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10-Q 1 d242950d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-33337

COLEMAN CABLE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

36-4410887

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1530 Shields Drive, Waukegan, Illinois 60085

(Address of Principal Executive Offices)

(847) 672-2300

(Registrant’s Telephone Number, including Area Code)

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Common shares outstanding as of November 3, 2011: 17,418,100

INDEX


	Page
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements (unaudited)		3
Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2011 and 2010		3
Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010		4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010		5
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2011 and 2010		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 4. Controls and Procedures		34
PART II. OTHER INFORMATION		35
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 6. Exhibits		35
Signatures		36
Exhibit Index		37

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Thousands, except per share data)

(unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2011		2010			2011			2010
NET SALES	$	234,851	$	187,597		$	660,502		$	517,588
COST OF GOODS SOLD		200,233		162,923			563,617			444,079

GROSS PROFIT		34,618		24,674			96,885			73,509
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		14,986		11,465			46,480			34,524
INTANGIBLE ASSET AMORTIZATION		1,950		1,606			5,282			5,228
ASSET IMPAIRMENTS		—		202			—			202
RESTRUCTURING CHARGES		1,061		235			1,256			1,560

OPERATING INCOME		16,621		11,166			43,867			31,995
INTEREST EXPENSE		7,086		6,969			21,183			20,471
LOSS ON EXTINGUISHMENT OF DEBT		—		—			—			8,566
GAIN ON AVAILABLE FOR SALE SECURITIES		—		—			(753	)		—
OTHER (INCOME) LOSS, NET		418		(170	)		332			(56	)

INCOME BEFORE INCOME TAXES		9,117		4,367			23,105			3,014
INCOME TAX EXPENSE		2,637		1,259			7,023			621

NET INCOME	$	6,480	$	3,108		$	16,082		$	2,393

EARNINGS PER COMMON SHARE DATA
NET INCOME PER SHARE:
Basic	$	0.37	$	0.18		$	0.92		$	0.14
Diluted		0.37		0.18			0.91			0.14
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		17,212		16,939			17,141			16,925
Diluted		17,465		17,012			17,362			16,981

See notes to condensed consolidated financial statements.

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands, except per share data)


	September 30, 2011			December 31, 2010
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,105		$	33,454
Accounts receivable, net of allowances of $2,610 and $2,491, respectively		132,170			110,774
Inventories		121,177			81,130
Deferred income taxes		3,885			3,171
Assets held for sale		546			546
Prepaid expenses and other current assets		3,072			3,761

Total current assets		266,955			232,836

PROPERTY, PLANT AND EQUIPMENT, NET		56,038			45,731
GOODWILL		56,705			29,134
INTANGIBLE ASSETS, NET		30,082			23,764
DEFERRED INCOME TAXES		715			301
OTHER ASSETS		8,415			9,345

TOTAL ASSETS	$	418,910		$	341,111

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	4		$	7
Accounts payable		33,451			22,016
Accrued liabilities		30,696			30,193

Total current liabilities		64,151			52,216

LONG-TERM DEBT		321,743			271,820
OTHER LONG-TERM LIABILITIES		3,115			4,258
DEFERRED INCOME TAXES		1,819			1,595
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock, par value $0.001; 75,000 authorized; 17,137 and 16,939 issued and outstanding on September 30, 2011 and December 31, 2010, respectively		17			17
Treasury stock, at cost: 122 and 0 shares, respectively		(1,113	)		—
Additional paid-in capital		92,514			90,483
Accumulated deficit		(63,178	)		(79,260	)
Accumulated other comprehensive loss		(158	)		(18	)

Total shareholders’ equity		28,082			11,222

TOTAL LIABILITIES AND EQUITY	$	418,910		$	341,111

See notes to condensed consolidated financial statements.

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands)

(unaudited)


	Nine Months Ended September 30,
	2011			2010
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	16,082		$	2,393
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation and amortization		15,601			15,141
Stock-based compensation		2,781			1,715
Foreign currency transaction loss (gain)		332			(56	)
Gain on available for sale securities		(753	)		—
Loss on extinguishment of debt		—			8,566
Asset impairments		—			202
Excess tax benefits from stock-based compensation		(512	)		—
Deferred taxes		(3,982	)		698
Loss on disposal of fixed assets		161			395
Changes in operating assets and liabilities:
Accounts receivable		(15,123	)		(26,599	)
Inventories		(26,474	)		(26,913	)
Prepaid expenses and other assets		2,067			(1,792	)
Accounts payable		7,929			9,427
Accrued liabilities		(3,483	)		(792	)

Net cash flow from operating activities		(5,374	)		(17,615	)

CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures		(10,479	)		(4,500	)
Purchases of investments		—			(1,576	)
Proceeds from sale of fixed assets		10			1,170
Acquisition of businesses, net of cash acquired		(58,872	)		—

Net cash flow from investing activities		(69,341	)		(4,906	)

CASH FLOW FROM FINANCING ACTIVITIES:
Borrowing under revolving loan facility		164,145			34,961
Repayments under revolving loan facility		(114,557	)		(45,200	)
Payment of deferred financing fees		(1,309	)		(6,695	)
Treasury stock purchases		(815	)		—
Excess tax benefits from stock-based compensation		512			—
Repayment of long-term debt		(5	)		(231,657	)
Proceeds from option exercises		81			—
Proceeds from the issuance of 2018 Senior Notes		—			271,911

Net cash flow from financing activities		48,052			23,320

Effect of exchange rate changes on cash and cash equivalents		(686	)		80
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(27,349	)		879
CASH AND CASH EQUIVALENTS — Beginning of period		33,454			7,599

CASH AND CASH EQUIVALENTS — End of period	$	6,105		$	8,478

NONCASH ACTIVITY
Unpaid capital expenditures		902			199
Capital lease obligation		—			10
Unpaid business acquisition consideration		350			—
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net		7,618			88
Cash interest paid		25,963			21,936

See notes to condensed consolidated financial statements.

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Thousands)

(unaudited)


	Common Stock Outstanding		Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total
BALANCE — January 1, 2010		16,809	$	17	$	0		$	88,475	$	(82,987	)	$	(245	)	$	5,260

Stock awards		130		—		—			—		—			—			—
Comprehensive income
Net income		—		—		—			—		2,393			—			2,393
Cumulative translation, net of tax of $107		—		—		—			—		—			181			181
Unrealized gains on available for sale securities (Level 1), net of tax of $137		—		—		—			—		—			(176	)		(176	)

Total Comprehensive Income																	2,398
Stock-based compensation		—		—		—			1,451		—			—			1,451

BALANCE — September 30, 2010		16,939	$	17	$	0		$	89,926	$	(80,594	)	$	(240	)	$	9,109

BALANCE — January 1, 2011		16,939	$	17	$	0		$	90,483	$	(79,260	)	$	(18	)	$	11,222

Stock awards		198		—		—			—		—			—			—
Comprehensive income
Net income		—		—		—			—		16,082			—			16,082
Cumulative translation, net of tax of $151		—		—		—			—		—			(53	)		(53	)
Unrealized gains on available for sale securities (Level 1), net of tax of $424		—		—		—			—		—			(89	)		(89	)
Pension adjustments, net of tax of $1		—		—		—			—		—			2			2

Total Comprehensive Income																	15,942
Shares Repurchases		—		—		(1,113	)		—		—			—			(1,113	)
Stock-based compensation		—		—		—			2,031		—			—			2,031

BALANCE — September 30, 2011		17,137	$	17	$	(1,113	)	$	92,514	$	(63,178	)	$	(158	)	$	28,082

See notes to condensed consolidated financial statements.

