <C> <C> <C> <C>
Net sales.................................$. -- $ 133,496 $ 7,633 $ (7,633) $ 133,496
Operating expenses
Cost of goods sold......................$. -- 104,675 4,468 (7,633) 101,510
Selling, general and
administrative.............................. -- 7,886 2,599 -- 10,485
Depreciation and
amortization................................ -- 6,556 431 -- 6,987
Expenses related to plant
closings.................................... -- 2,000 -- -- 2,000
Operating income (loss) -- 12,379 135 -- 12,514
Other income (expense):
Interest expense........................(11,168) -- -- -- (11,168)
Amortization of deferred
financing costs............................. (948) -- -- -- (948)
Equity in net income (loss) of
subsidiaries...............................12,342 -- -- (12,342) --
Other..................................... -- 30 -- -- 30
Income (loss) before income tax
provision................................... 226 12,409 135 (12,342) 428
Income tax provision........................ -- 98 104 -- 202
Net income (loss).........................$. 226 $ 12,311 $ 31 $ (12,342) $ 226
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
------------- -------------- --------------- ------------------- --------------
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C>
Net sales.............................$....-- $ 536,319 $ 28,124 $ (28,124) $536,319
Operating expenses:
Cost of goods sold.......................-- 430,072 11,458 (28,124) 413,406
Selling, general and
administrative.............................-- 33,121 9,461 -- 42,582
Depreciation and
amortization...............................-- 23,380 2,074 -- 25,454
Expenses related to plant
closings...................................-- 500 -- -- 500
Operating income (loss)....................-- 49,246 5,131 -- 54,377
Other income (expense):
Interest expense....................(38,281) -- -- -- (38,281)
Amortization of deferred
financing costs........................(2,992) -- -- -- (2,992)
Equity in net income
(loss) of
subsidiaries...........................48,873 -- -- (48,873) --
Other....................................-- (113) 2 -- (111)
Income (loss) before income
tax Provision...........................7,600 49,133 5,133 (48,873) 12,993
Income tax provision.......................-- 4,880 513 -- 5,393
Income (loss) before
extraordinary item......................7,600 44,253 4,620 (48,873) 7,600
Extraordinary item net of taxes..........
(2,991) -- -- -- (2,991)
Net income (loss).....................$.4,609 $ 44,253 $ 4,620 $ (48,873) $ 4,609
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
---------------- --------------- --------------- ------------------ ---------------
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
<S> <C> <C> <C> <C> <C>
Net sales.............................$.....-- $ 399,612 $ 23,729 $ (23,729) $ 399,612
Operating expenses
Cost of goods sold........................-- 320,248 12,959 (23,729) 309,478
Selling, general and
administrative..............................-- 23,377 7,686 -- 31,063
Depreciation and
amortization................................-- 18,756 1,177 -- 19,933
Inventory valuation
adjustment..................................-- 8,500 -- -- 8,500
Expenses related to plant
closings....................................-- 6,000 -- -- 6,000
Operating income (loss) -- 22,731 1,907 -- 24,638
Other income (expense):
Interest expense.....................(31,751) -- -- -- (31,751)
Amortization of deferred
financing costs.........................(2,762) -- -- -- (2,762)
Equity in net income
(loss)of subsidiaries...................24,023 -- -- (24,023) --
Other.....................................-- 162 -- -- 162
Income (loss) before income
tax provision..........................(10,490) 22,893 1,907 (24,023) (9,713)
Income tax provision........................-- 507 270 -- 777
Net income (loss).....................$(10,490) $ 22,386 $ 1,637 $ (24,023) $ (10,490)
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
-------------- --------------- --------------- ------------------ -----------------
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997
Net cash from operating
<S> <C> <C> <C> <C> <C>
activities.............................$(30,209) $ 63,787 $ 3,001 $ -- $ 36,579
Cash flows used in
investing activities:
Acquisition, net of cash................... -- (58,996) -- -- (58,996)
Capital expenditures....................... -- (12,737) (2,583) -- (15,320)
Net cash used in investing
activities................................. -- (71,733) (2,583) -- (74,316)
Cash flows provided by (used
in)financing activities:
Proceeds from issuance of
long-term 211,614 16,511 -- -- 228,125
obligations......................
Repayment of long-term
obligations............................(173,916) (1,822) -- -- (175,738)
Cash dividends paid on
preferred stock and
repurchase of stock of Holdings.......
