<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, 2000
------------------------------------------------
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, 2000
---------------------------- -------------
<S> <C>
Common Stock 1,000
</TABLE>
<PAGE> 2
INTERNATIONAL WIRE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C> <C>
International Wire Group, Inc.
Consolidated Balance Sheets as of June 30, 2000 and December 31,
1999 ............................................................................... 3
Consolidated Statements of Operations for the three months and six
months ended June 30, 2000 and 1999................................................. 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 2000 and 1999 ............................................................ 5
Notes to Consolidated Financial Statements............................................... 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................................
17
Quantitative and Qualitative Disclosure About Market Risk................................ 21
PART II - OTHER INFORMATION.................................................................... 22
SIGNATURES..................................................................................... 23
</TABLE>
2
<PAGE> 3
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
--------- ------------
2000 1999
--------- ---------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 12,579 $ 7,425
Accounts receivable, less allowance of $2,032
and $2,879, respectively ............................... 100,581 101,310
Inventories .............................................. 69,684 92,142
Prepaid expenses and other ............................... 9,159 12,223
Deferred income taxes .................................... 12,866 15,436
--------- ---------
Total current assets ................................... 204,869 228,536
Property, plant and equipment, net ......................... 159,329 184,660
Deferred financing costs, net .............................. 6,563 14,011
Intangible assets, net ..................................... 201,023 243,627
Other assets ............................................... 2,800 7,273
--------- ---------
Total assets ........................................... $ 574,584 $ 678,107
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations .............. $ 2,088 $ 9,606
Accounts payable ......................................... 42,022 48,655
Accrued and other liabilities ............................ 12,927 22,654
Accrued payroll and payroll related items ................ 6,599 12,858
Customers' deposits ...................................... 20,515 20,987
Accrued interest ......................................... 2,998 4,041
--------- ---------
Total current liabilities .............................. 87,149 118,801
Long-term obligations, less current maturities ............. 334,602 526,338
Deferred income taxes ...................................... 16,311 21,772
Other long-term liabilities ................................ 28,801 30,926
--------- ---------
Total liabilities ...................................... 466,863 697,837
Stockholder's equity (deficit):
Common stock, $.01 par value, 1,000 shares
authorized, issued and outstanding ..................... 0 0
Contributed capital ...................................... 246,578 124,751
Carryover of predecessor basis ........................... (67,762) (67,762)
Accumulated deficit ...................................... (71,095) (76,719)
--------- ---------
Total stockholder's equity (deficit) ................... 107,721 (19,730)
--------- ---------
Total liabilities and stockholder's equity (deficit) ... $ 574,584 $ 678,107
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE> 4
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ................................... $ 145,509 $ 124,040 $ 290,122 $ 242,385
Operating expenses:
Cost of goods sold ........................ 106,953 88,743 214,143 174,467
Selling, general and
administrative expenses .................. 12,294 10,732 24,709 21,517
Depreciation and
amortization ............................. 9,174 8,557 18,282 16,933
--------- --------- --------- ---------
Operating income ............................ 17,088 16,008 32,988 29,468
Other income (expense):
Interest expense .......................... (9,190) (10,557) (22,241) (23,019)
Amortization of deferred
financing costs .......................... (410) (631) (1,211) (1,264)
--------- --------- --------- ---------
Income from continuing
operations before income
tax provision, cumulative effect
of change in accounting principle and
extraordinary item ........................ 7,488 4,820 9,536 5,185
Income tax provision ........................ 3,244 2,126 4,799 2,397
--------- --------- --------- ---------
Income from continuing
operations before
cumulative effect of change
in accounting principle and
extraordinary item ........................ 4,244 2,694 4,737 2,788
Income from discontinued
operations, net of income taxes
of $1,598 for the six months June
30, 2000 and $1,673 and $3,248
for the three and six months ended
June 30, 1999, respectively ............... -- 2,551 3,634 5,006
--------- --------- --------- ---------
Income before cumulative effect of
change in accounting principle
and extraordinary item .................... 4,244 5,245 8,371 7,794
Cumulative effect of change in
accounting for start-up costs,
net of tax benefit of $592 ................ -- -- -- (818)
--------- --------- --------- ---------
Income before extraordinary item ............ 4,244 5,245 8,371 6,976
Extraordinary item - loss related
to early extinguishment of debt,
net of tax benefit of $2,073 .............. -- -- (2,747) --
