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 March 31, 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:
Outstanding at
Class April 30, 1998
-------------------------- --------------
Common Stock 1,000
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
International Wire Group, Inc.
Condensed Consolidated Balance Sheets as of March 31, 1998 and 3
December 31, 1997.................................................
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1998 and March 31, 1997.................... 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1998 and March 31, 1997.................... 5
Notes to Condensed Consolidated Financial Statements.................. 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 13
PART II - OTHER INFORMATION.............................................. 15
SIGNATURES............................................................... 16
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------------
1998 1997
-------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................... $ 9,066 $ 0
Accounts receivable, less allowance of $2,018
and $2,078, respectively ................... 94,500 87,201
Inventories .................................. 62,974 74,406
Other current assets ......................... 24,300 27,273
--------- ---------
Total current assets ....................... 190,840 188,880
Property, plant and equipment, net ............. 167,548 165,239
Intangible and other assets .................... 271,438 273,929
--------- ---------
Total assets ............................... $ 629,826 $ 628,048
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations .. $ 4,472 $ 4,493
Accounts payable ............................. 39,119 48,761
Accrued and other liabilities ................ 59,745 59,121
Accrued interest ............................. 14,001 4,834
--------- ---------
Total current liabilities .................. 117,337 117,209
Long-term obligations, less current maturities . 517,012 519,302
Other long-term liabilities .................... 37,275 37,365
--------- ---------
Total liabilities .......................... 671,624 673,876
Stockholder's equity (deficit):
Common stock, $.01 par value, 1,000 shares
authorized, issued and outstanding ......... 0 0
Contributed capital .......................... 113,831 113,717
Carryover of predecessor basis ............... (67,762) (67,762)
Accumulated deficit .......................... (87,867) (91,783)
--------- ---------
Total stockholder's equity (deficit) ....... (41,798) (45,828)
--------- ---------
Total liabilities and stockholder's
equity (deficit).......................... $ 629,826 $ 628,048
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
----------------------------
1998 1997
----------------------------
<S> <C> <C>
Net sales ................................... $ 174,006 $ 176,153
Operating expenses:
Cost of goods sold......................... 128,796 137,913
Selling, general and
administrative .............................. 15,469 13,308
expenses
Depreciation and amortization.............. 9,067 7,511
Plant closing charges ..................... -- 500
Operating income............................. 20,674 16,921
--------- ---------
Other income (expense):
Interest expense........................... (13,043) (12,011)
Amortization of deferred financing costs... (953) (995)
Other, net ................................ 4 11
--------- ---------
Income before income tax provision........... 6,682 3,926
Income tax provision ........................ 2,766 1,630
--------- ---------
Net income .................................. $ 3,916 $ 2,296
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial
statements
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
--------------------------------
1998 1997
--------------------------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income................................... $ 3,916 $ 2,296
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization.............. 10,020 8,506
Change in assets and liabilities, net of
Acquisitions:
Accounts receivable...................... (7,299) (19,379)
Inventories.............................. 11,432 12,958
Other assets............................. 1,553 (1,159)
Accounts payable......................... (9,642) (14,655)
Accrued and other liabilities............ 624 1,963
Accrued interest......................... 9,167 5,001
Other long-term liabilities.............. (90) (139)
---------- ----------
Net cash provided by (used in) operating
Activities................................... 19,681 (4,608)
---------- ----------
Cash flows used in investing activities:
Acquisitions, net of cash.................... -- (58,996)
Capital expenditures......................... (8,304) (3,038)
---------- ----------
Net cash used in investing activities.......... (8,304) (62,034)
---------- ----------
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of long-term
obligations................................ -- 65,000
Borrowing (repayment) of long-term
obligations................................ (2,311) 10,095
Cash dividends paid on preferred stock....... -- (1,378)
Financing fees and other..................... -- (3,250)
---------- ----------
Net cash provided by (used in) financing
activities................................... (2,311) 70,467
---------- ----------
Net change in cash and cash equivalents........ 9,066 3,825
Cash at beginning of the period................ -- --
---------- ----------
Cash at end of the period...................... $ 9,066 $ 3,825
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements
<PAGE>
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 ended March 31, 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.
