<PAGE> 1
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, 1998
------------------------------------------------
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 July 31, 1998
----- --------------
<S> <C>
Common Stock 1,000
</TABLE>
<PAGE> 2
INTERNATIONAL WIRE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
International Wire Group, Inc.
Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997....................... 3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 1998
and the three and six months ended June 30, 1997................................................. 4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and the six
months ended June 30, 1997....................................................................... 5
Notes to Condensed Consolidated Financial Statements.................................................... 6
Management's Discussion and Analysis of Financial Condition and Results of Operations................... 15
PART II - OTHER INFORMATION................................................................................. 18
SIGNATURES.................................................................................................. 19
</TABLE>
2
<PAGE> 3
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
------------------------------
1998 1997
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................... $ 4,549 $ --
Accounts receivable, less allowance of $2,034
and $2,078, respectively .................. 87,456 87,201
Inventories ................................. 66,570 74,406
Other current assets ........................ 21,630 27,273
------------ ------------
Total current assets ...................... 180,205 188,880
Property, plant and equipment, net ............ 174,381 165,239
Intangibles and other assets .................. 273,145 273,929
------------ ------------
Total assets .............................. $ 627,731 $ 628,048
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations . $ 4,472 $ 4,493
Accounts payable ............................ 35,536 48,761
Accrued and other liabilities ............... 63,819 59,121
Accrued interest ............................ 4,922 4,834
------------ ------------
Total current liabilities ................. 108,749 117,209
Long-term obligations, less current maturities 519,458 519,302
Other long-term liabilities ................... 36,265 37,365
------------ ------------
Total liabilities ......................... 664,472 673,876
Stockholder's equity (deficit):
Common stock, $.01 par value, 1,000 shares
authorized, issued and outstanding ........ 0 0
Contributed capital ......................... 113,944 113,717
Carryover of predecessor basis .............. (67,762) (67,762)
Accumulated deficit ......................... (82,923) (91,783)
------------ ------------
Total stockholder's equity (deficit) ...... (36,741) (45,828)
------------ ------------
Total liabilities and stockholder's
equity (deficit) ...................... $ 627,731 $ 628,048
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements
3
<PAGE> 4
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------------------------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ............................ $ 163,734 $ 189,398 $ 337,740 $ 365,551
Operating expenses:
Cost of goods sold ................. 116,373 146,465 245,169 284,378
Selling, general and
administrative expenses ........... 15,459 14,411 30,928 27,719
Depreciation and
amortization ...................... 10,114 8,656 19,181 16,167
Plant closing charges .............. -- -- -- 500
--------- --------- --------- ---------
Operating income ..................... 21,788 19,866 42,462 36,787
Other income (expense):
Interest expense ................... (12,541) (13,369) (25,584) (25,380)
Amortization of deferred
financing costs ................... (951) (1,062) (1,904) (2,057)
Other, net ......................... 13 -- 17 11
--------- --------- --------- ---------
Income before income tax
provision ......................... 8,309 5,435 14,991 9,361
Income tax provision ................. 3,365 2,313 6,131 3,943
--------- --------- --------- ---------
Income before extraordinary item ..... 4,944 3,122 8,860 5,418
Extraordinary item - loss related to
early extinguishment of debt, net of
taxes of $1,995 ..................... -- (2,991) -- (2,991)
--------- --------- --------- ---------
Net income ........................... $ 4,944 $ 131 $ 8,860 $ 2,427
========= ========= ========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
4
<PAGE> 5
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income .................................... $ 8,860 $ 2,427
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization ............... 21,085 18,224
Extraordinary loss on early
extinguishment of debt ..................... -- 4,986
Change in assets and liabilities, net of
acquisitions:
Accounts receivable ....................... 3,992 (13,654)
Inventories ............................... 8,253 20,482
Other assets .............................. 2,765 (4,220)
Accounts payable .......................... (16,873) (17,522)
Accrued and other liabilities ............. 1,867 (2,284)
Accrued interest .......................... 88 (1,932)
Other long-term liabilities ............... (1,100) 1,824
------------ ------------
Net cash provided by operating activities ....... 28,937 8,331
------------ ------------
Cash flows used in investing activities:
Acquisitions, net of cash ..................... (7,738) (58,996)
Capital expenditures .......................... (16,089) (7,679)
------------ ------------
Net cash used in investing activities ........... (23,827) (66,675)
------------ ------------
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of long-term
obligations ................................. -- 228,125
Borrowing (repayment) of long-term
obligations ................................. (439) (162,992)
Cash dividends paid on preferred stock ........ -- (1,378)
Financing fees and other ...................... (122) (5,411)
------------ ------------
Net cash provided by (used in) financing
activities .................................... (561) 58,344
------------ ------------
Net change in cash and cash equivalents ......... 4,549 --
Cash at beginning of the period ................. -- --
------------ ------------
Cash at end of the period ....................... $ 4,549 $ --
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements
5
<PAGE> 6
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. Basis of Presentation
Unaudited Interim Condensed Consolidated Financial Statements
The unaudited interim condensed 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 the
financial position and results of operations of the Company. The results
for the three months and six months ended June 30, 1998 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, 1997.