--------- --------- --------- ---------
Net income .................................. $ 4,244 $ 5,245 $ 5,624 $ 6,976
========= ========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE> 5
INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------------
2000 1999
------------------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income .................................................... $ 5,624 $ 6,976
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization ............................... 19,493 18,197
Income from discontinued operations ......................... (5,232) (8,254)
Cumulative effect of change in accounting
for start-up costs ......................................... -- 1,410
Extraordinary item .......................................... 4,820 --
Change in assets and liabilities of
continuing operations:
Accounts receivable ....................................... (12,607) (4,953)
Inventories ............................................... 2,151 14,360
Other assets .............................................. (327) (997)
Accounts payable .......................................... (5,380) 5,974
Accrued and other liabilities ............................. 2,560 (4,808)
Accrued interest .......................................... (1,043) 842
Other long-term liabilities ............................... (4,617) (2,316)
--------- ---------
Net cash provided by (used in) continuing
operations .................................................. 5,442 26,431
Net cash provided by (used in) discontinued
operations .................................................. (430) 6,298
--------- ---------
Net cash provided by (used in) operating
activities .................................................... 5,872 32,729
--------- ---------
Cash flows used in investing activities:
Capital expenditures of continuing
operations ................................................... (8,539) (9,934)
Capital expenditures of discontinued
operations .................................................. (982) (6,574)
--------- ---------
Net cash used in investing activities ........................... (9,521) (16,508)
--------- ---------
Cash flows provided by (used in) financing
activities:
Equity proceeds ............................................... -- 42
Repurchase stock of Holding ................................... -- (228)
Repayment of long-term obligations ............................ (198,998) (3,387)
Repayment on revolver (net) ................................... -- (9,000)
Financing fees and other ...................................... (699) --
Net proceeds from sale of Wire Harness
business .................................................... 208,500 --
--------- ---------
Net cash provided by (used in) financing
activities .................................................... 8,803 (12,573)
--------- ---------
Net change in cash and cash equivalents ......................... 5,154 3,648
Cash at beginning of the period ................................. 7,425 --
--------- ---------
Cash at end of the period ....................................... $ 12,579 $ 3,648
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 6
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. Basis of Presentation
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of the
financial position and results of operations of International Wire
Group, Inc. (the "Company"). The results for the three and six months
ended June 30, 2000 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, 1999. Also see Note 2 - Discontinued Operations
and Contributed Capital.
2. Discontinued Operations and Contributed Capital
On March 29, 2000, the Company consummated the sale of its Wire Harness
business to Viasystems International, Inc. ("Viasystems") for $210,000
in cash (the "Wire Harness Sale"). The Company and Viasystems are
commonly controlled by affiliates of Hicks, Muse, Tate and Furst
Incorporated. As such, the Company has accounted for the Wire Harness
Sale on a basis consistent with the accounting for a transfer of assets
between commonly owned entities. The Company has recorded an addition
to contributed capital related to the transaction of $121,713, which
represents the excess of the proceeds over the net book value of the
assets disposed plus the related expenses, approximately $1,500, and
estimated taxes of $7,000. The results of operations of the Wire
Harness business have been reclassified to discontinued operations for
all periods presented.
The purchase price was determined by senior management of both
companies. In addition, each of the boards of directors received
opinions from nationally recognized financial advisors that the
purchase price was fair, from a financial point of view, to each of the
respective parties. In connection with the Wire Harness Sale, the
Company entered into a supply agreement to supply substantially all of
the Wire Harness business' insulated wire requirements through 2003,
which is a continuation of existing practice. In connection with the
Wire Harness Sale, the Company agreed to indemnify Viasystems for
certain claims and litigation including any current or future claims
related to the case titled Whirlpool Corporation v. Wirekraft
Industries, Inc., certain product liability claims, as described in the
purchase agreement, and any current or future liabilities associated
with the Internal Revenue Service examination of the U.S. income tax
return of Kirtland Indiana, Limited Partnership for the tax period
ended December 21, 1992. The Company believes that final resolution of
these matters will not have a material adverse effect on the Company
and that adequate amounts of reserves have been established.