Recently Issued Accounting Standards
In April 1998, the Financial Accounting Standards Board (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
will adopt SOP 98-5 in fiscal 1999.
In June 1997, the 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.
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.
2. Inventories
The composition of inventories at March 31, 1998 is as follows:
Raw materials............................................. $ 25,057
Work-in-process .......................................... 11,604
Finished goods ........................................... 26,313
----------
Total.................................................... $ 62,974
==========
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
3. Long-Term Obligations
The composition of long-term obligations at March 31, 1998 is as follows:
Amended and Restated Credit Agreement:
Revolving credit facility............................... $ --
Term facility .......................................... 182,875
Senior Subordinated Notes................................. 150,000
Series B Senior Subordinated Notes........................ 150,000
Series B Senior Subordinated Notes Premium................ 12,198
Industrial revenue bonds.................................. 15,500
Other..................................................... 10,911
----------
521,484
Less, current maturities.................................. 4,472
----------
$ 517,012
==========
The schedule of principal payments (excluding amortization of premium) for
long-term obligations at March 31, 1998 is as follows:
1998...................................................... $ 3,409
1999...................................................... 5,940
2000...................................................... 7,262
2001...................................................... 8,138
2002...................................................... 46,532
Thereafter................................................ 438,005
---------
Total................................................... $ 509,286
=========
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.
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
4. Plant Closing Expense
A summary of activity related to plant closings is as follows:
Three Three
Months Ended Months Ended
March 31, March 31,
--------------------------
1998 1997
--------------------------
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................ (43) (317)
Lease commitments....................... (236) (57)
Key personnel and severance costs....... (36) (118)
-------- --------
(315) (492)
-------- --------
Balance, end of period.................... $ 1,130 $ 2,470
======== ========
5. Subsequent Event
On April 1, 1998, the Company acquired certain assets and assumed certain
liabilities of Spargo Wire Company, Inc. ("Spargo Wire"), a former
competitor of the Company in the wire market segment. Spargo Wire was in
the business of fabricating copper and tin wire products for distribution
in the northeastern and midwestern United States.
6. 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 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 (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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------------------------------------------------------------
BALANCE SHEET AS OF MARCH 31, 1998
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents .... $ -- $ 8,205 $ 861 $ -- $ 9,066
Accounts receivable .......... -- 93,930 570 -- 94,500
Inventories .................. -- 62,666 308 -- 62,974
Other assets ................. -- 23,976 324 -- 24,300
--------- --------- --------- --------- ---------
Total current assets ..... -- 188,777 2,063 -- 190,840
Property, plant and
equipment, net ............. -- 149,068 18,480 -- 167,548
Investment in subsidiaries ... 610,400 -- -- (610,400) --
Intangible and other assets .. 22,639 246,688 2,111 -- 271,438
--------- --------- --------- --------- ---------
Total assets ............. $ 633,039 $ 584,533 $ 22,654 $(610,400) $ 629,826
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current liabilities .......... $ 24,702 $ 89,312 $ 3,323 $ -- $ 117,337
Long-term obligations, less
current maturities ......... 500,707 16,305 -- -- 517,012
Other long-term liabilities .. -- 37,275 -- -- 37,275
Intercompany (receivable)
payable .................... 81,666 (98,184) 16,518 -- --
--------- --------- --------- --------- ---------
Total liabilities ........ 607,075 44,708 19,841 -- 671,624
Stockholder's equity (deficit)
Common stock ............... 0 0 0 0 0
Contributed capital ........ 113,831 571,892 138 (572,030) 113,831
Carryover of predecessor
basis .................... -- (67,762) -- -- (67,762)
Retained earnings
(accumulated deficit) .... (87,867) 35,695 2,675 (38,370) (87,867)
--------- --------- --------- --------- ---------
Total stockholder's
equity (deficit) ....... 25,964 539,825 2,813 (610,400) (41,798)