Statement of Cash Flows
Interest paid for the six months ended June 30, 1998 and 1997, was
approximately $25,500 and $27,300, respectively. Income taxes paid for the
six months ended June 30, 1998 and 1997, were approximately $2,100 and
$1,700, respectively.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board (FASB) adopted
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which requires
that a public business enterprise report financial and descriptive
information about its reportable business segments. SFAS 131 is effective
for fiscal years beginning after December 15, 1997, and does not apply to
interim financial statements in the year of adoption. The Company will
adopt SFAS No. 131 for the fiscal year ended December 31, 1998.
In February 1998, the FASB adopted SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits," which establishes
reporting requirements related to a business' pensions and other
postretirement benefits. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997, and does not apply to interim financial
statements in the year of adoption. The Company will adopt SFAS No. 132
for the fiscal year ended December 31, 1998.
In April 1998, the FASB adopted Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities," which requires costs of
start-up activities and organization costs to be expensed as incurred. SOP
98-5 is effective for financial statements for fiscal years beginning
after December 15, 1998. The Company expects to adopt SOP 98-5 in fiscal
1999.
6
<PAGE> 7
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
In June 1998, the FASB adopted SFAS No.133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No.133 establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the
income statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting. SFAS No.133 is effective for fiscal years beginning after June
15, 1999.
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. Certain of these statements will require the
Company to make additional disclosures.
2. Inventories
The composition of inventories at June 30, 1998 is as follows:
<TABLE>
<S> <C>
Raw materials.......................................... $28,618
Work-in-process ....................................... 11,289
Finished goods ........................................ 26,663
-------
Total $66,570
=======
</TABLE>
The carrying value of inventories at LIFO, at June 30, 1998, approximates
its current cost.
3. Long-Term Obligations
The composition of long-term obligations at June 30, 1998 is as follows:
<TABLE>
<S> <C>
Amended and Restated Credit Agreement:
Revolving credit facility ............................. $ 3,300
Term facility ......................................... 182,000
Senior Subordinated Notes ............................... 150,000
Series B Senior Subordinated Notes ...................... 150,000
Series B Senior Subordinated Notes Premium .............. 11,905
Industrial revenue bonds................................. 15,500
Other ................................................... 11,225
--------
523,930
Less, current maturities ................................ 4,472
--------
$519,458
========
</TABLE>
7
<PAGE> 8
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Amended and Restated Credit Agreement contains several financial
covenants which, among other things, require the Company to maintain
certain financial ratios and restrict the Company's ability to incur
indebtedness, make capital expenditures and pay dividends.
The Company's 11 3/4% Senior Subordinated Notes, 11 3/4% Series B Senior
Subordinated Notes, and 14% Senior Subordinated Notes ("Senior Notes")
restrict, among other things, the incurrence of additional indebtedness by
the Company, the payment of dividends and other distributions in respect
of the Company's capital stock, the imposition of restrictions on the
payment of dividends and other distributions by the Company's
subsidiaries, the creation of liens on the properties and the assets of
the Company to secure certain subordinated debt and certain mergers, sales
of assets and transactions with affiliates.