6
<PAGE> 7
3. Extraordinary Items-Loss Related to Early Retirement of Debt
Substantially all of the net proceeds (after the payment of fees and
expenses) from the Wire Harness Sale were used to repay indebtedness
outstanding under the Company's senior credit facility. Accordingly,
the Company recorded an extraordinary loss of $2,747, net of income tax
related to the write-off of deferred financing fees.
4. Inventories
The composition of inventories at June 30, 2000 and December 31, 1999
is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Raw materials .......................... $14,572 $30,723
Work-in-process ........................ 29,689 19,168
Finished goods ......................... 25,423 42,251
------- -------
Total ................................. $69,684 $92,142
======= =======
</TABLE>
The carrying value of inventories on a last-in, first-out basis, at
June 30, 2000 and December 31, 1999, approximate their current cost.
5. Property, Plant and Equipment
The composition of property, plant and equipment at June 30, 2000 and
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- -----------
<S> <C> <C>
Land ................................... $ 3,633 $ 3,759
Buildings and improvements ............. 56,826 51,367
Machinery and equipment ................ 234,345 270,892
Construction in progress ............... 4,069 2,824
--------- ---------
298,873 328,842
Less accumulated depreciation .......... (139,544) (144,182)
--------- ---------
$ 159,329 $ 184,660
========= =========
</TABLE>
6. Long-Term Obligations
The composition of long-term obligations at June 30, 2000 and December
31, 1999 is as follows:
7
<PAGE> 8
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Amended and Restated Credit Agreement:
Revolving credit facility ...................... $ -- $ --
Term facility .................................. 2,955 200,500
Senior Subordinated Notes ........................ 150,000 150,000
Series B Senior Subordinated Notes ............... 150,000 150,000
Series B Senior Subordinated Notes Premium ....... 9,269 9,979
Industrial revenue bonds ......................... 15,500 15,500
Other ............................................ 8,966 9,965
-------- --------
336,690 535,944
Less, current maturities ......................... 2,088 9,606
-------- --------
$334,602 $526,338
======== ========
</TABLE>
The schedule of principal payments for long-term obligations, excluding
premium, at June 30, 2000 is as follows:
<TABLE>
<S> <C>
2000 ......................... $ 2,088
2001 ......................... 2,114
2002 ......................... 1,385
2003 ......................... 114
2004 ......................... 125
Thereafter ................... 321,595
--------
Total ........................ $327,421
========
</TABLE>
In connection with the Wire Harness Sale, the Company repaid all of the
outstanding borrowing on the Term A1 Loan and Term B Loan of the
Amended and Restated Credit Agreement dated June 17, 1997, as amended
(the "Credit Agreement"). Additionally, the Company repaid a portion of
the Term A Loan. As of June 30, 2000, the Credit Agreement provides
senior secured financing under the Term A Loan of up to $2,955 (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 is
due September 30, 2002, at which time the Revolver is also due.
Borrowings under the Term A Loan and Revolver bear interest, at the
option of the Company, at a rate per annum equal to (a) the Alternate
Base Rate (as defined in the Credit Agreement) plus an applicable
margin as defined in the Credit Agreement; or (b) the Eurodollar Rate
(as defined in the Credit Agreement) plus an applicable margin as
defined in the Credit Agreement. The Alternate Base Rate and Eurodollar
Rate margins are established quarterly based on a formula as defined in
the 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 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
(collectively, the "Senior Notes") restrict, among other things, the
incurrence of additional
8
<PAGE> 9
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.
7. Business Segment Information
The Company operates its business as one business segment.
8. Guarantor Subsidiaries
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 IWG-Philippines, Inc., IWG International, Inc., Italtrecce-Societa
Italiana Trecce & Affini S.r.l., International Wire SAS, JYM Finance,
S.A., Tresse Metalique J. Forissier, S.A., Cablerie E. Charbonnet,
S.A., Forissier Connectique, S.A., Hermitec, S.A. and Fressynet, S.A.
(the "Non-Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries
and Non-Guarantor 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.
9
<PAGE> 10
INTERNATIONAL WIRE GROUP, INC.
