<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 March 31, 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:
Outstanding at
Class April 30, 2000
- ---------------------------- --------------
Common Stock 1,000
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INTERNATIONAL WIRE GROUP, INC.
<TABLE>
<CAPTION>
INDEX
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
International Wire Group, Inc.
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999............................... 3
Consolidated Statements of Operations for the three month periods ended March 31, 2000 and 1999...... 4
Consolidated Statements of Cash Flows for the three month periods ended March 31, 2000 and 1999...... 5
Notes to Consolidated Financial Statements........................................................... 6
Management's Discussion and Analysis of Financial Condition and Results of Operations................ 15
Quantitative and Qualitative Disclosure About Market Risk............................................ 18
PART II - OTHER INFORMATION................................................................................ 19
SIGNATURES................................................................................................. 20
</TABLE>
2
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INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
------------ ------------
2000 1999
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 6,135 $ 7,425
Accounts receivable, less allowance of $2,382
and $2,879, respectively ........................... 97,714 101,310
Inventories .......................................... 70,860 92,142
Prepaid expenses and other ........................... 8,624 12,223
Deferred income taxes ................................ 12,866 15,436
------------ ------------
Total current assets ............................... 196,199 228,536
Property, plant and equipment, net ..................... 162,070 184,660
Deferred financing costs, net .......................... 6,974 14,011
Intangible assets, net ................................. 202,652 243,627
Other assets ........................................... 2,903 7,273
------------ ------------
Total assets ....................................... $ 570,798 $ 678,107
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations .......... $ 2,088 $ 9,606
Accounts payable ..................................... 29,268 48,655
Accrued and other liabilities ........................ 44,019 43,641
Accrued payroll and payroll related items ............ 9,234 12,858
Accrued interest ..................................... 12,147 4,041
------------ ------------
Total current liabilities .......................... 96,756 118,801
Long-term obligations, less current maturities ......... 335,258 526,338
Deferred income taxes .................................. 16,311 21,772
Other long-term liabilities ............................ 18,996 30,926
------------ ------------
Total liabilities .................................. 467,321 697,837
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 .................................. (75,339) (76,719)
------------ ------------
Total stockholder's equity (deficit) ............... 103,477 (19,730)
------------ ------------
Total liabilities and stockholder's equity
(deficit) ........................................ $ 570,798 $ 678,107
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
3
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INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales ................................................ $ 144,613 $ 118,345
Operating expenses:
Cost of goods sold ..................................... 107,190 85,724
Selling, general and
administrative expenses ............................... 12,415 10,785
Depreciation and
amortization .......................................... 9,108 8,376
------------ ------------
Operating income ......................................... 15,900 13,460
Other income (expense):
Interest expense ....................................... (13,051) (12,462)
Amortization of deferred financing costs ............... (801) (633)
------------ ------------
Income from continuing operations before
income tax provision, cumulative effect
of change in accounting principle and
extraordinary item ..................................... 2,048 365
Income tax provision ..................................... 1,555 271
------------ ------------
Income from continuing operations before
cumulative effect of change in accounting
principle and extraordinary item ....................... 493 94
Income from discontinued operations, net of
income taxes of $1,598 and $1,575, respectively ........ 3,634 2,455
------------ ------------
Income before cumulative effect of change in
accounting principle and extraordinary item ............ 4,127 2,549
Cumulative effect of change in accounting for
start-up costs, net of tax benefit of $592 ............. -- (818)
------------ ------------
Income before extraordinary item ......................... 4,127 1,731
Extraordinary item - loss related to early
extinguishment of debt, net of taxes of
$2,073 ................................................. (2,747) --
------------ ------------
Net income ............................................... $ 1,380 $ 1,731
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
4
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INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income .................................................... $ 1,380 $ 1,731
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization ............................... 9,909 9,009
Income from discontinued operations ......................... (5,232) (4,030)
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 ....................................... (9,740) (9,009)
Inventories ............................................... 975 9,961
Other assets .............................................. (668) 2,953