4. Plant Closing Expense
A summary of activity related to plant closings is as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Balance, beginning of period .............. $ 1,445 $ 2,462
Charges to operations:
Facility shut-down costs ................ -- 375
Lease commitments ....................... -- --
Key personnel and severance costs ....... -- 125
----------- -----------
-- 500
----------- -----------
Costs incurred:
Facility shut-down costs ................ (45) (1,128)
Lease commitments ....................... (236) (114)
Key personnel and severance costs ....... (61) (202)
----------- -----------
(342) (1,444)
----------- -----------
Balance, end of period .................... $ 1,103 $ 1,518
=========== ===========
</TABLE>
5. Guarantor Subsidiaries
The Company's Senior Notes are fully and unconditionally (as well as
jointly and severally) guaranteed on an unsecured, senior subordinated
basis by each domestic subsidiary of the Company (the "Guarantor
Subsidiaries"). Each of the foreign subsidiaries of the Company (the
"Non-Guarantor Subsidiaries") have not guaranteed the Company's Senior
Notes. Each of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries
is wholly owned by the Company.
8
<PAGE> 9
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
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.
9
<PAGE> 10
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
AS OF JUNE 30, 1998
ASSETS
Cash and cash equivalents ...... $ -- $ 3,043 $ 1,506 $ -- $ 4,549
Accounts receivable ............ -- 85,185 2,271 -- 87,456
Inventories .................... -- 65,941 629 -- 66,570
Other assets ................... -- 21,146 484 -- 21,630
---------- ---------- ---------- ---------- ----------
Total current assets ........ -- 175,315 4,890 -- 180,205
Property, plant and equipment,
net .......................... -- 151,470 22,911 -- 174,381
Investment in subsidiaries ..... 632,791 -- -- (632,791) --
Intangibles and other assets ... 21,688 244,405 7,052 -- 273,145
---------- ---------- ---------- ---------- ----------
Total assets ................ $ 654,479 $ 571,190 $ 34,853 $ (632,791) $ 627,731
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current liabilities ............ $ 8,422 $ 93,287 $ 7,040 $ -- $ 108,749
Long-term obligations, less
current maturities ........... 497,323 21,562 573 -- 519,458
Other long-term liabilities .... -- 36,265 -- -- 36,265
Intercompany (receivable)
payable ...................... 117,713 (138,041) 20,328 -- --
---------- ---------- ---------- ---------- ----------
Total liabilities ........... 623,458 13,073 27,941 -- 664,472
Stockholder's equity (deficit):
Common stock .................. 0 0 0 0 0
Contributed capital ........... 113,944 572,112 3,908 (576,020) 113,944
Carryover of predecessor
basis......................... -- (67,762) -- -- (67,762)
Retained earnings
(accumulated deficit) ..... (82,923) 53,767 3,004 (56,771) (82,923)
---------- ---------- ---------- ---------- ----------
Total stockholder's equity
(deficit) ................. 31,021 558,117 6,912 (632,791) (36,741)
---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholder's equity
(deficit) ............... $ 654,479 $ 571,190 $ 34,853 $ (632,791) $ 627,731
========== ========== ========== ========== ==========
</TABLE>
10
<PAGE> 11
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
AS OF DECEMBER 31, 1997
ASSETS
Cash and cash equivalents ...... $ -- $ (226) $ 226 $ -- $ --
Accounts receivable ............ -- 86,521 680 -- 87,201
Inventories .................... -- 74,406 -- -- 74,406
Other assets ................... -- 27,273 -- -- 27,273
---------- ---------- ---------- ---------- ----------
Total current assets ........ -- 187,974 906 -- 188,880
Property, plant and equipment,
net .......................... -- 150,443 14,796 -- 165,239
Investment in subsidiaries ..... 592,643 -- -- (592,643) --
Intangibles and other assets ... 23,592 248,299 2,038 -- 273,929
---------- ---------- ---------- ---------- ----------
Total assets ................ $ 616,235 $ 586,716 $ 17,740 $ (592,643) $ 628,048
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current liabilities ............ $ 8,334 $ 106,623 $ 2,252 $ -- $ 117,209
Long-term obligations, less
current maturities .......... 498,014 21,288 -- -- 519,302
Other long-term liabilities .... -- 37,365 -- -- 37,365
Intercompany (receivable)