COLEMAN CABLE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Thousands, except per share data)

(unaudited)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include Coleman Cable, Inc. and all of its subsidiaries (the “Company,” “Coleman,” “we,” “us,” or “our”). The condensed consolidated financial statements included herein are unaudited. The preparation of the condensed consolidated financial statements is in conformity with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules or regulations. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation in conformity with U.S. GAAP. All amounts are in thousands, unless otherwise indicated. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2010. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

2. NEW ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update No. 2010-28 – “Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU No. 2010-28”)

ASU No. 2010-28 affects all entities that have recognized goodwill and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the goodwill impairment test is zero or negative. The amendments in this update modify Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The accounting update was effective for a reporting entity’s first annual reporting period that begins after December 2010, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. This update, which was effective for the first quarter of 2011, did not have a significant impact on the Company’s results of operations, financial position and cash flows.

Accounting Standards Update No. 2010-29—“Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations” (“ASU No. 2010-29”)

ASU No. 2010-29 amends existing guidance for presenting pro forma results of business combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The accounting update was effective for a reporting entity’s business combinations occurring beginning on or after the entity’s first annual reporting period after December 15, 2010. The Company has applied the provisions of this update for all material business combinations that occurred after January 1, 2011.

Accounting Standards Update No. 2011-04 – “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU No. 2011-04”)

ASU No. 2011-04 generally provides a uniform framework for fair value measurements and related disclosures between GAAP and International Financial Reporting Standards (“IFRS”). Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will be effective for interim and annual periods beginning on or after December 15, 2011. The Company is currently evaluating the impact ASU 2011-04 will have on its financial statements but does not expect it to have a material impact on the Company’s results of operations, financial position and cash flows.

Accounting Standards Update No. 2011-05 – “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU No. 2011-05”)

ASU No. 2011-05 amends existing guidance by allowing only two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement, statement of comprehensive income or (2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of other comprehensive income. Also, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements. ASU No. 2011-05 requires retrospective application, and it is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company believes the adoption of this update will change the order in which certain financial statements are presented and provide additional detail on those financial statements when applicable, but will not have any other impact on its financial statements or results of operations. The Company plans to adopt during the interim period ended March 31, 2012.

Accounting Standards Update No. 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU No. 2011-08”)

ASU No. 2011-08 amends existing guidance by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. ASU No. 2011-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance but does not expect it to have a material impact on the Company’s results of operations, financial position and cash flows.

3. ACQUISITIONS

During the second quarter of 2011, we utilized cash on hand, as well as borrowings under our existing credit facility to complete three business combination transactions (collectively, the “2011 Acquisitions”), as set forth below. Each of these 2011 Acquisitions was structured as an all-cash transaction, with aggregate consideration totaling $69,733. We believe these acquisitions represent significant opportunities for us, including the strengthening and greater diversification of our overall portfolio.

The 2011 Acquisitions are included in our condensed consolidated financial statements, including our results of operations, beginning from each respective acquisition date. Accordingly, the consolidated statement of operations for the three and nine months ended September 30, 2011 includes six months of operations for the assets acquired in connection with the TDE (as defined below) acquisition, approximately five months of operations for the assets acquired in connection with FCWC and CWC (as defined below) acquisition, and approximately 19 weeks of operations related to TRC (as defined below). The consolidated statement of income for the three and nine months ended September 30, 2010 does not include the impact of the 2011 Acquisitions.

We incurred acquisition-related costs, including outside legal, consulting and other fees, of $223 and $2,801 for the three and nine months ended September 30, 2011, respectively. These costs have been recorded as a component of selling, general and administrative expenses in our condensed consolidated statement of operations.

Acquisition of the Assets of The Designers Edge (“TDE”)

On April 1, 2011, we acquired the assets of TDE, a leading designer and distributor of specialty lighting products in the U.S. and Canada, with 2010 sales in excess of $20,000. The total purchase price for the assets acquired, primarily trade receivables and merchandise inventories, was $10,925, subject to certain purchase price adjustments. The acquisition of TDE assets significantly expands our current product portfolio across a wide range of lighting product categories, including industrial, work and utility, as well as products for security and landscape applications. We fully integrated the assets of TDE into our existing operations during the second quarter of 2011.

Acquisition of the Assets of First Capitol Wire and Cable (“FCWC”) and Continental Wire and Cable (“CWC”)

On April 29, 2011, we acquired the assets of FCWC and CWC, both of which were privately-held entities based in York, Pennsylvania, with CWC being a 100%-owned subsidiary of FCWC. These two entities, which had annual combined sales in excess of $10,000, are leading manufacturers of industrial wire and cable products used across a number of commercial, utility and industrial end-markets. The total purchase price for the assets acquired, primarily merchandise inventories and production equipment, was $7,298, inclusive of working capital adjustments of $834. The acquisition of the assets of FCWC and CWC has allowed us to expand our capabilities, product offerings and capacity for producing a wide assortment of high-quality industrial cables. We fully integrated the assets of FCWC and CWC into our operations during the second quarter of 2011.

Acquisition of Technology Research Corporation (“TRC”)

On May 16, 2011, we completed the acquisition of 100% of the outstanding stock of TRC, pursuant to a merger agreement under which each outstanding share of TRC common stock was converted into the right to receive $7.20 per share payable in cash. For its fiscal year ended March 31, 2011, TRC had revenues of $35,982 and net income of $1,545. TRC is a recognized leader in providing cost effective engineered solutions for applications involving power management and control, intelligent battery systems technology and electrical safety products based on proven ground fault sensing and Fire Shield^® technology. These products are designed, manufactured and distributed to the consumer, commercial and industrial markets worldwide. TRC also supplies power monitors and control equipment to the United States military and its prime contractors. We believe the TRC acquisition both strengthens and diversifies our overall portfolio. TRC was publicly traded on the NASDAQ prior to its acquisition by Coleman. We completed the TRC acquisition as the result of a successful public tender offer to acquire all outstanding shares of TRC. The total purchase price consideration for TRC was $51,510, including the acquisition-date fair value of an approximate 4.8% interest in TRC’s common stock acquired by Coleman prior to submitting its acquisition proposal for TRC.

TRC is reported herein as a separate reportable segment.

Gain on Available For Sale Securities

As noted above, our pre-existing 4.8% interest in TRC was accounted for as a component of the overall purchase price for TRC. Accordingly, using the tender offer price of $7.20 per share, the value of this component of total consideration was $2,331, with the difference between this calculated fair value and our cost basis in the 4.8% pre-existing interest recognized as a $753 gain in our condensed consolidated statement of income at the time of the acquisition in accordance with the applicable accounting rules.

Purchase Price Allocations

The 2011 Acquisitions were accounted for under the purchase method of accounting. Accordingly, we have allocated the purchase price for each acquisition to the net assets acquired based on the related estimated fair values at each respective acquisition date. The expected long-term growth, increased market position and expected synergies to be generated from the 2011 Acquisitions are the primary factors which gave rise to acquisition prices for each of the 2011 Acquisitions which resulted in the recognition of goodwill.

The purchase price allocations have been determined provisionally. The Company is in the process of reviewing recently finalized appraisals of tangible and intangible assets and is continuing to evaluate the initial purchase price allocations. Additionally, we are in the process of negotiating purchase price adjustments and resolving other purchase matters for the TDE acquisition, which may result in a corresponding adjustment to the total TDE purchase price as well as the value of assets acquired. Accordingly, the provisional measurement of inventories, property, plant, and equipment, intangible assets, taxes, and goodwill are subject to change. Any change in the acquisition date fair value of the acquired net assets will change the amount of the purchase price allocated to goodwill.