Accounts payable .......................................... (8,900) 6,358
Accrued and other liabilities ............................. (7,326) (6,971)
Accrued interest .......................................... 8,106 9,396
Other long-term liabilities ............................... (559) (6,130)
------------ ------------
Net cash provided by (used in) continuing
operations .................................................. (7,235) 14,678
Net cash provided by discontinued operations .................. 1,697 6,996
------------ ------------
Net cash provided by (used in) operating
activities .................................................... (5,538) 21,674
------------ ------------
Cash flows used in investing activities:
Capital expenditures .......................................... (4,229) (3,857)
Capital expenditures of discontinued
operations .................................................. (982) (4,636)
------------ ------------
Net cash used in investing activities ........................... (5,211) (8,493)
------------ ------------
Cash flows provided by (used in) financing
activities:
Equity proceeds ............................................... -- 42
Repayment of long-term obligations ............................ (198,342) (1,811)
Repayment on revolver (net) ................................... -- (9,000)
Financing fees and other ...................................... (699) --
Net proceeds from sale of Wire Harness
Segment ..................................................... 208,500 --
------------ ------------
Net cash provided by (used in) financing activities ............. 9,459 (10,769)
------------ ------------
Net change in cash and cash equivalents ......................... (1,290) 2,412
Cash at beginning of the period ................................. 7,425 --
------------ ------------
Cash at end of the period ....................................... $ 6,135 $ 2,412
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
5
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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 months ended
March 31, 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.
Statement of Cash Flows
Interest paid for the three months ended March 31, 2000 and 1999, were
$4,945 and $3,077, respectively. Total income taxes paid (refunded) for
the three months ended March 31, 2000 and 1999, was $2,059 and ($504),
respectively.
Change in Accounting Principle
In April 1998, the Financial Accounting Standards Board ("FASB") issued
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 adopted SOP 98-5 effective January 1, 1999. The
Company had $1,410 in net capitalized start-up costs remaining at
December 31, 1998, which the Company expensed in accordance with SOP
98-5 at January 1, 1999.
2. Discontinued Operations and Contributed Capital
On March 29, 2000, the Company consummated the sale of its Wire Harness
Segment 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 excess of (1) the proceeds over
(2) the net book value of the assets disposed plus the related
expenses, approximately $1,500, and estimated taxes of $7,000; of
$121,713 has been recorded as a contribution of capital. The results of
operations of the Wire Harness Segment 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 Segment's insulated wire requirements through 2003,
which is a continuation of
6
<PAGE> 7
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.
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 March 31, 2000 and December 31, 1999
is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Raw materials ......... $ 29,207 $ 30,723
Work-in-process ....... 17,388 19,168
Finished goods ........ 24,265 42,251
---------- ----------
Total ................ $ 70,860 $ 92,142
========== ==========
</TABLE>
The carrying value of inventories on a last-in, first-out basis, at
March 31, 2000 and December 31, 1999, approximate their current cost.
5. Property, Plant and Equipment
The composition of property, plant and equipment at March 31, 2000 and
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Land ................................ $ 3,633 $ 3,759
Buildings and improvements .......... 50,240 51,367
Machinery and equipment ............. 236,604 270,892
Construction in progress ............ 2,746 2,824
------------ ------------
293,223 328,842
Less accumulated depreciation ....... (131,153) (144,182)
------------ ------------
$ 162,070 $ 184,660
============ ============
</TABLE>
6. Long-Term Obligations
The composition of long-term obligations at March 31, 2000 and December
31, 1999 is as follows:
7
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<TABLE>
<CAPTION>
March 31, 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 ....... 9,628 9,979
Industrial revenue bonds ......................... 15,500 15,500
Other ............................................ 9,263 9,965
---------- ----------
337,346 535,944
Less, current maturities ......................... 2,088 9,606
---------- ----------
$ 335,258 $ 526,338
========== ==========
</TABLE>
The schedule of principal payments for long-term obligations, excluding
premium, at March 31, 2000 is as follows:
<TABLE>
<S> <C>
2000 .................................................. $ 2,088
2001 .................................................. 2,114
2002 .................................................. 1,385
2003 .................................................. 114
2004 .................................................. 125
Thereafter ............................................ 321,892
--------
Total ............................................... $327,718
========
</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 March 31, 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 0.25% or (b) the
Eurodollar Rate (as defined in the Credit Agreement) plus 1.25%. 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 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.