--------- --------- --------- --------- ---------
Total liabilities and
stockholder's equity
(deficit) ............ $ 633,039 $ 584,533 $ 22,654 $(610,400) $ 629,826
========= ========= ========= ========= =========
</TABLE>
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------------------------------------------------------------
BALANCE SHEET AS OF DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C>
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) --
Intangible 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>
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------------------------------------------------------------
STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1998
<S> <C> <C> <C> <C> <C>
Net sales ...................... $ -- $ 174,006 $ 5,882 $ (5,882) $ 174,006
Operating expenses
Cost of goods sold .......... -- 130,249 4,429 (5,882) 128,796
Selling, general
and ............................ -- 12,190 3,279 -- 15,469
administrative expenses
Depreciation and amortization -- 8,251 816 -- 9,067
--------- --------- --------- --------- ---------
Operating income (loss) ........ -- 23,316 (2,642) -- 20,674
Other income (expense):
Interest expense ............ (13,008) (35) -- -- (13,043)
Amortization of deferred
financing costs ........... (953) -- -- -- (953)
Equity in net income (loss)
of subsidiaries ........... 17,877 -- -- (17,877) --
Other, net .................. -- 4 -- -- 4
--------- --------- --------- --------- ---------
Income (loss) before income tax
provision .................... 3,916 23,285 (2,642) (17,877) 6,682
--------- --------- --------- --------- ---------
Income tax provision ........... -- 2,554 212 -- 2,766
--------- --------- --------- --------- ---------
Net income (loss) .............. $ 3,916 $ 20,731 $ (2,854) $ (17,877) $ 3,916
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Net sales ...................... $ -- $ 176,153 $ 8,566 $ (8,566) $ 176,153
Operating expenses
Cost of goods sold ........... $ -- 142,833 3,646 (8,566) 137,913
Selling, general and
administrative expenses .... -- 10,286 3,022 -- 13,308
Depreciation and amortization -- 7,077 434 -- 7,511
Expenses related to plant
closings ................... -- 500 -- -- 500
--------- --------- --------- --------- ---------
Operating income (loss) ........ -- 15,457 1,464 -- 16,921
Other income (expense):
Interest expense ............. (12,011) -- -- -- (12,011)
Amortization of deferred
financing costs ............ (995) -- -- -- (995)
Equity in net income (loss) of
subsidiaries ............... 15,302 -- -- (15,302) --
Other ........................ -- 14 (3) -- 11
--------- --------- --------- --------- ---------
Income (loss) before income tax
provision .................... 2,296 15,471 1,461 (15,302) 3,926
Income tax provision ........... -- 1,499 131 -- 1,630
--------- --------- --------- --------- ---------
Net income (loss) .............. $ 2,296 $ 13,972 $ 1,330 $ (15,302) $ 2,296
========= ========= ========= ========= =========
</TABLE>
<PAGE>
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1998
<S> <C> <C> <C> <C> <C>
Net cash from operating
activities ................. $ (2,693) $ 17,983 $ 4,391 $ -- $ 19,681
Net cash used in investing
activities for capital
expenditures ............... -- (4,548) (3,756) -- (8,304)
Net cash provided by (used in)
financing activities related
net repayment of long-term
obligations ................ 2,693 (5,004) -- -- (2,311)
-------- -------- -------- ------- --------
Net change in cash and cash
equivalents ................ $ -- $ 8,431 $ 635 $ -- $ 9,066
======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997
<S> <C> <C> <C> <C> <C>
Net cash from operating
activities.................. $(53,956) $ 47,301 $ 2,047 $ -- $ (4,608)
-------- --------- -------- --------- --------
Cash flows by used in investing activities:
Acquisition, net of cash.. -- (58,996) -- -- (58,996)
Capital expenditures...... -- (2,402) (636) -- (3,038)
-------- --------- -------- --------- --------
Net cash used in investing
activities.................. -- (61,398) (636) -- (62,034)
-------- --------- -------- --------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of
long-term obligations... 48,489 16,511 -- -- 65,000
Repayment of long-term
obligations................... 10,095 -- -- -- 10,095
Cash dividends paid on
preferred stock......... (1,378) -- -- -- (1,378)
Financing fees and other.. (3,250) -- -- -- (3,250)
-------- --------- -------- --------- --------
Net cash provided by financing
activities.................. 53,956 16,511 -- -- 70,467
-------- --------- -------- --------- --------
Net change in cash and cash
equivalents................. $ -- $ 2,414 $ 1,411 $ -- $ 3,825
======== ========= ======== ========= ========
</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 ended March 31, 1998 compared to the three months ended March 31,
1997.