payable ..................... 87,953 (97,774) 9,821 -- --
---------- ---------- ---------- ---------- ----------
Total liabilities ........... 594,301 67,502 12,073 -- 673,876
Stockholder's equity (deficit):
Common stock .................. 0 0 0 0 0
Contributed capital ........... 113,717 572,012 138 (572,150) 113,717
Carryover of predecessor
basis........................ -- (67,762) -- -- (67,762)
Retained earnings
(accumulated deficit) ....... (91,783) 14,964 5,529 (20,493) (91,783)
---------- ---------- ---------- ---------- ----------
Total stockholder's equity
(deficit) ................. 21,934 519,214 5,667 (592,643) (45,828)
---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholder's equity
(deficit) ............... $ 616,235 $ 586,716 $ 17,740 $ (592,643) $ 628,048
========== ========== ========== ========== ==========
</TABLE>
11
<PAGE> 12
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
JUNE 30, 1998
Net sales .......................... $ -- $ 163,734 $ 9,243 $ (9,243) $ 163,734
Operating expenses
Cost of goods sold ............. -- 121,450 4,166 (9,243) 116,373
Selling, general and
administrative expenses ...... -- 12,101 3,358 -- 15,459
Depreciation and amortization .. -- 8,844 1,270 -- 10,114
------------ ------------ ------------ ------------ ------------
Operating income (loss) ............ -- 21,339 449 -- 21,788
Other income (expense):
Interest expense ............... (12,506) (35) -- -- (12,541)
Amortization of deferred
financing costs .............. (951) -- -- -- (951)
Equity in net income (loss) of
subsidiaries ................. 18,401 -- -- (18,401) --
Other, net ..................... -- 12 1 -- 13
------------ ------------ ------------ ------------ ------------
Income (loss) before income tax
provision ........................ 4,944 21,316 450 (18,401) 8,309
Income tax provision ............... -- 3,244 121 -- 3,365
------------ ------------ ------------ ------------ ------------
Net income (loss) .................. $ 4,944 $ 18,072 $ 329 $ (18,401) $ 4,944
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
JUNE 30, 1997
Net sales .......................... $ -- $ 189,398 $ 9,457 $ (9,457) $ 189,398
Operating expenses
Cost of goods sold ............... -- 151,961 3,961 (9,457) 146,465
Selling, general and
administrative expenses ........ -- 11,083 3,328 -- 14,411
Depreciation and amortization .... -- 8,041 615 -- 8,656
------------ ------------ ------------ ------------ ------------
Operating income (loss) ............ -- 18,313 1,553 -- 19,866
Other income (expense):
Interest expense ................. (13,369) -- -- -- (13,369)
Amortization of deferred
financing costs ................ (1,062) -- -- -- (1,062)
Equity in net income (loss) of
subsidiaries ................... 17,553 -- -- (17,553) --
Other ............................ -- (4) 4 -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before income tax
provision ........................ 3,122 18,309 1,557 (17,553) 5,435
Income tax provision ............... -- 2,179 134 -- 2,313
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary
item ............................. 3,122 16,130 1,423 (17,553) 3,122
Extraordinary item, net of income
taxes ............................ (2,991) -- -- -- (2,991)
------------ ------------ ------------ ------------ ------------
Net income (loss) .................. $ 131 $ 16,130 $ 1,423 $ (17,553) $ 131
============ ============ ============ ============ ============
</TABLE>
12
<PAGE> 13
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
Net sales .......................... $ -- $ 337,740 $ 15,125 $ (15,125) $ 337,740
Operating expenses
Cost of goods sold ............. -- 251,699 8,595 (15,125) 245,169
Selling, general and
administrative expenses ...... -- 24,291 6,637 -- 30,928
Depreciation and amortization .. -- 17,095 2,086 -- 19,181
------------ ------------ ------------ ------------ ------------
Operating income (loss) ............ -- 44,655 (2,193) -- 42,462
Other income (expense):
Interest expense ............... (25,514) (70) -- -- (25,584)
Amortization of deferred
financing costs .............. (1,904) -- -- -- (1,904)
Equity in net income (loss) of
subsidiaries ................. 36,278 -- -- (36,278) --
Other, net ..................... -- 16 1 -- 17
------------ ------------ ------------ ------------ ------------
Income (loss) before income tax
provision ........................ 8,860 44,601 (2,192) (36,278) 14,991
