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,
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:
Outstanding at
Class July 31, 1997
International Wire Group, Inc.
Common Stock 1,000
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
<TABLE>
<CAPTION>
INDEX
PART I - FINANCIAL INFORMATION Page
<S> <C>
International Wire Group, Inc.
Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations for the three and six months ended June 30,1997 and the three
and six months ended June 30, 1996................................................................... 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and six months ended June 30, 1996............................................... 5
Notes to Consolidated Financial Statements............................................................. 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................................................... 11
PART II - OTHER INFORMATION................................................................................ 14
SIGNATURES................................................................................................. 15
</TABLE>
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
------------------------ --------------------
1997 1996
------------------------ --------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Accounts receivable, less allowance of $ 1,418
and $1,363, respectively.......................................... $ 100,307 $ 71,181
Inventories......................................................... 65,066 60,362
Prepaid expenses and other.......................................... 11,119 5,060
Deferred income taxes............................................... 4,741 4,741
Total current assets.............................................. 181,233 141,344
Property, plant and equipment, net.................................... 156,513 118,551
Deferred financing costs, net......................................... 24,890 21,222
Intangible assets, net................................................ 244,931 244,655
Other assets.......................................................... 7,229 5,248
Total assets...................................................... $ 614,796 $ 531,020
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations......................... $ 4,463 $ 20,948
Accounts payable.................................................... 42,065 45,832
Accrued and other liabilities....................................... 53,706 41,183
Accrued interest.................................................... 2,716 4,648
Total current liabilities......................................... 102,950 112,611
Long-term obligations, less current maturities........................ 521,296 426,719
Deferred income taxes................................................. 14,719 14,719
Other long-term liabilities........................................... 19,746 12,162
Total liabilities................................................. 658,711 566,211
Stockholders' 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, 400,000 shares authorized,
issued and outstanding................................................ -- 4
Contributed capital................................................. 114,193 125,340
Carryover of predecessor basis...................................... (67,762) (67,762)
Accumulated deficit................................................. (90,346) (92,773)
Total stockholder's equity (deficit).............................. (43,915) (35,191)
Total liabilities and stockholder's equity (deficit).............. $ 614,796 $ 531,020
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------ ------------------ ------------------- ------------------
1997 1996 1997 1996
------------------ ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Net sales............................ $ 189,398 $ 147,309 $ 365,551 $ 266,116
Operating expenses:
Cost of goods sold.................. 146,465 114,493 284,378 207,968
Selling, general and administrative. 14,411 10,857 27,719 20,578
Depreciation and amortization....... 8,656 6,902 16,167 12,946
Inventory valuation adjustment -- 6,500 -- 8,500
Expenses related to plant closings.. -- -- 500 4,000
Operating income...................... 19,866 8,557 36,787 12,124
Other income (expense):
Interest expense.................... (13,369) (11,011) (25,380) (20,583)
Amortization of deferred
financing costs................... (1,062) (1,091) (2,057) (1,814)
Other, net.......................... -- 43 11 132
Income (loss) before income taxes and
extraordinary item.................. 5,435 (3,502) 9,361 (10,141)
Income tax provision.................. 2,313 320 3,943 575
Income (loss) before
extraordinary item.................. 3,122 (3,822) 5,418 (10,716)
Extraordinary item - loss related to
early extinguishment of debt,net of
taxes of $1,995...................... (2,991) -- (2,991) --
Net income (loss)..................... $ 131 $ (3,822) $ 2,427 $ (10,716)
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
------------------------ ------------------------
1997 1996
------------------------ ------------------------
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income(loss)................................................ $ 2,427 $ (10,716)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization................................ 16,167 12,946
Amortization of deferred financing costs..................... 2,057 1,814
Extraordinary loss on early extinguishment of debt........ 4,986 --
Inventory valuation adjustment............................... -- 8,500
Change in assets and liabilities, net of
acquisitions:
Accounts receivable....................................... (13,654) (11,380)
Inventories............................................... 20,482 5,541
Prepaid expenses and other................................ (4,220) (2,751)
Accounts payable.......................................... (17,522) (8,546)
Accrued and other liabilities............................. (2,284) 3,111
Accrued interest.......................................... (1,932) 1,161
Income taxes payable/refundable........................... -- 4,001
Other long-term liabilities............................... 1,824 (203)
Net cash provided by operating 8,331 3,478
activities...........................
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash....................................... (58,996) (160,259)
Capital expenditures, net....................................... (7,679) (5,486)
Net cash from investing activities.................................. (66,675) (165,745)
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...................... (162,992) (336)
Cash dividends paid on preferred stock............................ (1,378) --
Financing fees and other.......................................... (5,411) (7,800)
Net cash from financing activities.................................. 58,344 165,103
Net change in cash and cash equivalents............................. -- 2,836
Cash at beginning of the
period............................................................ -- --
Cash at end of the period........................................... $ -- $ 2,836
</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 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 six months ended June 30, 1997 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 June 30, 1997 were $27,312 and $1,721,
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 statement of position.