NOTES TO 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, 2000
ASSETS
Cash and cash equivalents .......... $ -- $ 9,924 $ 2,655 $ -- $ 12,579
Accounts receivable ................ -- 87,085 13,496 -- 100,581
Inventories ........................ -- 60,702 8,982 -- 69,684
Other assets ....................... -- 20,939 1,086 -- 22,025
--------- --------- --------- --------- ---------
Total current assets ........ -- 178,650 26,219 -- 204,869
Property, plant and equipment,
net .............................. -- 137,507 21,822 -- 159,329
Investment in subsidiaries ......... 628,870 -- -- (628,870) --
Intangibles and other assets ....... 9,543 190,945 9,898 -- 210,386
--------- --------- --------- --------- ---------
Total assets ................ $ 638,413 $ 507,102 $ 57,939 $(628,870) $ 574,584
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current liabilities ................ $ 3,680 $ 72,291 $ 11,178 $ -- $ 87,149
Long-term obligations, less
current maturities ............... 316,542 18,060 -- -- 334,602
Other long-term liabilities ........ -- 43,906 1,206 -- 45,112
Intercompany (receivable)
payable .......................... 142,708 (174,101) 31,393 -- --
--------- --------- --------- --------- ---------
Total liabilities ........... 462,930 (39,844) 43,777 -- 466,863
Stockholder's equity:
Common stock ..................... 0 0 0 0 0
Contributed capital .............. 246,578 497,571 10,855 (508,426) 246,578
Carryover of predecessor basis
-- (67,762) -- -- (67,762)
Retained earnings
(accumulated deficit) ......... (71,095) 117,137 3,307 (120,444) (71,095)
--------- --------- --------- --------- ---------
Total stockholder's
equity .................... 175,483 546,946 14,162 (628,870) 107,721
--------- --------- --------- --------- ---------
Total liabilities and
stockholder's equity ...... $ 638,413 $ 507,102 $ 57,939 $(628,870) $ 574,584
========= ========= ========= ========= =========
</TABLE>
10
<PAGE> 11
INTERNATIONAL WIRE GROUP, INC.
NOTES TO 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, 1999
ASSETS
Cash and cash equivalents ............... $ -- $ 7,131 $ 294 $ -- $ 7,425
Accounts receivable ..................... -- 84,278 17,284 (252) 101,310
Inventories ............................. -- 83,593 8,549 -- 92,142
Other assets ............................ -- 24,456 3,203 -- 27,659
--------- --------- --------- --------- ---------
Total current assets ................. -- 199,458 29,330 (252) 228,536
Property, plant and equipment,
net ................................... -- 149,212 35,448 -- 184,660
Intangible assets, net .................. 18,484 229,358 9,796 -- 257,638
Investment in subsidiaries .............. 736,090 -- -- (736,090) --
Other assets ............................ -- 3,147 4,126 -- 7,273
--------- --------- --------- --------- ---------
Total assets ......................... $ 754,574 $ 581,175 $ 78,700 $(736,342) $ 678,107
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current liabilities ..................... $ 11,674 $ 92,255 $ 15,124 $ (252) $ 118,801
Long-term obligations, less
current maturities .................... 507,479 18,859 -- -- 526,338
Other long-term liabilities ............. -- 51,849 849 -- 52,698
Intercompany (receivable)
payable ............................... 187,389 (231,846) 44,457 -- --
--------- --------- --------- --------- ---------
Total liabilities .................. 706,542 (68,883) 60,430 (252) 697,837
Stockholder's equity
(deficit):
Common stock ........................... 0 0 0 0 0
Contributed capital .................... 124,751 572,012 10,867 (582,879) 124,751
Carryover of predecessor
basis ................................ -- (67,762) -- -- (67,762)
Retained earnings
(accumulated deficit) ................ (76,719) 145,808 7,403 (153,211) (76,719)
--------- --------- --------- --------- ---------
Total stockholder's equity
(deficit) ........................ 48,032 650,058 18,270 (736,090) (19,730)
--------- --------- --------- --------- ---------
Total liabilities and
stockholder's equity
(deficit) ........................ $ 754,574 $ 581,175 $ 78,700 $(736,342) $ 678,107
========= ========= ========= ========= =========
</TABLE>
11
<PAGE> 12
INTERNATIONAL WIRE GROUP, INC.