(2,078) -- -- -- (2,078)
Financing fees and other...............(5,411) -- -- -- (5,411)
Net cash provided by
financing activities....................30,209 14,689 -- -- 44,898
Net change in cash and cash
equivalents...........................$.... -- $ 6,743 $ 418 $ -- $ 7,161
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-GUARANTOR
COMPANY GUARANTOR ELIMINATIONS TOTAL
--------------- -------------- --------------- ------------------ ---------------
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net cash from operating
<S> <C> <C> <C> <C> <C>
activities.............................$.14,515 $ 5,848 $ 3,033 $ -- $ 23,396
Cash flows by used in
investing activities:
Acquisition, net of cash...............(160,259) -- -- -- (160,259)
Capital expenditures....................... -- (6,011) (2,430) -- (8,441)
Net cash used in investing
activities.............................(160,259) (6,011) (2,430) -- (168,700)
Cash flows provided by (used
in)financing activities:
Equity proceeds..........................45,039 -- -- -- 45,039
Proceeds from issuance of
long-term 128,200 -- -- -- 128,200
obligations......................
Repayment of long-term
obligations.............................(19,695) (440) -- -- (20,135)
Cash dividends paid on
preferred stock............................ -- -- -- -- --
Financing fees and other.................(7,800) -- -- -- (7,800)
Net cash provided by
financing activities....................145,744 (440) -- -- 145,304
Net change in cash and cash
equivalents............................$... -- $ (603) $ 603 $ -- $ --
</TABLE>
<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 and nine months ended September 30, 1997 compared to the three
months and nine months ended September 30, 1996, respectively. Included in the
three months and nine months ended September 30, 1997 are the results of
operations of Camden Wire Co., Inc. ("Camden Wire") from February 12, 1997, the
date of acquisition.
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,
---------------- -------------- -------------- --------------
1997 1996 1997 1996
---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Wire sales.................................$..130,711 $ 92,310 $405,867 $276,541
Harness sales..................................40,057 41,186 130,452 123,071
Net sales...................................170,768 133,496 536,319 399,612
Cost of goods sold............................129,028 101,510 413,406 309,478
Selling, general and
administrative.................................14,863 10,485 42,582 31,063
Depreciation and amortization...................9,287 6,987 25,454 19,933
Inventory valuation adjustment.....................-- -- -- 8,500
Expenses related to plant closings.................-- 2,000 500 6,000
Operating income...........................$...17,590 $ 12,514 $ 54,377 $ 24,638
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30,1996
Net sales for the three months ended September 30, 1997 were $170.8 million,
representing a $37.3 million, or 27.9%, increase compared to the third quarter
of 1996. Wire segment (non-insulated and insulated wire) sales increased $38.4
million, or 41.6%, in the three months ended September 30, 1997 as compared to
the three months ended September 30, 1996. This increase was primarily the
result of the acquisition of Camden Wire and increased demand in most major
markets served by the Company, including computer and electronics and
industrial. The three months ended September 30, 1997 included the operations
of Camden Wire for the full quarter with sales of $31.5 million. Also,
contributing to the increase in sales was an increase in average copper prices.
In general, the Company prices its products based upon a spread over the cost
of copper, which results in an increased dollar value of sales when copper
prices increase. The average price of copper based upon the New York Mercantile
Exchange, Inc. ("COMEX") increased to $1.02 per pound over the three months
ended September 30, 1997 from $0.91 per pound over the three months ended
September 30, 1996. Within the harness segment, sales decreased $1.1 million,
or 2.7 %, for the three months ended September 30, 1997 compared to the same
period in 1996. This decrease was due to lower sales to one of the Company's
large harness customers.
Cost of goods sold as a percentage of net sales decreased to 75.6% for the three
months ended September 30, 1997 from 76.0% for the three months ended September
30, 1996. This improvement reflected lower costs achieved through the transition
of certain harness segment business to lower-cost Mexican facilities, savings
realized from plant consolidation actions taken in 1996 and reduced material and
logistics costs. Partially offsetting these improvements was the impact of
higher copper prices. Because the Company's products are typically priced at a
spread over the cost of copper, a higher copper price leads to a lower gross
margin percentage but generally has no impact on gross margin dollars.
Selling, general and administrative expenses were $14.9 million for the three
months ended September 30, 1997 compared to $10.5 million for the same period
in 1996. This $4.4 million increase primarily reflected the acquisition of
Camden Wire and volume related items.
Depreciation and amortization was $9.3 million for the three months ended
September 30, 1997 compared to $7.0 million for the same period in 1996. The
increase of $2.3 million was the result of depreciation of property, plant and
equipment additions and the amortization of goodwill from the Camden Acquisition
partially offset by lower amortization as the result of the goodwill impairment
charge recorded in 1996.