The allocation below differs from our preliminary allocation previously disclosed primarily due to the completion of a comprehensive study of the fair value of intangibles. As a result of this change, the amount allocated to intangibles increased by $125 with a corresponding decrease to goodwill.

The table below summarizes the provisional allocations of purchase price related to the 2011 Acquisitions as of their respective acquisition dates.


	TDE		FCWC and CWC			TRC
Cash and cash equivalents	$	—	$	—		$	8,180
Accounts receivable		2,123		—			4,073
Income tax receivable							1,077
Inventories		3,129		1,631			8,794
Prepaid expenses and other current assets		—		44			314
Property, plant and equipment, net		157		3,687			4,668
Other assets		—		—			33
Deferred income tax asset		18		288			309
Intangible assets		2,115		1,200			8,287
Goodwill		3,383		696			23,541

Total assets acquired		10,925		7,546			59,276

Current liabilities		—		—			(4,515	)
Deferred income tax liability		—		(248	)		(3,251	)

Total liabilities assumed		—		(248	)		(7,766	)

Net assets acquired	$	10,925	$	7,298		$	51,510

A total of approximately $6,426 of goodwill is deductible for income tax purposes. Goodwill has not yet been assigned to our reporting units.

As part of the TRC acquisition, we assumed a contingent liability of TRC related to an acquisition made by TRC in March 2010. Under the terms of the March 2010 acquisition, TRC, as acquirer, is obligated to make contingent cash payments, or an earn-out payment, to the seller equal to a pre-determined percentage of total revenues within selected product categories that exceed a pre-determined threshold level for the 12-month period ended March 31, 2012. Included in our preliminary purchase price allocation for TRC, and classified as a component of current liabilities, is an accrual of $378, which represents our best estimate of TRC’s obligation under the terms of this earn-out.

The purchase price allocation to identifiable intangible assets, which are all amortizable, along with their respective weighted-average amortization periods at the acquisition date are as follows:


	Weighted-Average Amortization Period		TDE		FCWC and CWC		TRC
Customer relationships		6	$	900	$	600	$	1,460
Trademarks and trade names		6		610		600		1,450
Developed technology		3		560		—		2,000
Contractual agreements		3		—		—		2,900
Non-competition agreements		2		45		—		80
Backlog		1		—		—		340
Other		6		—		—		57

Total intangible assets			$	2,115	$	1,200	$	8,287

Unaudited Selected Pro Forma Financial Information

The following unaudited pro forma financial information summarizes our estimated combined results of operations assuming that our only material business combination consummated during the first nine months of 2011, TRC, had taken place on January 1, 2010. The unaudited pro forma combined results of operations were prepared using historical financial information of TRC, and we make no representation with respect to the accuracy of such information. The pro forma combined results of operations reflect adjustments for interest expense, depreciation adjustments based on the fair value of acquired property, plant and equipment, amortization of acquired identifiable intangible assets, income tax expense, and excludes acquisition costs. The unaudited pro forma information is presented for informational purposes only and does not include any anticipated cost savings or other effects of integration, nor do they purport to be indicative of the results of operations that actually would have resulted had the acquisition of TRC occurred on the date indicated or may result in the future.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Net sales	$	234,851	$	196,461	$	673,575	$	544,441
Net income		6,480		3,195		16,037		2,086

4. RESTRUCTURING ACTIVITIES

We incurred restructuring costs of $1,061 and $1,256 during the three and nine months ended September 30, 2011, respectively. Most notably, during the third quarter of 2011, we recorded $857 in severance costs for positions eliminated in connection with our realignment of our Canadian distribution and support operations. As part of this realignment, at the end of the fourth quarter of 2011, we plan to vacate our current Toronto-based distribution and headquarters facility, with a majority of our Canadian distribution being transitioned to our existing distribution facility in Wisconsin and a new, smaller Toronto-based distribution facility. In addition to the $857 in severance recorded in the third quarter of 2011, we anticipate incurring approximately $500 in costs during the fourth quarter of 2011 associated with termination of the existing Toronto-based facility lease and other related closing costs.

Restructuring costs for both 2011 and 2010 also included lease termination and other holding costs related to facilities closed in prior years, currently consisting of one leased and one owned facility for which we continue to pay holding costs. Our restructuring reserve was $2,947 as of September 30, 2011, recorded within accrued liabilities and other long-term liabilities, comprised, in part, of the above-noted $857 severance accrual, with the balance in the reserve representing our estimate of the remaining liability existing relative to one closed property under lease and which is equal to our remaining obligation under such lease reduced by estimated sublease rental income reasonably expected for the property. Accordingly, the liability may be increased or decreased in future periods as facts and circumstances change, including possible negotiation of a lease termination, sublease agreement, or changes in the related market in which the property is located. Other than for TRC, restructuring expense is not segregated by reportable segment as our operating segments share common production processes and manufacturing facilities, as discussed in Note 17 below.


	Lease Termination Costs			Severance & Other Closing Costs			Total
BALANCE — December 31, 2010	$	2,383		$	—		$	2,383
Provision		141			1,115			1,256
Cash payments		(434	)		(258	)		(692	)

BALANCE — September 30, 2011	$	2,090		$	857		$	2,947

5. INVENTORIES

Inventories consisted of the following:


	September 30, 2011		December 31, 2010
FIFO cost:
Raw materials	$	45,447	$	28,831
Work in progress		3,983		2,640
Finished products		71,747		49,659

Total	$	121,177	$	81,130

6. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:


	September 30, 2011		December 31, 2010
Salaries, wages and employee benefits	$	9,155	$	7,084
Sales incentives		9,473		9,092
Interest		3,217		9,537
Other		8,851		4,480

Total	$	30,696	$	30,193

7. DEBT


	September 30, 2011			December 31, 2010
Revolving Credit Facility expiring October 2016	$	49,588		$	—
9% Senior Notes due February 2018, including unamortized discount of $2,848 and $3,185, respectively		272,152			271,815
Capital lease obligations		7			12

		321,747			271,827
Less current portion		(4	)		(7	)

Long-term debt	$	321,743		$	271,820

Senior Secured Revolving Credit Facility

On August 4, 2011, we entered into a new $250,000, five-year revolving credit facility agreement, with an accordion feature that allows us to increase our borrowings by an additional $50,000 (the “Revolving Credit Facility”). The Revolving Credit Facility replaced a $200,000 revolving credit facility which was scheduled to expire in April of 2012. The Revolving Credit Facility, which expires on October 1, 2016, is an asset-based loan facility, with a $20,000 Canadian facility sublimit, and which is secured by substantially all of our assets, as further detailed below. We incurred $1,443 in fees and direct costs related to negotiating the Revolving Credit Facility. These respective fees and costs are being amortized over the life of the revolver. At September 30, 2011, we had $49,588 in borrowings under the facility, with $119,778 in remaining excess availability. At December 31, 2010, we had no borrowings outstanding under the previous facility, with $113,739 in remaining excess availability.

The interest rate charged on borrowings under the Revolving Credit Facility is based on our election of either the base rate (greater of the federal funds rate plus 0.5% and the lender’s prime rate) plus a range of 0.25% to 0.75% or the Eurodollar rate plus a range of 1.50% to 2.00%, in each case based on quarterly average excess availability under the Revolving Credit Facility. In addition, we pay an unused line fee of between 0.25% and 0.50% based on quarterly average excess availability pursuant to the terms of the Revolving Credit Facility.