Income tax provision ............... -- 5,798 333 -- 6,131
------------ ------------ ------------ ------------ ------------
Net income (loss) .................. $ 8,860 $ 38,803 $ (2,525) $ (36,278) $ 8,860
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1997
Net sales .......................... $ -- $ 365,551 $ 18,023 $ (18,023) $ 365,551
Operating expenses
Cost of goods sold ............... $ -- 294,794 7,607 (18,023) 284,378
Selling, general and
administrative expenses ........ -- 21,369 6,350 -- 27,719
Depreciation and amortization .... -- 15,118 1,049 -- 16,167
Plant closing charges ............ -- 500 -- -- 500
------------ ------------ ------------ ------------ ------------
Operating income (loss) ............ -- 33,770 3,017 -- 36,787
Other income (expense):
Interest expense ................. (25,380) -- -- -- (25,380)
Amortization of deferred
financing costs ................ (2,057) -- -- -- (2,057)
Equity in net income (loss) of
subsidiaries ................... 32,855 -- -- (32,855) --
Other ............................ -- 10 1 -- 11
------------ ------------ ------------ ------------ ------------
Income (loss) before income tax
provision ........................ 5,418 33,780 3,018 (32,855) 9,361
Income tax provision ............... -- 3,678 265 -- 3,943
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary
item ............................. 5,418 30,102 2,753 (32,855) 5,418
Extraordinary item ................. (2,991) -- -- -- (2,991)
------------ ------------ ------------ ------------ ------------
Net income (loss) .................. $ 2,427 $ 30,102 $ 2,753 $ (32,855) $ 2,427
============ ============ ============ ============ ============
</TABLE>
13
<PAGE> 14
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
Net cash from operating
activities ............................. $ 691 $ 16,930 $ 7,446 $ 3,870 $ 28,937
------------ ------------ ------------ ------------ ------------
Cash flows used in Investing activities:
Acquisition, net of cash ............. -- (7,738) -- -- (7,738)
Capital expenditures ................. -- (6,153) (9,936) -- (16,089)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities ............................. -- (13,891) (9,936) -- (23,827)
------------ ------------ ------------ ------------ ------------
Cash flows provided by (used in)
financing activities:
Equity proceeds ...................... -- 100 3,770 (3,870) --
Repayment of long-term
obligations ........................ (691) 252 -- -- (439)
Financing fees and other ............. -- (122) -- -- (122)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities ................. (691) 230 3,770 (3,870) (561)
------------ ------------ ------------ ------------ ------------
Net change in cash and cash
equivalents .......................... $ -- $ 3,269 $ 1,280 $ -- $ 4,549
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1997
Net cash from (used in)
operating activities ...................... $ (42,084) $ 48,923 $ 1,492 $ -- $ 8,331
------------ ------------ ------------ ------------ ------------
Cash flows by used in Investing activities:
Acquisition, net of cash ................ -- (58,996) -- -- (58,996)
Capital expenditures .................... -- (6,128) (1,551) -- (7,679)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities ................................ -- (65,124) (1,551) -- (66,675)
------------ ------------ ------------ ------------ ------------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of
long-term obligations ................. 211,614 16,511 -- -- 228,125
Repayment of long-term
obligations ........................... (162,741) (251) -- -- (162,992)
Cash dividends paid on
preferred stock ....................... (1,378) -- -- -- (1,378)
Financing fees and other ................ (5,411) -- -- -- (5,411)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities ................................ 42,084 16,260 -- -- 58,344
------------ ------------ ------------ ------------ ------------
Net change in cash and cash
equivalents ............................... $ -- $ 59 $ (59) $ -- $ --
============ ============ ============ ============ ============
</TABLE>
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis includes the results of operations for the
three and six months ended June 30, 1998 compared to the three and six months
ended June 30, 1997, respectively.