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 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 of financial position but will
have disclosure requirements.
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. 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.
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 & equipment............... 42,041
Goodwill.................................. 3,802
Other, non-current........................ 1,696
Fees and costs............................ 3,250
Current liabilities....................... (28,062)
Other liabilities......................... (5,760)
$65,000
</TABLE>
Unaudited pro forma results of operations of
the Company for the six months ended June 30,
1997 and June 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>
Six Months Ended
June 30,
----------------- ------------------
1997 1996
----------------- ------------------
<S> <C> <C>
Net sales.............................................................. $384,542 $363,134
Net income (loss)...................................................... $ 1,366 $ (6,551)
</TABLE>
4. Inventories
Inventories are valued at the lower of cost
or market. Cost is determined using the
last-in, first-out ("LIFO") method.
The composition of inventories at June 30, 1997 is as follows:
<TABLE>
<S> <C>
Raw materials........................................................................ $ 26,033
Work-in-process ..................................................................... 18,305
Finished goods ...................................................................... 20,728
Total $ 65,066
</TABLE>
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
5. Long-Term Obligations
The composition of long-term obligations at
June 30, 1997 is as follows:
<TABLE>
<S> <C>
Credit Agreement:
Revolving credit facility.......................................................... $ --
Term facility ..................................................................... 185,500
Senior Subordinated Notes............................................................ 150,000
Series B Senior Subordinated Notes................................................... 150,000
Series B Senior Subordinated Notes Premium........................................... 13,036
Exchange notes....................................................................... 5,000
Industrial revenue bonds............................................................. 15,500
Other 6,723
525,759
Less, current maturities............................................................. 4,463
$ 521,296
</TABLE>
The schedule of principal payments for
long-term obligations at June 30, 1997 is as
follows:
<TABLE>
<S> <C>
1997 $ 2,251
1998 4,424
1999 5,674
2000 6,924
2001 8,174
Thereafter........................................................................... 485,276
Total $ 512,723
</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.
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
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- (continued)
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. 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 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.
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. 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 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.
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
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- (continued)
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 pretax
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>
Six Six
Months Months
Ended Ended
June 30, June 30,
------------------- ------------------
1997 1996
------------------- ------------------
<S> <C> <C>
Balance beginning of period..................................... $ 2,462 $ 700
Charges to operations:
Facility shut-down costs...................................... 375 2,500
Lease commitments............................................. 570
Key personnel and severance costs............................. _ 125 930
500 4,000
Costs incurred:
Facility shut-down costs...................................... (1,128) (202)
Lease commitments............................................. (114) --
Key personnel and severance costs............................. (202) --
(1,444) (202)
Balance, end of period.......................................... $ 1,518 $ 4,498
</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.
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.
<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 six
months ended June 30, 1997 compared to the three
months and six months ended June 30, 1996,
respectively. Included in the three months ended
March 31, 1997 and the six months ended June 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 Six Months Ended
June 30, June 30,
---------------- ----------------- -------------- ---------------
1997 1996 1997 1996
---------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Wire sales.......................................... $ 143,720 $ 106,363 $ 275,156 $ 184,231
Harness sales....................................... 45,678 40,946 90,395 81,885
Net sales......................................... 189,398 147,309 365,551 266,116
Cost of goods sold.................................. 146,465 114,493 284,378 207,968
Selling, general and administrative.. 14,411 10,857 27,719 20,578
Depreciation and amortization....................... 8,656 6,902 16,167 12,946
Inventory valuation adjustment...................... -- 6,500 -- 8,500
Plant closings expenses............................. -- -- 500 4,000
Operating income.................................... $ 19,866 $ 8,557 $ 36,787 $ 12,124
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three
Months Ended June 30, 1996
Net sales for the three months ended June 30, 1997
were $189.4 million, representing a $42.1 million, or
28.6%, increase compared to the second quarter of
1996. Wire segment sales increased $37.4 million, or
35.1%, in the three months ended June 30, 1997 as
compared to the three months ended June 30, 1996.
This increase was primarily the result of the
acquisition of Camden Wire and growth in the
Company's computer and electronics, control signal and
security and alarm accounts. The three months ended
June 30, 1997 included the operations of Camden Wire
for the full quarter with sales of $35.8 million.
The increase in sales was partially offset by a
decline in the average price of copper during the
three months ended June 30, 1997 compared to the same
period in 1996. 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
Mercantile Exchange, Inc. ("COMEX") declined to $1.14
per pound over the three months ended June 30, 1997
from $1.16 per pound over the three months ended June
30, 1996. Within the harness segment, sales increased
$4.7 million, or 11.6%, for the three months ended
June 30, 1997 compared to the same period in 1996.
This increase was due to higher sales to the
Company's major harness customers.
Cost of goods sold as a percentage of sales decreased
to 77.3% for the three months ended June 30, 1997
from 77.7% for the three months ended June 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, reduced material
and logistic costs 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.