8
<PAGE> 9
7. Business Segment Information
On March 29, 2000, the Company sold its Wire Harness Segment. As a
result, the Company operates its business as one business segment, the
Wire 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 Electro Componentes de Mexico, S.A. de C.V. (sold to Viasystems on
March 29, 2000 as part of the Wire Harness Sale), Wirekraft Industries
de Mexico, S.A. de C.V. (sold to Viasystems on March 29, 2000 as part
of the Wire Harness Sale), 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
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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 MARCH 31, 2000
ASSETS
Cash and cash equivalents .............. $ -- $ 6,064 $ 71 $ -- $ 6,135
Accounts receivable .................... -- 80,362 17,352 -- 97,714
Inventories ............................ -- 62,472 8,388 -- 70,860
Other assets ........................... -- 20,472 1,018 -- 21,490
------------ ------------ ------------ ------------ ------------
Total current assets ................ -- 169,370 26,829 -- 196,199
Property, plant and equipment,
net .................................. -- 140,365 21,705 -- 162,070
Investment in subsidiaries ............. 614,036 -- -- (614,036) --
Intangibles and other assets ........... 9,954 192,565 10,010 -- 212,529
------------ ------------ ------------ ------------ ------------
Total assets ........................ $ 623,990 $ 502,300 $ 58,544 $ (614,036) $ 570,798
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current liabilities .................... $ 12,829 $ 73,137 $ 10,790 $ -- $ 96,756
Long-term obligations, less
current maturities .................. 316,901 18,357 -- -- 335,258
Other long-term liabilities ............ -- 34,455 852 -- 35,307
Intercompany (receivable) payable ...... 123,021 (157,213) 34,192 -- --
------------ ------------ ------------ ------------ ------------
Total liabilities ................... 452,751 (31,264) 45,834 -- 467,321
Stockholder's equity
(deficit):
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) .............. (75,339) 103,755 1,855 (105,610) (75,339)
------------ ------------ ------------ ------------ ------------
Total stockholder's equity
(deficit) ......................... 171,239 533,564 12,710 (614,036) 103,477
------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholder's equity
(deficit) ......................... $ 623,990 $ 502,300 $ 58,544 $ (614,036) $ 570,798
============ ============ ============ ============ ============
</TABLE>
10
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CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash ...................................... $ -- $ 7,131 $ 294 $ -- $ 7,425
Accounts receivable ....................... -- 84,278 17,284 (252) 101,310
Inventories ............................... -- 83,593 8,549 -- 92,142
Other current 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 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
MARCH 31, 2000
Net sales ................................... $ -- $ 128,853 $ 15,760 $ -- $ 144,613
Operating expenses:
Cost of goods sold ...................... -- 96,280 10,910 -- 107,190
Selling, general and
administrative expenses .............. -- 11,292 1,123 -- 12,415
Depreciation and amortization ........... 156 7,914 1,038 -- 9,108
--------- --------- --------- --------- ---------
Operating income ............................ (156) 13,367 2,689 -- 15,900
Other income (expense):
Interest expense ........................ (12,763) (189) (99) -- (13,051)
Amortization of deferred
financing costs ...................... (801) -- -- -- (801)
Equity in net income of
subsidiaries ......................... 17,847 -- -- (17,847) --
--------- --------- --------- --------- ---------
Income from continuing operations
before income tax provision
and extraordinary item .................. 4,127 13,178 2,590 (17,847) 2,048
Income tax provision ........................ -- 1,171 384 -- 1,555
--------- --------- --------- --------- ---------
Income from continuing operations
before extraordinary item ............... 4,127 12,007 2,206 (17,847) 493
Income from discontinued
operations, net of taxes of
$1,598 .................................. -- 2,288 1,346 -- 3,634
--------- --------- --------- --------- ---------
Income before extraordinary
item .................................... 4,127 14,295 3,552 (17,847) 4,127
Extraordinary item - loss
related to early
extinguishment if debt,
net if taxes if $2,073 .................. (2,747) -- -- -- (2,747)
--------- --------- --------- --------- ---------
Net income (loss) ........................... $ 1,380 $ 14,295 $ 3,552 $ (17,847) $ 1,380
========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
--------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999
Net sales ...................................... $ -- $ 113,505 $ 4,840 $ -- $ 118,345