Pursuant to the terms of the Revolving Credit Facility, we are required to maintain a fixed charge covenant ratio of not less than 1.0 to 1.0 for any month during which our excess availability under the Revolving Credit Facility falls below $30,000. Borrowing availability under the Revolving Credit Facility is limited to the lesser of (1) $250,000 or (2) the sum of 85% of eligible accounts receivable, 70% of eligible inventory, with a maximum amount of borrowing-base availability which may be generated from inventory of $150,000 for the U.S. portion and $12,000 Canadian for the Canadian portion, and an advance rate to be 75% of certain appraised real estate and 85% of certain appraised equipment and capped at $62,500, with a $15,000 sublimit for letters of credit. Our current availability does not include additional availability that may be generated by adding real estate and certain equipment to the borrowing base.

The Revolving Credit Facility is guaranteed by CCI International Inc. (“CCI International”), TRC (excluding TRC’s 100%-owned foreign subsidiary, TRC Honduras, S.A. de C.V.) and Patco Electronics (“Patco”), each of which are 100%-owned domestic subsidiaries, and is secured by substantially all of our assets and the assets of each of CCI International, TRC and Patco, including accounts receivable, inventory and any other tangible and intangible assets (including real estate, machinery and equipment and intellectual property) as well as by a pledge of all the capital stock of CCI International, TRC and Patco and 65% of the capital stock of our Canadian foreign subsidiary, but not our Chinese 100%-owned entity.

As of September 30, 2011, we were in compliance with all of the covenants of our Revolving Credit Facility.

9% Senior Notes due 2018 (the “Senior Notes”)

Our Senior Notes were issued at a discount in 2010, resulting in proceeds of less than par value. This discount is being amortized to par value over the remaining term of the Senior Notes. As of September 30, 2011, we were in compliance with all of the covenants of our Senior Notes.


Senior Notes		September 30, 2011
Face Value		$275,000
Fair Value		$270,188
Interest Rate		9%
Interest Payment		Semi-Annually February 15th and August 15th
Maturity Date		February 15, 2018
Guarantee		Jointly and severally guaranteed fully and conditionally by our 100% owned subsidiaries, CCI International, Inc., Patco and TRC


	Beginning Date	Percentage
Optional redemption (1)(2)	February 15, 2014	104.50%
	February 15, 2015	102.25%
	February 15, 2016	100.00%

(1)	The Company may, at its option, redeem the Senior Notes, in whole at any time or in part from time to time, on or after the above-noted dates and at the above-noted percentages of the principal amount thereof (plus interest due).

(2)

In addition, the Company may, at its option, use the net cash proceeds from a public equity offering, to redeem up to 35% of the aggregate principal amount of the Senior Notes at a redemption price equal to 109.00% of the principal amount, plus accrued and unpaid interest if completed before February 15, 2013.

8. EARNINGS PER SHARE

We compute earnings per share using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities. Our participating securities are our grants of restricted stock, as such awards contain non-forfeitable rights to dividends. Security holders are not obligated to fund the Company’s losses, and therefore, participating securities are not allocated a portion of these losses in periods where a net loss is recorded. As of September 30, 2011 and 2010, the impact of participating securities on net income allocated to common shareholders and the dilutive effect of share-based awards outstanding on weighted average shares outstanding was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
Components of Basic and Diluted Earnings per Share	2011			2010			2011			2010
Basic EPS Numerator:
Net income	$	6,480		$	3,108		$	16,082		$	2,393
Less: Earnings allocated to participating securities		(104	)		(73	)		(260	)		(56	)

Net income allocated to common shareholders	$	6,376		$	3,035		$	15,822		$	2,337

Basic EPS Denominator:
Weighted average shares outstanding		17,212			16,939			17,141			16,925
Basic earnings per common share	$	0.37		$	0.18		$	0.92		$	0.14

Diluted EPS Numerator:
Net income	$	6,480		$	3,108		$	16,082		$	2,393
Less: Earnings allocated to participating securities		(103	)		(72	)		(257	)		(56	)

Net income allocated to common shareholders	$	6,377		$	3,036		$	15,825		$	2,337

Diluted EPS Denominator:
Weighted average shares outstanding		17,212			16,939			17,141			16,925
Dilutive common shares issuable upon exercise of stock options		253			73			221			56

Diluted weighted average shares outstanding		17,465			17,012			17,362			16,981

Diluted earnings per common share	$	0.37		$	0.18		$	0.91		$	0.14

Options

Options with respect to 766 and 771 common shares were not included in the computation of diluted earnings per share for the three and nine months ended September 30, 2011, respectively, because they were antidilutive. Options with respect to 1,121 common shares were not included in the computation of diluted earnings per share for the three and nine months ended September 30, 2010, respectively, because they were antidilutive.

9. SHAREHOLDERS’ EQUITY

Stock-Based Compensation

The Company has a stock-based compensation plan for its directors, executives and certain key employees under which the grant of stock options and other share-based awards is authorized. We recorded $(739) and $2,781 in stock compensation expense (income) for the three and nine months ended September 30, 2011, respectively, compared to $631 and $1,715 for the three and nine months ended September 30, 2010, respectively. The wide fluctuations in stock-based compensation expense recorded for the third quarter and first nine months of 2011, as compared to the third quarter and first nine months of 2010, are a function of the accounting required for the cash-settled portion of our performance-based share awards, as further explained below in the “Stock Awards” section.

Stock Options

No stock options were issued during the first nine months of 2011.

Changes in stock options were as follows:


	Shares			Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Terms		Aggregate Intrinsic Value
Outstanding January 1, 2011		1,408		$	11.03		6.8		936
Granted		—			—		—		—
Exercised		(15	)		5.73				41
Forfeited or expired		(2	)		18.27		5.5		—

Outstanding September 30, 2011		1,391			11.07		6.1		1,863
Vested or expected to vest		1,374			11.15		6.0		1,796
Exercisable		374			6.24		6.8		804

Intrinsic value for stock options is defined as the difference between the current market value of the Company’s common stock and the exercise price of the stock option. When the current market value is less than the exercise price, there is no aggregate intrinsic value.

Stock Awards

In January 2011, the Company awarded unvested common shares to members of its Board of Directors. In total, non-management board members were awarded 89 unvested shares with an approximate aggregate fair value of $560. One-third of the shares vest on the first, second and third anniversary of the grant date. These awarded shares are participating securities which provide the recipient with both voting rights and, to the extent dividends, if any, are paid by the Company, non-forfeitable dividend rights with respect to such shares.

Changes in nonvested shares for the first nine months of 2011 were as follows:


	Shares			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2011		923		$	4.09
Granted		89			6.32
Vested		(303	)		4.29
Forfeited		(26	)		4.54

Nonvested at September 30, 2011		683		$	4.28

In the first quarter of 2010, 517 performance shares were granted, which are convertible to stock, on a one-to-one basis, contingent upon future stock price performance. If, at any time up to ten years after the date of grant, the Company’s common stock attains three separate incrementally increasing stock price goals beginning with a price representing approximately 350% of the average stock price on the date of grant, a portion of the awards will vest. On July 7, 2011, the first tranche of shares reached their vesting price. As a result, 117 shares of common stock were issued on the respective date.