Selling, general and administrative expenses were
$14.4 million for the three months ended June 30,
1997 compared to $10.9 million for the same period in
1996. This $3.5 million increase primarily reflected
the acquisition of Camden Wire. Expressed as a
percentage of sales, selling, general and
administrative expenses increased slightly from 7.4%
for the six month period ended June 30, 1996 to 7.6%
for the six month period ended June 30, 1997.
Depreciation and amortization was $8.7 million for
the three months ended June 30, 1997 compared to $6.9
million for the same period in 1996. The increase of
$1.8 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 $6.5 million pre-tax inventory valuation charge was
recorded in the second quarter 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 March 31, 1996 to June 30,
1996. During the second quarter of 1997, a similar
decrease did not occur.
Six Months Ended June 30, 1997 Compared to Six Months
Ended June 30, 1996
Net sales for the six months ended June 30, 1997 were
$365.6 million, representing a $99.4 million, or
37.4%, increase compared to the same period in 1996.
Wire segment sales increased $90.9 million, or 49.4%,
in the six months ended June 30, 1997 as compared to
the six months ended June 30, 1996. This increase
was the result of the DWT Acquisition, the Camden
Wire Acquisition and growth in the Company's computer
and electronics, control signal and security and
alarm accounts. The six months ended June 30, 1997
included the operations of Wire Technologies from
March 5, 1996, the date of the DWT Acquisition. In
addition, the six months ended June 30, 1997 included
$52.7 million of sales from Camden Wire. The
increase in sales was partially offset by a decline
in the average price of copper during the six months
ended June 30, 1997 compared to the same period in
1996. 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 $1.13 per pound over
the six months ended June 30, 1997 from $1.17 per
pound over the six months ended June 30, 1996. Within
the harness segment, sales increased $8.5 million, or
10.4%, for the six months ended June 30, 1997
compared to the same period in 1996. This increase
was due to higher sales to the Company's major
harness customers.
Cost of goods sold as a percentage of sales decreased
to 77.8% for the six months ended June 30, 1997 from
78.1% for the six months ended June 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, reduced
material and logistic costs 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.
Selling, general and administrative expenses were
$27.7 million for the first six months of 1997
compared to $20.6 million for the same period in
1996. This $7.1 million increase primarily reflected
the acquisition of DWT and Camden Wire. Expressed as
a percentage of sales, selling, general and
administrative expenses decreased from 7.7% for the
six month period ended June 30, 1996 to 7.6% for the
six month period ended June 30, 1997. This
improvement was attributed to synergies created
through the acquisitions, cost control and the
effects of increased sales volume.
Depreciation and amortization was $16.2 million for
the six months ended June 30, 1997 as compared to
$12.9 million for the same period in 1996. The
increase of $3.3 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 $8.5 million pre-tax inventory valuation charge was
recorded in the first six 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 June
30, 1996. During the first six months of 1997, a
similar decrease did not occur. A $4.0 million
pre-tax charge to operations was recorded in March
1996, representing 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 $8.3
million for the six months ended June 30, 1997,
compared to $3.5 million for the six months ended
June 30, 1996. The fluctuation was primarily due to
an increase in net income.
Net cash used in investing activities was $66.7
million for the six months ended June 30, 1997 and
includes (i) acquisition costs of $59.0 million,
related to the Camden Acquisition and (ii) capital
expenditures of $7.7 million. Net cash used in
investing activities was $165.7 million for the six
months ended June 30, 1996, and represented (i)
acquisition costs of $160.3 million related to the
acquisition of DWT Acquisition and (ii) capital
expenditures of $5.5 million.
Net cash provided by financing activities was $58.3
million for the six months ended June 30, 1997 and
includes (i) proceeds of $228.1 million from the
issuance of long-term obligations, (ii) net
repayments of $163.0 million under debt obligations,
(iii) payments of $5.4 million related to financing
fees and (iv) cash dividends of $1.4 million related
to the Preferred Stock. Net cash provided by
financing activities was $165.1 million for the six
months ended June 30, 1996 and includes (i) proceeds
of $173.2 million from the issuance of equity
securities and long-term obligations, (ii) net
repayments of $.3 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 March 31, 1997.
<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 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.)
<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-30-1997
<CASH> $ 0
<SECURITIES> 0
<RECEIVABLES> 101,725
<ALLOWANCES> 1,418
<INVENTORY> 65,066
<CURRENT-ASSETS> 181,233
<PP&E> 209,987
<DEPRECIATION> 53,474
<TOTAL-ASSETS> 614,796
<CURRENT-LIABILITIES> 102,950
<BONDS> 525,759
0
0
<COMMON> 0
<OTHER-SE> (43,915)
<TOTAL-LIABILITY-AND-EQUITY> 614,796
<SALES> 365,551
<TOTAL-REVENUES> 365,551
<CGS> 284,378
<TOTAL-COSTS> 328,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,437
<INCOME-PRETAX> 9,361
<INCOME-TAX> 3,943
<INCOME-CONTINUING> 5,418
<DISCONTINUED> 0
<EXTRAORDINARY> (2,991)
<CHANGES> 0
<NET-INCOME> 2,427
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