The Company conducts its operations through two segments: wire products, which
includes both non-insulated and insulated wire, and wire harness products.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Net sales for the three months ended March 31, 1998 were $174.0 million,
representing a $2.2 million, or 1.2%, decrease compared to the first quarter of
1997. Increases in unit volume in both segments along with the full quarter
sales of the Company's Camden Wire subsidiary (acquired in the first quarter of
1997) were offset by the impact of a decrease in the average cost and selling
price of copper. In general, the Company prices its wire products based upon a
spread over the cost of copper, which results in a decreased dollar value of
sales when copper costs decrease. The average price of copper based upon the New
York Mercantile Exchange, Inc. ("COMEX") decreased to $.77 per pound during the
three months ended March 31, 1998 from $1.11 per pound during the three months
ended March 31, 1997.
Wire segment (non-insulated and insulated wire) sales were $129.3 million and
decreased $2.2 million, or 1.6%, in the three months ended March 31, 1998 as
compared to the three months ended March 31, 1997. The growth in sales of
non-insulated cable for industrial customers and increased volume of automotive
lead wire were offset by the impact of the decrease in the average cost and
selling price of copper. Within the wire harness segment, sales were $44.7
million for each of the quarters ended March 31, 1998 and March 31, 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 decreased from 78.3% for the three
months ended March 31, 1997 to 74.0% for the three months ended March 31, 1998.
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 as well as the impact of lower copper prices.
Because the Company's products are typically priced at a spread over the cost of
copper, lower copper costs and prices lead to a higher gross margin percentage
but generally have no impact on gross margin dollars.
Selling, general and administrative expenses were $15.5 million for the three
months ended March 31, 1998 compared to $13.3 million for the same period in
1997. This $2.2 million increase primarily reflected the addition of Camden Wire
for a full quarter, volume related items and cost inflation.
Depreciation and amortization was $9.1 million for the three months ended March
31, 1998 compared to $7.5 million for the same period in 1997. The increase of
$1.6 million was primarily the result of depreciation of property, plant and
equipment additions.
<PAGE>
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 quarter of 1998, there was no
similar charge.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $19.7 million for the three months
ended March 31, 1998, compared to net cash used in operating activities of $4.6
million for the three months ended March 31, 1997. The fluctuation was primarily
due to the increase in net income and an improved working capital position.
Net cash used in investing activities was $8.3 million for the three months
ended March 31, 1998 which represented capital expenditures. Net cash used in
investing activities was $62.0 million for the three months ended March 31,
1997, and represented (i) acquisition costs of $59.0 million related to the
Camden Acquisition and (ii) capital expenditures of $3.0 million.
Net cash used in financing activities was $2.3 million for the three months
ended March 31, 1998 and represented net repayments under the debt obligations.
Net cash provided by financing activities was $70.5 million for the three months
ended March 31, 1997 and included (i) proceeds of $65.0 million from the
issuance of long-term obligations, (ii) net borrowings of $10.1 million under
the existing debt obligations, (iii) payments of $3.3 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 receive 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.
<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, 1998.
<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: May 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)
<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
<CIK> 0000947429
<NAME> INTERNATIONAL WIRE GROUP, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> $9,066
<SECURITIES> 0
<RECEIVABLES> 96,518
<ALLOWANCES> 2,018
<INVENTORY> 62,974
<CURRENT-ASSETS> 190,840
<PP&E> 264,230
<DEPRECIATION> 96,682
<TOTAL-ASSETS> 629,826
<CURRENT-LIABILITIES> 117,337
<BONDS> 517,012
0
0
<COMMON> 0
<OTHER-SE> (41,798)
<TOTAL-LIABILITY-AND-EQUITY> 629,826
<SALES> 174,006
<TOTAL-REVENUES> 174,006
<CGS> 128,796
<TOTAL-COSTS> 128,796
<OTHER-EXPENSES> 9,067
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 13,996
<INCOME-PRETAX> 6,682
<INCOME-TAX> 2,766
<INCOME-CONTINUING> 3,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,916
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