In addition, in the first quarter of 2010, 258 performance shares were granted, which are settled in cash rather than stock. If, at any time up to ten years after the date of grant, the Company’s common stock attains three separate incrementally increasing stock price goals beginning with a price representing approximately 350% of the average stock price on the date of grant, a portion of the awards will vest. On July 7, 2011, the first tranche of these shares reached their vesting price. Accordingly, the equivalent of 58 shares of common stock were paid in cash on the respective date. The cash-settled shares are re-measured each balance sheet date using a Monte Carlo model and recorded as a liability. Any increase in the value of such awards followed by a subsequent decrease will result in the reversal of stock compensation expense, as was the case in the third quarter of 2011. During the third quarter, these cash-settled shares were measured using an assumption of 94.2% volatility, and a risk-free rate of 1.66%, resulting in an estimated aggregate fair value of approximately $2,497, which is recorded to the stock compensation liability over the estimated derived service period (also estimated using a Monte Carlo model), which was approximately 0.9 years as of September 30, 2011.

Treasury Stock

On August 3, 2011, our Board of Directors authorized the purchase over the next 24 months of up to 500 shares of the Company’s common stock in open market or privately-negotiated transactions. We repurchased 119 shares at a total cost of $1,113, including commissions, of common stock during the three and nine months ended September 30, 2011. There can be no assurance that any additional share purchases will be made. The number of shares actually purchased in future periods will depend on various factors, including limitations imposed by the Company’s debt instruments, the price of our common stock, overall market and business conditions, and management’s assessment of competing alternatives for capital deployment.

10. RELATED PARTIES

We lease our corporate office facility from certain members of our Board of Directors and executive management, and we made rental payments of $103 and $371 for the three and nine months ended September 30, 2011, respectively. We made rental payments of $101 and $297 for our corporate office facility for the three and nine months ended September 30, 2010, respectively. In addition, we lease three manufacturing facilities from an entity in which one of our executive officers has a minority interest, and we paid a total of $261 and $851 for the three and nine months ended September 30, 2011, respectively. We made payments of $260 and $850 for these manufacturing facilities for the three and nine months ended September 30, 2010, respectively.

11. COMMITMENTS AND CONTINGENCIES

Operating Leases

We lease certain of our buildings, machinery and equipment under lease agreements that expire at various dates over the next ten years. Rental expense under operating leases was $1,618 and $4,695 for the three and nine months ended September 30, 2011, respectively, and was $1,509 and $4,555 for the three and nine months ended September 30, 2010, respectively.

Legal Matters

We are party to one environmental claim. The Leonard Chemical Company Superfund site consists of approximately 7.1 acres of land in an industrial area located a half mile east of Catawba, York County, South Carolina. The Leonard Chemical Company operated this site until the early 1980s for recycling of waste solvents. These operations resulted in the contamination of soils and groundwater at the site with hazardous substances. In 1984, the U.S. Environmental Protection Agency (the “EPA”) listed this site on the National Priorities List. Riblet Products Corporation, with which the Company merged in 2000, was identified through documents as a company that sent solvents to the site for recycling and was one of the companies receiving a special notice letter from the EPA identifying it as a party potentially liable under the Comprehensive Environmental Response, Compensation, and Liability Act for cleanup of the site.

In 2004, along with other “potentially responsible parties” (“PRPs”), we entered into a Consent Decree with the EPA requiring the performance of a remedial design and remedial action (“RD/RA”) for this site. We have entered into a Site Participation Agreement with the other PRPs for fulfillment of the requirements of the Consent Decree. Under the Site Participation Agreement, we are responsible for 9.19% share of the costs for the RD/RA. As of September 30, 2011 and December 31, 2010, we had a $341 and $400 accrual, respectively, recorded for this liability.

Though no assurances are possible, we believe that our accruals related to the environmental litigation and other claims are sufficient and that these items and our rights to available insurance and indemnity will be resolved without material effect on our financial position, results of operations or cash flows.

12. DERIVATIVES

We are exposed to certain commodity price risks including fluctuations in the price of copper. From time-to-time, we enter into copper futures contracts to mitigate the potential impact of fluctuations in the price of copper on our pricing terms with certain customers. We recognize all of our derivative instruments on our balance sheet at fair value, and record changes in the fair value of such contracts within cost of goods sold in the statement of operations as they occur unless specific hedge accounting criteria are met. We had no hedge positions at September 30, 2011 to which hedge accounting was applied. Cash settlements related to derivatives are included in the operating section of the condensed consolidated statement of cash flows.


	Contract Position (In Total Pounds)						Fair Value
Commodity Derivatives	Long		Short		Cash Collateral Posted		Asset (2)		Liability (3)
Copper futures contracts outstanding as of (1):
Period ended September 30, 2011		450		625	$	66	$	90	$	—
Period ended September 30, 2010		100		1,150	$	678	$	—	$	254

(1)	All of our copper futures contracts mature in less than three months and are tied to the price of copper on the COMEX and, accordingly, the value of such futures contracts changes directly in relation thereto.

(2)	Balance recorded in “Prepaid expenses and other current assets.”

(3)	Balance recorded in “Accrued liabilities.”

As of September 30, 2011 and 2010, no cumulative losses or gains existed in Other Comprehensive Income (“OCI”). As hedge accounting has not been applied to any of our open hedges at September 30, 2011, no associated losses or gains have been recorded within OCI.


Derivatives Not Accounted for as Hedges Under the Accounting Rules	Gain (Loss) Recognized in Income			Location of Gain (Loss) Recognized in Income
Copper commodity contracts:
Three months ended September 30, 2011	$	313		Cost of goods sold
Three months ended September 30, 2010		(386	)	Cost of goods sold
Nine months ended September 30, 2011		620		Cost of goods sold
Nine months ended September 30, 2010		(131	)	Cost of goods sold

13. INCOME TAXES


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Effective Tax Rate		28.9	%		28.8	%		30.4	%		20.6	%

The increase in our tax rate for the three and nine months ended September 30, 2011, as compared to the same respective periods of 2010, primarily reflects an increase in our pre-tax income in 2011 offset by the impact of a $753 non-taxable gain on our approximate 4.8% equity holdings in TRC at the time of the acquisition as further explained in Note 3 above.

14. BENEFIT PLANS

Employee Savings Plan

We provide defined contribution savings plans for employees meeting certain age and service requirements. We currently make matching contributions for a portion of employee contributions to the plans. Including such matching contributions, we recorded expenses totaling $281 and $841 related to these savings plans during the three and nine months ended September 30, 2011, respectively. We recorded expense of $232 and $720 for the three and nine months ended September 30, 2010, respectively.

Riblet Pension Plan

As a result of its merger with Riblet Products Corporation (“Riblet”) in 2000, the Company is responsible for a defined-benefit pension plan of Riblet. The Riblet plan was frozen in 1990 and no additional benefits have been earned by plan participants since that time. A total of 78 former employees of Riblet currently receive or may be eligible to receive future benefits under the plan. The Company does not expect to make any plan contributions in 2011. The net period income for the three and nine months ended September 30, 2011 was $8 and $24, respectively. For the three and nine month periods ended September 30, 2010, we incurred net period expense of $7 and $21, respectively.

15. FAIR VALUE DISCLOSURE

Accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources or reflect our own assumptions of market participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1 Inputs – Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 Inputs – Level 3 inputs are unobservable inputs for the asset or liability.

As of the periods ending September 30, 2011 and December 31, 2010, we utilized Level 1 inputs to determine the fair value of cash and cash equivalents, derivatives, and for 2010 only, equity securities.

We classify cash on hand and deposits in banks, including money market accounts, commercial paper, and other investments with an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations.