Operating expenses:
Cost of goods sold ......................... -- 81,812 3,912 -- 85,724
Selling, general and
administrative expenses ................. -- 10,620 165 -- 10,785
Depreciation and amortization .............. 156 6,830 1,390 -- 8,376
--------- --------- --------- --------- ---------
Operating income ............................... (156) 14,243 (627) -- 13,460
Other income (expense):
Interest expense ........................... (12,206) (256) -- -- (12,462)
Amortization of deferred
financing costs ......................... (633) -- -- -- (633)
Equity in net income
(loss) of subsidiaries .................. 14,726 -- -- (14,726) --
--------- --------- --------- --------- ---------
Income from continuing operations
before income tax provision
and cumulative effect of
change in accounting
principle .................................. 1,731 13,987 (627) (14,726) 365
Income tax provision ........................... -- 159 112 -- 271
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle .................................. 1,731 13,828 (739) (14,726) 94
Income from discontinued
operations, net of taxes of
$1,575 ..................................... -- 1,736 719 -- 2,455
--------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of change in accounting
principle .................................. 1,731 15,564 (20) (14,726) 2,549
Cumulative effect of change in
accounting for start-up costs,
net of tax benefit of $592 ................... -- (818) -- -- (818)
--------- --------- --------- --------- ---------
Net income (loss) .............................. $ 1,731 $ 14,746 $ (20) $ (14,726) $ 1,731
========= ========= ========= ========= =========
</TABLE>
13
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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 THREE MONTHS ENDED
MARCH 31, 2000
Net cash provided by (used
in) operating activities ........................ $ (10,161) $ 3,206 $ 1,417 $ -- $ (5,538)
------------ ------------ ------------ ------------ ------------
Cash flows used in investing
activities for capital
expenditures .................................... -- (3,571) (1,640) -- (5,211)
------------ ------------ ------------ ------------ ------------
Cash flows provided by (used in)
financing activities:
Repayment of long-term
obligations ................................. (197,640) (702) -- -- (198,342)
Financing fees and other ...................... (699) -- -- -- (699)
Net proceeds from sale of
Wire Harness Segment ........................ 208,500 -- -- -- 208,500
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities .......................... (10,161) (702) -- -- 9,459
------------ ------------ ------------ ------------ ------------
Net change in cash and cash
equivalents ................................... $ -- $ (1,067) $ (223) $ -- $ (1,290)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
TOTAL NON-
COMPANY GUARANTOR GUARANTOR ELIMINATIONS TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999
Net cash from operating
activities ...................... $ 10,462 $ 8,917 $ 2,295 $ -- $ 21,674
----------- ----------- ----------- ----------- -----------
Cash flows used in investing
activities for capital
expenditures .................... -- (6,330) (2,163) -- (8,493)
----------- ----------- ----------- ----------- -----------
Cash flows provided by (used in)
financing activities:
Equity proceeds ............... 42 -- -- -- 42
Repayment of long-term
obligations ................. (10,504) (307) -- -- (10,811)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities ............ (10,462) (307) -- -- (10,769)
----------- ----------- ----------- ----------- -----------
Net change in cash and cash
equivalents ..................... $ -- $ 2,280 $ 132 $ -- $ 2,412
=========== =========== =========== =========== ===========
</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 months ended March 31, 2000, compared to the three months ended March 31,
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 months ended March
31, 2000, are the results of operations of the Forissier Group.
On March 29, 2000, the Company consummated the sale of its Wire Harness Segment
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 excess of (1) the
proceeds over (2) the net book value of the assets disposed plus the related
expenses, approximately $1.5 million, and estimated taxes of $7.0 million; has
been recorded as a contribution of capital. The results of operations of the
Wire Harness Segment 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 Segment's 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.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Net sales for the three months ended March 31, 2000 were $144.6 million,
representing a $26.3 million, or 22.2%, increase over the first quarter of 1999.