The Company conducts its operations through two segments: (i) wire products,
which includes both bare wire and insulated wire, and (ii) wire harness
products.
The cost of copper has historically been subject to fluctuations. While
fluctuations in the price of copper directly affect the per unit prices of the
company's products, these fluctuations have not had, nor are expected to have, a
material impact on the company's profitability due to the copper price
pass-through arrangements that the Company has with its customers. These sales
arrangements are based on similar variations of monthly copper price formulas.
Use of these copper price formulas minimize the differences between raw material
copper costs charged to the cost of sales and the pass-through pricing charged
to customers.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
Net sales for the three months ended June 30, 1998 were $163.7 million,
representing a $25.7 million, or 13.6%, decrease compared to the second quarter
of 1997. Increases in unit volume in the wire segment were offset by the impact
of a decrease in the average cost and selling price of copper. The average price
of copper based upon the New York Mercantile Exchange, Inc. ("COMEX") decreased
to $.78 per pound during the three months ended June 30, 1998 from $1.14 per
pound during the three months ended June 30, 1997.
Wire segment sales were $120.7 million and decreased $23.0 million, or 16.0%, in
the three months ended June 30, 1998 as compared to the three months ended June
30, 1997, as a result of the lower costs and selling prices of copper. The
copper effect was partially offset by growth in sales of bare cable for
industrial customers and increased volume of insulated appliance lead wire.
Within the wire harness segment, net sales for the three months ended June 30,
1998 were $43.0 million, representing a $2.7 million, or 5.9%, decrease compared
to the second quarter of 1997. The decrease resulted from the discontinuation of
a non-core product line in September 1997.
Cost of goods sold as a percentage of sales improved to 71.1% for the three
months ended June 30, 1998 from 77.3% for the three months ended June 30, 1997.
This improvement reflected continued synergies related to the acquisition of
Camden Wire, savings realized from previous plant consolidations, cost
reductions achieved through the transition of certain wire harness segment
business to lower-cost Mexican facilities, and the impact of lower copper
prices.
Selling, general and administrative expenses were $15.5 million for the three
months ended June 30, 1998 compared to $14.4 million for the same period in
1997. This $1.1 million increase primarily resulted from increased sales volume.
Depreciation and amortization was $10.1 million for the three months ended June
30, 1998 compared to $8.7 million for the same period in 1997. The increase of
$1.4 million was primarily the result of depreciation of property, plant and
equipment additions.
15
<PAGE> 16
Other expenses decreased $0.9 million from $14.4 million in the second quarter
of 1997 to $13.5 million in the second quarter of 1998, due primarily to reduced
interest expense as a result of improved cash flows from increased profitability
and lower working capital requirements.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales for the six months ended June 30, 1998 were $337.7 million,
representing a $27.8 million, or 7.6%, decrease compared to the first half of
1997. Increases in unit volume in both segments were more than offset by the
impact of a decrease in the average cost and selling price of copper as well as
the discontinuance of a non-core product line in September 1997. The average
price of copper based upon the New York Mercantile Exchange, Inc. ("COMEX")
decreased to $.78 per pound during the six months ended June 30, 1998 from $1.13
per pound during the six months ended June 30, 1997.
Wire segment sales were $250.0 million and decreased $25.1 million, or 9.1%, in
the six months ended June 30, 1998 as compared to the six months ended June 30,
1997, as a result of lower copper costs and selling prices. The copper effect
was partially offset by increased unit volumes due to higher demand in most
major market segments, primarily industrial cable, automotive and appliance lead
wire. In addition, 1998 includes the impact of the acquisition of Camden Wire
which was acquired in the first quarter of 1997. Within the wire harness
segment, net sales for the six months ended June 30, 1998 were $87.7 million,
representing a $2.7 million, or 3.0%, decrease compared to the second quarter of
1997, as increased appliance harness sales were offset by the effect of a
non-core product line discontinued in September 1997.
Cost of goods sold as a percentage of sales improved to 72.6% for the six months
ended June 30, 1998 from 77.8% for the six months ended June 30, 1997. This
improvement reflected synergies related to the Camden Wire Acquisition, savings
realized from previous plant consolidations, lower current period costs achieved
through the transition of certain wire harness segment business to lower-cost
Mexican facilities, and the impact of lower copper prices.