Financial assets measured at fair value on a recurring basis are summarized below:


	Fair Value Measurement
	September 30, 2011								December 31, 2010
	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
Assets:
Cash and Cash Equivalents	$	6,105	$	—	$	—	$	6,105	$	33,454	$	—	$	—	$	33,454
Derivative Assets, Inclusive of Collateral		156		—		—		156		740		—		—		740
Available for Sale Securities		—		—		—		—		1,243		—		—		1,243

Total	$	6,261	$	—	$	—	$	6,261	$	35,437	$	—	$	—	$	35,437

16. OTHER (INCOME) LOSS

We recorded other loss of $418 and $332 for the third quarter and first nine months of 2011, respectively, primarily reflecting the exchange rate impact on our Canadian subsidiary. We recorded other income of $170 and $56 for the third quarter and first nine months of 2010, respectively, also reflecting the exchange rate impact.

17. BUSINESS SEGMENT INFORMATION

During the second quarter of 2011, we changed our management reporting structure and the manner in which we report our financial results internally as a result of the acquisition of TRC. We now have three reportable segments: (1) Distribution, (2) Original Equipment Manufacturers (“OEM”) and (3) TRC. The Distribution segment serves our customers in distribution businesses, who are resellers of our products, while our OEM segment serves our OEM customers, who generally purchase more tailored products from us, which are used as inputs into subassemblies of manufactured finished goods.

Financial data for the Company’s reportable segments is as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net Sales:
Distribution Segment	$	170,312		$	142,222		$	475,271		$	383,091
OEM Segment		55,782			45,375			171,826			134,497
TRC		8,757			—			13,405			—

Total	$	234,851		$	187,597		$	660,502		$	517,588

Operating Income:
Distribution Segment	$	17,519		$	12,561		$	48,894		$	36,507
OEM Segment		4,040			3,099			14,365			10,388
TRC		(1,013	)		—			(1,817	)		—

Total segments		20,546			15,660			61,442			46,895
Corporate		(3,925	)		(4,494	)		(17,575	)		(14,900	)

Consolidated operating income	$	16,621		$	11,166		$	43,867		$	31,995

Our Distribution and OEM segments have common production processes and manufacturing facilities. Accordingly, we do not identify all of our net assets to those segments. Thus, we do not report capital expenditures at the segment level. Additionally, depreciation expense is not allocated to those segments, but is included in manufacturing overhead cost pools and is absorbed into product cost (and inventory) as each product passes through our manufacturing work centers. Accordingly, as products are sold across those segments, it is impracticable to determine the amount of depreciation expense included in the operating results of each segment.

Given it is currently being operated on a largely stand-alone basis, TRC’s segment results currently include all expenses associated with the operation of TRC, including the expenses of the Clearwater, FL headquarters, $260 in restructuring expense, and $1,419 of depreciation and amortization expense associated with those fixed and intangible assets recorded in connection with the acquisition of TRC.

18. SUPPLEMENTAL GUARANTOR INFORMATION

The Senior Notes and the Revolving Credit Facility are instruments of the parent, and are reflected in their respective balance sheets. As of September 30, 2011, our payment obligations under the Senior Notes and the Revolving Credit Facility (see Note 7) were guaranteed by our 100% owned subsidiaries, CCI International, Inc., Patco and TRC (the “Guarantor Subsidiaries”). Such guarantees are full, unconditional, and joint and several. The following unaudited supplemental financial information sets forth, on a combined basis, balance sheets, statements of operations and statements of cash flows for Coleman Cable, Inc. (“Parent”) and the Guarantor Subsidiaries. The condensed consolidating financial statements have been prepared on the same basis as the condensed consolidated financial statements of Parent. The equity method of accounting is followed within this financial information.

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2011


	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries		Eliminations			Total
NET SALES	$	216,142		$	8,756		$	26,447	$	(16,494	)	$	234,851
COST OF GOODS SOLD		187,028			7,303			22,396		(16,494	)		200,233

GROSS PROFIT		29,114			1,453			4,051		—			34,618
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		10,946			2,406			1,634		—			14,986
INTANGIBLE ASSET AMORTIZATION		1,350			595			5		—			1,950
RESTRUCTURING CHARGES		146			58			857		—			1,061

OPERATING INCOME (LOSS)		16,672			(1,606	)		1,555		—			16,621
INTEREST EXPENSE		7,029			—			57		—			7,086
OTHER LOSS, NET		—			—			418		—			418

INCOME (LOSS) BEFORE INCOME TAXES		9,643			(1,606	)		1,080		—			9,117
LOSS FROM SUBSIDIARIES		(409	)		—			—		409			—
INCOME TAX EXPENSE (BENEFIT)		2,754			(288	)		171		—			2,637

NET INCOME (LOSS)	$	6,480		$	(1,318	)	$	909	$	409		$	6,480

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2010


	Parent		Guarantor Subsidiary		Non Guarantor Subsidiaries			Eliminations			Total
NET SALES	$	173,292	$	—	$	14,305		$	—		$	187,597
COST OF GOODS SOLD		151,569		—		11,354			—			162,923

GROSS PROFIT		21,723		—		2,951			—			24,674
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		10,090		—		1,375			—			11,465
INTANGIBLE ASSET AMORTIZATION		1,594		—		12			—			1,606
ASSET IMPAIRMENTS		202										202
RESTRUCTURING CHARGES		235		—		—			—			235

OPERATING INCOME		9,602		—		1,564			—			11,166
INTEREST EXPENSE		6,909		—		60			—			6,969
OTHER LOSS, NET		—		—		(170	)		—			(170	)

INCOME BEFORE INCOME TAXES		2,693		—		1,674			—			4,367
INCOME FROM SUBSIDIARIES		1,130		—		—			(1,130	)		—
INCOME TAX EXPENSE		715		—		544			—			1,259

NET INCOME	$	3,108	$	—	$	1,130		$	(1,130	)	$	3,108

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2011


	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries		Eliminations			Total
NET SALES	$	626,124		$	13,405		$	53,665	$	(32,692	)	$	660,502
COST OF GOODS SOLD		539,489			11,353			45,467		(32,692	)		563,617

GROSS PROFIT		86,635			2,052			8,198		—			96,885
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		38,565			3,559			4,356		—			46,480
INTANGIBLE ASSET AMORTIZATION		4,273			994			15		—			5,282
RESTRUCTURING CHARGES		139			260			857		—			1,256

OPERATING INCOME (LOSS)		43,658			(2,761	)		2,970		—			43,867
INTEREST EXPENSE		20,997			—			186		—			21,183
GAIN ON AVAILABLE FOR SALE SECURITIES		(753	)		—			—		—			(753	)
OTHER INCOME, NET		—			—			332		—			332

INCOME (LOSS) BEFORE INCOME TAXES		23,414			(2,761	)		2,452		—			23,105
LOSS FROM SUBSIDIARIES		(201	)		—			—		201			—
INCOME TAX EXPENSE (BENEFIT)		7,131			(637	)		529		—			7,023

NET INCOME (LOSS)	$	16,082		$	(2,124	)	$	1,923	$	201		$	16,082

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2010


	Parent			Guarantor Subsidiary		Non Guarantor Subsidiaries			Eliminations			Total
NET SALES	$	487,483		$	—	$	30,105		$	—		$	517,588
COST OF GOODS SOLD		420,282			—		23,797			—			444,079

GROSS PROFIT		67,201			—		6,308			—			73,509
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		30,661			—		3,863			—			34,524
INTANGIBLE ASSET AMORTIZATION		5,194			—		34			—			5,228
ASSET IMPAIRMENTS		202											202
RESTRUCTURING CHARGES		1,560			—		—			—			1,560