The increase in sales resulted from higher sales volume to customers in the
general industrial, electronics/data communications and automotive industries,
incremental sales from the Forissier Group Acquisition and an increase in the
average selling price of copper. Partially offsetting these factors were lower
sales to customers who supplying the appliance industry from slower industry
growth and customers' inventory reductions. In general, the Company prices its
wire products based upon a spread over the cost of copper, which results in a
increased dollar value of sales when copper costs increase. The average price
15
<PAGE> 16
of copper based upon the New York Mercantile Exchange, Inc. ("COMEX") increased
to $0.82 per pound during the three months ended March 31, 2000 from $0.64 per
pound during the three months ended March 31, 1999.
Cost of goods sold as a percentage of sales increased to 74.1% for the three
months ended March 31, 2000, from 72.4% for the three months ended March 31,
1999. This change was due primarily to the increased cost and selling price of
copper. Cost reductions achieved from improved operating efficiencies and a
favorable shift in product mix partially offset the impact of higher copper
prices.
Selling, general and administrative expenses increased $1.6 million to $12.4
million for the three months ended March 31, 2000, compared to $10.8 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 $9.1 million for the three months ended March
31, 2000, compared to $8.4 million for the same period in 1999. The increase of
$0.7 million was primarily the result of depreciation of property, plant and
equipment additions and amortization of goodwill related to the Forissier Group
Acquisition.
Income from discontinued operations was $3.6 million for the three months ended
March 31, 2000, compared to $2.5 million for the three months ended March 31,
1999. This increase was due primarily to a one-time charge related to a change
in accounting principle in 1999. There was no such charge in the first quarter
of 2000.
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
quarter ended March 31, 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 quarter 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 redeemed bank debt. There was
no such charge in the first quarter 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 (used in) operating activities for the quarter ended March
31, 2000 was ($5.5) million, compared to $21.7 million for the three months
ended March 31, 1999. This decrease was primarily due to fluctuations in working
capital requirements, primarily inventory and accounts payable levels, from the
previous year end to March 31 of each respective year.
Net cash used in investing activities, representing capital expenditures, was
$5.2 million for the three months ended March 31, 2000, compared to $8.5 million
for the three months ended March 31, 1999.
Net cash provided by (used in) financing activities was $9.5 million for the
three months ended March 31, 2000, compared to ($10.8) million for the same
16
<PAGE> 17
period in 1999. In March 2000, the Company generated $208.5 million in proceeds
from the sale of the Wire Harness Segment, 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'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.
17
<PAGE> 18
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 Segment 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 March 31,
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.
18
<PAGE> 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on April 13, 2000 related to the
sale of the Wire Harness Segment.
19
<PAGE> 20
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 15, 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: Vice President - Finance
(Chief Accounting Officer)
20
<PAGE> 21
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>
<CIK> 0000947429
<NAME> INTERNATIONAL WIRE GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,135
<SECURITIES> 0
<RECEIVABLES> 100,025
<ALLOWANCES> (2,311)
<INVENTORY> 70,860
<CURRENT-ASSETS> 196,199
<PP&E> 293,223
<DEPRECIATION> (131,153)
<TOTAL-ASSETS> 570,798
<CURRENT-LIABILITIES> 96,756
<BONDS> 335,258
0
0
<COMMON> 0
<OTHER-SE> 103,477
<TOTAL-LIABILITY-AND-EQUITY> 570,798
<SALES> 144,613
<TOTAL-REVENUES> 144,613
<CGS> 107,190
<TOTAL-COSTS> 107,190
<OTHER-EXPENSES> 9,108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,852
<INCOME-PRETAX> 2,048
<INCOME-TAX> 1,555
<INCOME-CONTINUING> 493
<DISCONTINUED> 3,634
<EXTRAORDINARY> (2,747)
<CHANGES> 0
<NET-INCOME> 1,380
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