NOTES TO 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, 2000
Net sales .............................. $ -- $ 130,170 $ 15,339 $ -- $ 145,509
Operating expenses:
Cost of goods sold ................. -- 95,727 11,226 -- 106,953
Selling, general and
administrative expenses .......... -- 11,246 1,048 -- 12,294
Depreciation and amortization ...... 1,163 7,004 1,007 -- 9,174
--------- --------- --------- --------- ---------
Operating income ....................... (1,163) 16,193 2,058 -- 17,088
Other income (expense):
Interest expense ................... (9,017) (187) (360) -- (9,190)
Amortization of deferred
financing costs .................. (410) -- -- -- (410)
Equity in net income of
subsidiaries ..................... 14,834 -- -- (14,834) --
--------- --------- --------- --------- ---------
Income before income tax
provision .......................... 4,244 16,380 1,698 (14,834) 7,488
Income tax provision ................... -- 2,998 246 -- 3,244
--------- --------- --------- --------- ---------
Net income ............................. $ 4,244 $ 13,382 $ 1,452 $ (14,834) $ 4,244
========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 13
INTERNATIONAL WIRE GROUP, INC.
NOTES TO 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, 2000
Net sales .............................. $ -- $ 259,023 $ 31,099 $ -- $ 290,122
Operating expenses:
Cost of goods sold ................. -- 192,007 22,136 -- 214,143
Selling, general and
administrative expenses .......... -- 22,538 2,171 -- 24,709
Depreciation and amortization ...... 1,319 14,918 2,045 -- 18,282
--------- --------- --------- --------- ---------
Operating income ....................... (1,319) 29,560 4,747 -- 32,988
Other income (expense):
Interest expense ................... (21,780) (2) (459) -- (22,241)
Amortization of deferred
financing costs .................. (1,211) -- -- -- (1,211)
Equity in net income of
subsidiaries ..................... 32,681 -- -- (32,681) --
--------- --------- --------- --------- ---------
Income from continuing operations
before income tax provision
and extraordinary item ............. 8,371 29,558 4,288 (32,681) 9,536
Income tax provision ................... -- 4,169 630 -- 4,799
--------- --------- --------- --------- ---------
Income from continuing operations
before extraordinary item .......... 8,371 25,389 3,658 (32,681) 4,737
Income from discontinued
operations, net of taxes of
$1,598 ............................. -- 2,288 1,346 -- 3,634
--------- --------- --------- --------- ---------
Income before extraordinary
item ............................... 8,371 27,677 5,004 (32,681) 8,371
Extraordinary item - loss
related to early
extinguishment if debt,
net if taxes if $2,073 ............. (2,747) -- -- -- (2,747)
--------- --------- --------- --------- ---------
Net income ............................. $ 5,624 $ 27,677 $ 5,004 $ (32,681) $ 5,624
========= ========= ========= ========= =========
</TABLE>
13
<PAGE> 14
INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
------------- --------------- --------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
June 30, 1999
Net sales ........................................ $ -- $ 119,919 $ 4,121 $ -- $ 124,040
Operating expenses:
Cost of goods sold ........................... -- 85,304 3,439 -- 88,743
Selling, general and
administrative expenses .................... -- 10,626 106 -- 10,732
Depreciation and amortization ................ 156 7,729 672 -- 8,557
--------- --------- --------- --------- ---------
Operating income ................................. (156) 16,260 (96) -- 16,008
Other income (expense):
Interest expense ............................. (10,289) (268) -- -- (10,557)
Amortization of deferred
financing costs ............................ (631) -- -- -- (631)
Equity in net income
(loss) of subsidiaries ..................... 16,321 -- -- (16,321) --
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income tax provision and
cumulative effect of change in accounting
principle .................................... 5,245 15,992 (96) (16,321) 4,820
Income tax provision ............................. -- 2,166 (40) -- 2,126
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations ................................... 5,245 13,826 (56) (16,321) 2,694
Income (loss) from discontinued
operations, net of taxes of $1,673 ........... -- (4,356) 6,907 -- 2,551
--------- --------- --------- --------- ---------
Net income ....................................... $ 5,245 $ 9,470 $ 6,851 $ (16,321) $ 5,245
========= ========= ========= ========= =========
</TABLE>
14
<PAGE> 15
INTERNATIONAL WIRE GROUP, INC.