OPERATING INCOME		29,584			—		2,411			—			31,995
INTEREST EXPENSE		20,302			—		169			—			20,471
LOSS ON EXTINGUISHMENT OF DEBT		8,566			—		—			—			8,566
OTHER LOSS, NET		—			—		(56	)		—			(56	)

INCOME BEFORE INCOME TAXES		716			—		2,298			—			3,014
INCOME FROM SUBSIDIARIES		1,486			—		—			(1,486	)		—
INCOME TAX EXPENSE (BENEFIT)		(191	)		—		812			—			621

NET INCOME	$	2,393		$	—	$	1,486		$	(1,486	)	$	2,393

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 30, 2011


	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,518		$	528		$	4,059		$	—		$	6,105
Accounts receivable — net of allowances		114,859			4,572			12,739			—			132,170
Intercompany receivable		—			10,445			4,064			(14,509	)		—
Inventories		105,016			5,521			10,640			—			121,177
Deferred income taxes		3,420			295			170			—			3,885
Assets held for sale		546			—			—			—			546
Prepaid expenses and other current assets		7,737			102			591			(5,358	)		3,072

Total current assets		233,096			21,463			32,263			(19,867	)		266,955

PROPERTY, PLANT AND EQUIPMENT, NET		51,300			2,911			1,827			—			56,038
GOODWILL		31,675			23,541			1,489			—			56,705
INTANGIBLE ASSETS, NET		22,699			7,294			89			—			30,082
DEFERRED INCOME TAXES		58			—			657			—			715
OTHER ASSETS		8,320			—			95			—			8,415
INVESTMENT IN SUBSIDIARIES		60,608			—			—			(60,608	)		—

TOTAL ASSETS	$	407,756		$	55,209		$	36,420		$	(80,475	)	$	418,910

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	4		$	—		$	—		$	—		$	4
Accounts payable		29,294			354			3,803			—			33,451
Intercompany payable		764			4,063			9,682			(14,509	)		—
Accrued liabilities		26,584			(845	)		4,957			—			30,696
Other liabilities		—			—			5,358			(5,358	)		—

Total current liabilities		56,646			3,572			23,800			(19,867	)		64,151

LONG-TERM DEBT		321,743			—			—			—			321,743
OTHER LONG-TERM LIABILITIES		3,115			—			—			—			3,115
DEFERRED INCOME TAXES		(1,830	)		3,649			—			—			1,819
SHAREHOLDERS’ EQUITY:
Common stock		17			—			928			(928	)		17
Treasury Stock		(1,113	)		—			—			—			(1,113	)
Additional paid-in capital		92,514			50,112			1,474			(51,586	)		92,514
Retained earnings (accumulated deficit)		(63,178	)		(2,124	)		10,497			(8,373	)		(63,178	)
Accumulated other comprehensive loss		(158	)		—			(279	)		279			(158	)

Total shareholders’ equity		28,082			47,988			12,620			(60,608	)		28,082

TOTAL LIABILITIES AND EQUITY	$	407,756		$	55,209		$	36,420		$	(80,475	)	$	418,910

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2010


	Parent			Guarantor Subsidiary		Non Guarantor Subsidiaries			Eliminations			Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	30,493		$	77	$	2,884		$	—		$	33,454
Accounts receivable — net of allowances		100,285			—		10,489			—			110,774
Intercompany receivable		2,188			—		—			(2,188	)		—
Inventories		75,001			—		6,129			—			81,130
Deferred income taxes		3,008			—		163			—			3,171
Assets held for sale		546			—		—			—			546
Prepaid expenses and other current assets		8,340			1		778			(5,358	)		3,761

Total current assets		219,861			78		20,443			(7,546	)		232,836

PROPERTY, PLANT AND EQUIPMENT, NET		45,470			—		261			—			45,731
GOODWILL		27,598			—		1,536			—			29,134
INTANGIBLE ASSETS, NET		23,657			—		107			—			23,764
DEFERRED INCOME TAXES		—			—		301			—			301
OTHER ASSETS		9,345			—		—			—			9,345
INVESTMENT IN SUBSIDIARIES		9,538			—		—			(9,538	)		—

TOTAL ASSETS	$	335,469		$	78	$	22,648		$	(17,084	)	$	341,111

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	7		$	—	$	—		$	—		$	7
Accounts payable		19,075			—		2,941			—			22,016
Intercompany payable		—			73		2,115			(2,188	)		—
Accrued liabilities		27,492			5		2,696			—			30,193
Other liabilities		—			—		5,358			(5,358	)		—

Total current liabilities		46,574			78		13,110			(7,546	)		52,216

LONG-TERM DEBT		271,820			—		—			—			271,820
OTHER LONG-TERM LIABILITIES		4,258			—		—			—			4,258
DEFERRED INCOME TAXES		1,595			—		—			—			1,595
SHAREHOLDERS’ EQUITY:
Common stock		17			—		—			—			17
Additional paid-in capital		90,483			—		1,000			(1,000	)		90,483
Retained earnings (accumulated deficit)		(79,260	)		—		8,572			(8,572	)		(79,260	)
Accumulated other comprehensive loss		(18	)		—		(34	)		34			(18	)

Total shareholders’ equity		11,222			—		9,538			(9,538	)		11,222

TOTAL LIABILITIES AND EQUITY	$	335,469		$	78	$	22,648		$	(17,084	)	$	341,111

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2011


	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Total
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)	$	16,082		$	(2,124	)	$	1,923		$	201		$	16,082
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
Depreciation and amortization		14,065			1,330			206			—			15,601
Stock-based compensation		2,781			—			—			—			2,781
Foreign currency transaction gain		—			—			332			—			332
Gain on available for sale securities		(753	)		—			—			—			(753	)
Deferred taxes		(4,118	)		417			(281	)		—			(3,982	)
Excess tax benefits from stock-based compensation		(512	)		—			—			—			(512	)
Loss on disposal of fixed assets		161			—			—			—			161
Equity in consolidated subsidiaries		201			—			—			(201	)		—
Changes in operating assets and liabilities:
Accounts receivable		(12,449	)		(499	)		(2,175	)		—			(15,123	)
Inventories		(25,256	)		(310	)		(908	)		—			(26,474	)
Prepaid expenses and other assets		645			1,289			133			—			2,067
Accounts payable		9,527			(1,637	)		39			—			7,929
Intercompany accounts		(26	)		(4,879	)		4,905			—			—
Accrued liabilities		(3,236	)		(2,307	)		2,060			—			(3,483	)

Net cash flow from operating activities		(2,888	)		(8,720	)		6,234			—			(5,374	)

CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures		(10,075	)		(384	)		(20	)		—			(10,479	)
Proceeds from sale of fixed assets		10			—			—			—			10
Acquisition of businesses, net of cash acquired		(64,074	)		9,555			(4,353	)		—			(58,872	)

Net cash flow from investing activities		(74,139	)		9,171			(4,373	)		—			(69,341	)

CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under revolving loan facilities		164,145			—			—			—			164,145
Repayments under revolving loan facilities		(114,557	)		—			—			—			(114,557	)
Payment of deferred financing fees		(1,309	)		—			—			—			(1,309	)
Purchase of Treasury Stock		(815	)		—			—			—			(815	)
Repayment of long-term debt		(5	)		—			—			—			(5	)
Excess tax benefits from stock-based compensation		512			—			—			—			512