Selling, general and administrative expenses were $30.9 million for the six
months ended June 30, 1998 compared to $27.7 million for the same period in
1997. This $3.2 million increase primarily reflected the addition of Camden Wire
for a full first quarter and increased sales volume.
Depreciation and amortization was $19.2 million for the six months ended June
30, 1998 compared to $16.2 million for the same period in 1997. The increase of
$3.0 million was primarily the result of depreciation of property, plant and
equipment additions.
In the first quarter of 1997, a $.5 million pre-tax plant closing charge to
operations was recorded. The plant closing costs related to consolidation
efforts within the wire segment. During the first six months of 1998, there was
no similar charge.
Other expenses were $27.5 million and $27.4 million for the six months ended
June 30, 1998 and 1997, respectively. The $0.1 million increase was the result
of higher interest expense from the increased borrowings as a result of 1997 and
1998 acquisitions partially offset by improved cash flows from increased
profitability and lower working capital requirements.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $28.9 million for the six months
ended June 30, 1998, compared to $8.3 million for the six months ended June 30,
1997. The fluctuation was primarily due to the increase in net income and an
improved working capital position.
16
<PAGE> 17
Net cash used in investing activities was $23.8 million for the six months ended
June 30, 1998 which represented (i) acquisition costs of $7.7 million related to
the acquisitions of Spargo Wire Company, Inc. and Italtrecce S.r.l. and (ii)
capital expenditures of $16.1 million. Net cash used in investing activities was
$66.7 million for the six months ended June 30, 1997, and represented (i)
acquisition costs of $59.0 million related to the acquisition of Camden Wire and
(ii) capital expenditures of $7.7 million.
Net cash used in financing activities was $0.6 million for the six months ended
June 30, 1998 and represented net repayments under the debt obligations of $0.5
million and financing fees related to the acquisitions of Spargo and Italtrecce
of $0.1 million. Net cash provided by financing activities was $58.3 million for
the six months ended June 30, 1997 and included (i) proceeds of $228.1 million
from the issuance of long-term obligations, (ii) net repayments of $163.0
million under the existing debt obligations, (iii) payments of $5.4 million
related to financing fees and (iv) cash dividends of $1.4 million related to the
Series A Cumulative Exchangeable Redeemable Preferred Stock which the Company
exchanged for debt in 1997.
The Company's ability to fund its liquidity and capital requirements and to pay
its indebtedness is limited to its ability to received dividends and other
distributions from its subsidiaries. The Company's Amended and Restated Credit
Agreement and its 11 3/4% Senior Subordinated Notes due 2005, 11 3/4% Series B
Senior Subordinated Notes due 2005, and 14% Senior Subordinated Notes due 2005
prohibit the Company from imposing certain restrictions on the ability of its
subsidiaries to pay dividends or make other distributions to the Company.
17
<PAGE> 18
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 June
30, 1998.
18
<PAGE> 19
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.
Date: August 14, 1998 By : /s/ DAVID M. SINDELAR
----------------------------------
Name : David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By : /s/ GLENN J. HOLLER
----------------------------------
Name : Glenn J. Holler
Title: Vice President - Finance
(Chief Accounting Officer)
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 4,549
<SECURITIES> 0
<RECEIVABLES> 89,490
<ALLOWANCES> 2,034
<INVENTORY> 66,570
<CURRENT-ASSETS> 180,205
<PP&E> 277,784
<DEPRECIATION> 103,403
<TOTAL-ASSETS> 627,731
<CURRENT-LIABILITIES> 108,749
<BONDS> 519,458
0
0
<COMMON> 0
<OTHER-SE> (36,741)
<TOTAL-LIABILITY-AND-EQUITY> 627,731
<SALES> 337,740
<TOTAL-REVENUES> 337,740
<CGS> 245,169
<TOTAL-COSTS> 245,169
<OTHER-EXPENSES> 19,181
<LOSS-PROVISION> 184
<INTEREST-EXPENSE> 27,488
<INCOME-PRETAX> 14,991
<INCOME-TAX> 6,131
<INCOME-CONTINUING> 8,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,860
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