NOTES TO 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, 1999
Net sales .............................. $ -- $ 233,424 $ 8,961 $ -- $ 242,385
Operating expenses:
Cost of goods sold ................. -- 167,116 7,351 -- 174,467
Selling, general and
administrative expenses .......... -- 21,246 271 -- 21,517
Depreciation and amortization ...... 312 14,559 2,062 -- 16,933
--------- --------- --------- --------- ---------
Operating income ....................... (312) 30,503 (723) -- 29,468
Other income (expense):
Interest expense ................... (22,495) (524) -- -- (23,019)
Amortization of deferred
financing costs .................. (1,264) -- -- -- (1,264)
Equity in net income of
subsidiaries ..................... 31,047 -- -- (31,047) --
--------- --------- --------- --------- ---------
Income from continuing operations
before income tax provision
and cumulative effect of
change in accounting
principle .......................... 6,976 29,979 (723) (31,047) 5,185
Income tax provision ................... -- 2,325 72 -- 2,397
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle .......................... 6,976 27,654 (795) (31,047) 2,788
Income (loss) from discontinued
operations, net of taxes of
$3,248 ............................. -- (2,620) 7,626 -- 5,006
--------- --------- --------- --------- ---------
Income before cumulative effect
of change in accounting
principle .......................... 6,976 25,034 6,831 (31,047) 7,794
Cumulative effect of change in
accounting for start-up costs,
net of tax benefit of $592 ......... -- (818) -- -- (818)
--------- --------- --------- --------- ---------
Net income ............................. $ 6,976 $ 24,216 $ 6,831 $ (31,047) $ 6,976
========= ========= ========= ========= =========
</TABLE>
15
<PAGE> 16
INTERNATIONAL WIRE GROUP, INC.
NOTES TO 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, 2000
Net cash provided by (used
in) operating activities ..................... $ (9,491) $ 11,193 $ 4,170 $ -- $ 5,872
------------ ----------- ----------- ----------- ------------
Cash flows used in investing
activities for capital
expenditures ................................. -- (7,712) (1,809) -- (9,521)
------------ ----------- ----------- ----------- ------------
Cash flows provided by (used in) financing
activities:
Repayment of long-term
obligations .............................. (198,310) (688) -- -- (198,998)
Financing fees and other ................... (699) -- -- -- (699)
Net proceeds from sale of
Wire Harness business .................... 208,500 -- -- -- 208,500
------------ ----------- ----------- ----------- ------------
Net cash provided by (used in) financing
activities .................................. 9,491 (688) -- -- 8,803
------------ ----------- ----------- ----------- ------------
Net change in cash and cash equivalents ....... $ -- $ 2,793 $ 2,361 $ -- $ 5,154
============ =========== =========== =========== ============
</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, 1999
Net cash from operating activities ............ $ 12,199 $ 16,025 $ 4,505 $ -- $ 32,729
----------- ------------ ----------- ----------- -----------
Cash flows used in investing
activities for capital
expenditures ................................ -- (12,072) (4,436) -- (16,508)
----------- ------------ ----------- ----------- -----------
Cash flows provided by (used in) financing
activities:
Equity proceeds ........................... 42 -- -- -- 42
Repurchase of stock of
Holding ................................. (228) -- -- -- (228)
Repayment of long-term
obligations ............................. (12,013) (307) (63) -- (12,387)
----------- ------------ ----------- ----------- -----------
Net cash provided by (used in) financing
activities .................................. (12,199) (307) -- -- (12,573)
----------- ------------ ----------- ----------- -----------
Net change in cash and cash equivalents ....... $ -- $ 3,646 $ 2 $ -- $ 3,648
=========== ============ =========== =========== ===========
</TABLE>
16
<PAGE> 17
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, 2000, compared to the three and six months
ended June 30, 1999.
On December 29, 1999, the Company acquired (the "Forissier Group Acquisition")
the business of a group of three French wire and cable manufacturers
(collectively, the "Forissier Group"). Included in the three and six months
ended June 30, 2000, are the results of operations of the Forissier Group.