A $2.0 million pre-tax plant closing expense charge to operations was recorded
in the third quarter of 1996. The plant closing costs related to shutting down
and consolidating several wire segment facilities. During the third quarter of
1997, there was no similar charge.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
For the first nine months of 1997, net sales were $536.3 million, an increase of
$136.7 million over the same period in 1996. This 34.2% increase was the result
of the DWT Acquisition ("DWT"), the Camden acquisition, growth in the Company's
computer and electronics, control signal and security and alarm accounts and a
6% harness segment sales increase. The increase in sales was also partially
attributed to a slight increase in the average COMEX price of copper during the
nine months from $1.08 in 1996 to $1.09 in 1997.
Cost of goods sold as a percentage of net sales decreased to 77.1% for the nine
months ended September 30, 1997 from 77.4% for the nine months ended September
30, 1996. This improvement reflected lower current period costs achieved through
the transition of certain harness segment business to lower-cost Mexican
facilities, savings realized from plant consolidation actions taken in 1996 and
reduced material and logistics costs. This improvement was partially offset by
the impact of increasing copper prices.
Selling, general and administrative expenses were $42.6 million for the first
nine months of 1997 compared to $31.1 million for the same period in 1996.
This $11.5 million increase primarily reflected the addition of DWT and Camden
Wire and volume related items.
Depreciation and amortization was $25.5 million for the nine months ended
September 30, 1997 as compared to $19.9 million for the same period in 1996.
The increase of $5.6 million was the result of depreciation of property, plant
and equipment additions and the amortization of goodwill from the Camden
Acquisition partially offset by lower amortization as the result of the goodwill
impairment charge recorded in 1996.
A $8.5 million pre-tax inventory valuation charge was recorded in the first nine
months of 1996. 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 September 30, 1996. During the first nine months of 1997,
a similar decrease did not occur.
A $6.0 million pre-tax plant closing expense charge to operations was recorded
in the first nine months of 1996. The plant closing costs. The plant closing
costs related to shutting down and consolidating several wire segment
facilities. During the same period in 1997, the Company recorded a $.5 million
pre-tax charge to operations for consolidating a wire segment facility.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $36.6 million for the nine
months ended September 30, 1997, compared to $23.4 million for the nine months
ended September 30, 1996. The fluctuation was primarily due to the increase in
net income.
Net cash used in investing activities was $74.3 million for the nine months
ended September 30, 1997 and includes (i) acquisition costs of $59.0 million,
related to the Camden Acquisition and (ii) capital expenditures of $15.3
million. Net cash used in investing activities was $168.7 million for the nine
months ended September 30, 1996, and represented (i) acquisition costs of $160.3
million related to the DWT
Acquisition and (ii) capital expenditures of $8.4 million.
Net cash provided by financing activities was $44.9 million for the nine months
ended September 30, 1997 and includes (i) repurchase of $0.7 million of Holdings
common stock, (ii) proceeds of $228.1 million from the issuance of long-term
obligations, (iii) net repayments of $175.7 million under debt obligations,
(iv) payments of $5.4 million related to financing fees and (v) cash dividends
of $1.4 million related to the Preferred Stock. Net cash provided by financing
activities was $145.3 million for the nine months ended September 30, 1996 and
includes (i) proceeds of $173.2 million from the issuance of equity securities
and long-term obligations, (ii) net repayments of $20.1 million under debt
obligations and (iii) payments of $7.8 million related to 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, 1997.
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 14, 1997 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.)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
[TEXT]
<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>
<CIK> 0000947429
<NAME> International Wire Group, Inc.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> $ 7,161
<SECURITIES> 0
<RECEIVABLES> 94,185
<ALLOWANCES> 1,417
<INVENTORY> 66,949
<CURRENT-ASSETS> 183,876
<PP&E> 280,841
<DEPRECIATION> 122,489
<TOTAL-ASSETS> 617,301
<CURRENT-LIABILITIES> 105,721
<BONDS> 519,901
0
0
<COMMON> 0
<OTHER-SE> (42,320)
<TOTAL-LIABILITY-AND-EQUITY> 617,301
<SALES> 536,319
<TOTAL-REVENUES> 536,319
<CGS> 413,406
<TOTAL-COSTS> 413,406
<OTHER-EXPENSES> 25,454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,273
<INCOME-PRETAX> 12,993
<INCOME-TAX> 5,393
<INCOME-CONTINUING> 7,600
<DISCONTINUED> 0
<EXTRAORDINARY> (2,991)
<CHANGES> 0
<NET-INCOME> 4,609
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