On March 29, 2000, the Company consummated the sale of its Wire Harness business
to Viasystems International, Inc. ("Viasystems") for $210.0 million in cash (the
"Wire Harness Sale"). The Company and Viasystems are commonly controlled by
affiliates of Hicks, Muse, Tate and Furst Incorporated. As such, the Company has
accounted for the Wire Harness Sale on a basis consistent with the accounting
for a transfer of assets between commonly owned entities. The Company has
recorded an addition to contributed capital related to the transaction of $121.7
million which represents the excess of the proceeds over the net book value of
the assets disposed plus the related expenses, approximately $1.5 million, and
estimated taxes of $7.0 million. The results of operations of the Wire Harness
business have been reclassified to discontinued operations for all periods
presented. The purchase price was determined by senior management of both
companies. In addition, each of the boards of directors received opinions from
nationally recognized financial advisors that the purchase price was fair, from
a financial point of view, to each of the respective parties. In connection with
the Wire Harness Sale, the Company entered into a supply agreement to supply
substantially all of the Wire Harness business' insulated wire requirements
through 2003, which is a continuation of existing practice.
A portion of the Company's revenues is derived from processing customer-owned
("tolled") copper. The value of tolled copper is excluded from both sales and
costs of sales of the Company, as title to these materials and the related risks
of ownership do not pass to the Company.
The cost of copper has historically been subject to fluctuations. While
fluctuations in the price of copper may 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 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 minimizes the differences between raw
material copper costs charged to the cost of sales and the pass-through pricing
charged to customers.
17
<PAGE> 18
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Net sales for the quarter were $145.5 million, an increase of $21.5 million, or
17.3%, compared to the three months ended June 30, 1999. This increase in sales
was primarily the result of increased demand in the general industrial and
electronics/data communications markets, incremental sales from the Forissier
Group, an increase in the average selling price of copper and a decrease in the
percentage of tolled copper. In general, the Company prices its wire products
based on a spread over the cost of copper, which results in an increased dollar
value of sales when copper costs increase. The average price of copper based on
the New York Mercantile Exchange, Inc. ("COMEX") increased to $0.80 per pound
during the quarter from $0.67 per pound during the three months ended June 30,
1999.
Cost of goods sold as a percentage of sales increased to 73.5% for the three
months ended June 30, 2000, from 71.5% for the three months ended June 30, 1999.
This change was due primarily to the increased cost and selling price of copper
and a reduction in the percent of tolled copper. These factors were partially
offset by cost reductions achieved from improved operating efficiencies and a
favorable shift in product mix.
Selling, general and administrative expenses increased $1.6 million to $12.3
million for the three months ended June 30, 2000, compared to $10.7 million for
the same period in 1999 due to the additional costs related to the Forissier
Group operations and incremental costs from higher unit volume.
Depreciation and amortization was $9.2 million for the three months ended June
30, 2000, compared to $8.6 million for the same period in 1999. The increase of
$0.6 million was primarily the result of depreciation of property, plant and
equipment additions and amortization of goodwill related to the Forissier Group
Acquisition.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Net sales were $290.1 million, an increase of $47.7 million, or 19.7%, in the
six months ended June 30, 2000, as compared to the six months ended June 30,
1999. Year-over-year increases in unit volume to the general industrial,
electronics/data communications and automotive markets were partially offset by
a decrease in sales to the appliance industry in the first quarter from slowing
industry growth and customers' inventory reductions. Incremental sales from the
Forissier Group acquisition, higher copper prices and a lower percent of tolled
copper also contributed to the increased sales. The average price for copper
based on COMEX increased to $0.81 per pound during the six months ended June 30,
2000 from $0.65 per pound for the six months ended June 30, 1999.
Cost of goods sold as a percentage of sales increased to 73.8% for the six
months ended June 30, 2000, from 72.0% for the six months ended June 30, 1999.
This change was due primarily to the increased cost and selling price of copper
and a reduction in the percentage of tolled copper. Cost reductions achieved
from improved operating efficiencies and a favorable shift in product mix
partially offset these factors.
Selling, general and administrative expenses increased $3.2 million to $24.7
million for the six months ended June 30, 2000, compared to $21.5 million for
the same period in 1999 due to the additional costs related to the Forissier
Group operations and incremental costs from higher unit volume.
18
<PAGE> 19
Depreciation and amortization was $18.3 million for the six months ended June
30, 2000, compared to $16.9 million for the same period in 1999. The increase of
$1.4 million was primarily the result of depreciation of property, plant and
equipment additions and amortization of goodwill related to the Forissier Group
Acquisition.
Effective January 1, 1999, the Company 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. In the
six months ended June 30, 1999, the Company had a charge of $1.4 million related
to the cumulative effect of this change in accounting principle. There was no
such charge in the first six months of 2000.
In connection with Wire Harness Sale, the Company utilized the majority of the
proceeds to pay down outstanding debt on the Company's senior bank facility.
Accordingly, the Company recognized a one-time charge of $4.8 million related to
the write-off of deferred fees associated with the repayment. There was no such
charge in the first six months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Inflation has not been a material factor affecting the Company's business. As a
result of the copper price pass-through arrangements that the Company has with
its customers, fluctuations in the price of copper have not, nor are expected to
have, a material impact on the Company's profitability. The Company's general
operating expenses, such as salaries, employee benefits and facilities costs are
subject to normal inflationary pressures.
Net cash provided by continuing operations for the six months ended June 30,
2000 was $5.4 million, compared to $26.4 million for the six months ended June
30, 1999. This decrease was primarily due to fluctuations in working capital
requirements, primarily accounts receivable, inventory and accounts payable
levels, from the previous year-end to June 30 of each respective year.
Net cash used in investing activities, representing capital expenditures, was
$9.5 million for the six months ended June 30, 2000, compared to $16.5 million
for the six months ended June 30, 1999. Most of the decrease was due to lower
capital expenditures associated with discontinued operations.
Net cash provided by (used in) financing activities was $8.8 million for the six
months ended June 30, 2000, compared to ($12.6) million for the same period in
1999. In March 2000, the Company generated $208.5 million in proceeds from the
sale of the Wire Harness business, net of transaction costs of approximately
$1.5 million. The Company applied substantially all of the net proceeds from
this sale for repayment of outstanding obligations under the Company's Amended
and Restated Credit Agreement. The Company is currently negotiating with the
sellers of the Forissier Group on a final settlement related to the Forissier
Acquisition. Since the amount of the final settlement has not been determined,
the Company has not recorded the liability and related goodwill as of June 30,
2000. The Company does not expect the final payment to have a material adverse
effect on the Company's operating results or financial position.
19
<PAGE> 20
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 Senior Notes prohibit the Company from imposing certain
restrictions on the ability of its subsidiaries to pay dividends or make other
distributions to the Company.
20
<PAGE> 21
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not ordinarily hold market risk sensitive instruments for
trading purposes. The Company does, however, recognize market risk from interest
rate, foreign currency exchange and commodity price exposure.
INTEREST RATE RISK
With the sale of the Wire Harness business and the subsequent repayment of debt
outstanding under the Company's Amended and Restated Credit Agreement, the
Company has reduced its exposure to fluctuations in interest rates. At June 30,
2000, approximately $18.5 million of the Company's long-term debt, specifically,
borrowings outstanding under the Company's Amended and Restated Credit Agreement
and the Company's borrowings related to Industrial Revenue Bonds, bears interest
at variable rates.
FOREIGN CURRENCY RISK
The Company has foreign operations in the Philippines, Italy and France.
Accordingly, the Company has some transactions that are denominated in foreign
currencies and are subject to market risk with respect to fluctuations in the
relative value of currencies.
COMMODITY PRICE RISK
The principal raw material used by the Company is copper, which is purchased in
the form of 5/16 inch rod from the major copper producers in North America.
Copper rod prices are based on market prices, which are generally established by
reference to the New York Mercantile Exchange, Inc. ("COMEX") prices, plus a
premium charged to convert copper cathode to copper rod and deliver it to the
required location. As a world traded commodity, copper prices have historically
been subject to fluctuations. While fluctuations in the price of copper may
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 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
minimizes the differences between raw material copper costs charged to the cost
of sales and the pass-through pricing charged to customers.
21
<PAGE> 22
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
There were no reports on Form 8-K filed during the reporting period.
22
<PAGE> 23
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, 2000 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: Chief Accounting Officer
23
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