Proceeds from stock option exercises		81			—			—			—			81

Net cash flow from financing activities		48,052			—			—			—			48,052

Effect of exchange rate on cash and cash equivalents		—			—			(686	)		—			(686	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(28,975	)		451			1,175			—			(27,349	)
CASH AND CASH EQUIVALENTS — Beginning of period		30,493			77			2,884			—			33,454

CASH AND CASH EQUIVALENTS — End of period	$	1,518		$	528		$	4,059		$	—		$	6,105

NONCASH ACTIVITY
Unpaid capital expenditures		902			—			—			—			902
Unpaid business acquisition consideration		350			—			—			—			350
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net		7,080			170			368			—			7,618
Cash interest paid		25,963			—			—			—			25,963

COLEMAN CABLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2010


	Parent			Guarantor Subsidiary			Non Guarantor Subsidiary			Eliminations			Total
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	2,393		$	—		$	1,486		$	(1,486	)	$	2,393
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation and amortization		14,996			—			145			—			15,141
Stock-based compensation		1,715			—			—			—			1,715
Foreign currency transaction loss		—			—			(56	)		—			(56	)
Loss on extinguishment of debt		8,566			—			—			—			8,566
Asset impairments		202			—			—			—			202
Deferred taxes		(144	)		—			842			—			698
Loss on disposal of fixed assets		395			—			—			—			395
Equity in consolidated subsidiaries		(1,486	)		—			—			1,486			—
Changes in operating assets and liabilities:
Accounts receivable		(24,265	)		—			(2,334	)		—			(26,599	)
Inventories		(22,165	)		—			(4,748	)		—			(26,913	)
Prepaid expenses and other assets		(6,896	)		11			5,093			—			(1,792	)
Accounts payable		8,609			8			810			—			9,427
Intercompany accounts		2,029			(10	)		(2,019	)		—			—
Accrued liabilities		40			1			(833	)		—			(792	)

Net cash flow from operating activities		(16,011	)		10			(1,614	)		—			(17,615	)

CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures		(4,500	)		—			—			—			(4,500	)
Purchase of investments		(1,576	)		—			—			—			(1,576	)
Proceeds from sale of fixed assets		1,170			—			—			—			1,170

Net cash flow from investing activities		(4,906	)		—			—			—			(4,906	)

CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under revolving loan facilities		34,961			—			—			—			34,961
Repayments under revolving loan facilities		(45,200	)		—			—			—			(45,200	)
Payment of deferred financing fees related to issuance of 2018 Senior Notes		(6,695	)		—			—			—			(6,695	)
Repayment of long-term debt		(231,657	)		—			—			—			(231,657	)
Proceeds from issuance of 2018 Senior Notes		271,911			—			—			—			271,911

Net cash flow from financing activities		23,320			—			—			—			23,320

Effect of exchange rate on cash and cash equivalents		—			—			80			—			80
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,403			10			(1,534	)		—			879
CASH AND CASH EQUIVALENTS — Beginning of period		4,018			57			3,524			—			7,599

CASH AND CASH EQUIVALENTS — End of period	$	6,421		$	67		$	1,990		$	—		$	8,478

NONCASH ACTIVITY
Unpaid capital expenditures		199			—			—			—			199
Capital lease obligation		10			—			—			—			10
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (refunded), net		(932	)		—			1,020			—			88
Cash interest paid		21,936			—			—			—			21,936

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in this report under “Cautionary Note Regarding Forward-Looking Statements” and under “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2010. We assume no obligation to update any of these forward-looking statements. You should read the following discussion in conjunction with our condensed consolidated financial statements and the notes thereto included in this report.

Overview

Coleman Cable, Inc. (the “Company,” “Coleman,” “us,” “we,” or “our”) is a leading designer, developer, manufacturer and supplier of electrical wire and cable products for consumer, commercial and industrial applications, with operations primarily in the U.S. and, to a lesser degree, in Honduras and Canada.

Raw materials, primarily copper, comprise the primary component of our cost of goods sold. The price of copper is particularly volatile, and fluctuations in copper prices can significantly affect our sales and profitability. The average copper price on the COMEX was $4.07 and $4.20 per pound for the third quarter and first nine months of 2011, respectively, as compared to $3.30 and $3.26 per pound for the third quarter and first nine months of 2010, which represented increases of 23.3% and 28.8%, respectively.

As the result of our acquisition of TRC (as defined below) in the second quarter of 2011, we now have three reportable segments, Distribution, OEM (“Original Equipment Manufacturers”), and TRC.

2011 Acquisitions

During the second quarter of 2011, we utilized cash on hand, as well as borrowings under our existing credit facility to complete three business combination transactions (collectively, the “2011 Acquisitions”), as set forth below. Each of these 2011 Acquisitions was structured as an all-cash transaction, with aggregate consideration totaling $69.7 million. As further discussed below, we believe these acquisitions represent significant opportunities for us, including the strengthening and greater diversification of our overall portfolio.

Acquisition of the Assets of The Designers Edge (“TDE”)

On April 1, 2011, we acquired the assets of TDE, a leading designer and distributor of specialty lighting products in the U.S. and Canada, with 2010 sales in excess of $20.0 million. The total purchase price for the assets acquired, primarily trade receivables and merchandise inventories, was $10.9 million, subject to certain purchase price adjustments. The acquisition of TDE assets significantly expands our current product portfolio across a wide range of lighting product categories, including industrial, work and utility, as well as products for security and landscape applications. We fully integrated the assets of TDE into our existing operations during the second quarter of 2011.

Acquisition of the Assets of First Capitol Wire and Cable (“FCWC”) and Continental Wire and Cable (“CWC”)

On April 29, 2011, we acquired the assets of FCWC and CWC, both of which were privately-held entities based in York, Pennsylvania, with CWC being a 100%-owned subsidiary of FCWC. These two entities, which had annual combined sales in excess of $10.0 million, are leading manufacturers of industrial wire and cable products used across a number of commercial, utility and industrial end-markets. The total purchase price for the assets acquired, primarily merchandise inventories and production equipment, was $7.3 million, inclusive of working capital adjustments of $0.8 million. The acquisition of the assets of FCWC and CWC has allowed us to expand our capabilities, product offerings and capacity for producing a wide assortment of high-quality industrial cables. We fully integrated the assets of FCWC and CWC into our operations during the second quarter of 2011.

Acquisition of Technology Research Corporation (“TRC”)

On May 16, 2011, we completed the acquisition of 100% of the outstanding stock of TRC. For its fiscal year ended March 31, 2011, TRC had revenues of approximately $36.0 million and net income of $1.5 million. TRC is a recognized leader in providing cost effective engineered solutions for applications involving power management and control, intelligent battery systems technology and electrical safety products based on proven ground fault sensing and Fire Shield^® technology. These products are designed, manufactured and distributed to the consumer, commercial and industrial markets worldwide. TRC also supplies power monitors and control equipment to the United States Military and its prime contractors. TRC was publicly traded on the NASDAQ prior to its acquisition by Coleman. We completed the TRC acquisition as the result of a successful public tender offer to acquire all outstanding shares of TRC. The total purchase price consideration for TRC was approximately $51.5 million, including the acquisition-date fair value of an approximate 4.8% interest in TRC acquired by Coleman prior to submitting its acquisition proposal for TRC.

The Company believes TRC's sizable commercial and consumer products segment greatly broadens our current electrical products platform. In addition, TRC's battery, power storage, and power management systems, represent new product lines for Coleman.

TRC has maintained its current production facilities in Clearwater, FL, Titusville, FL, and Honduras and is reported herein as a separate reportable segment.

Gain on Available For Sale Securities

As noted above, our pre-existing 4.8% interest in TRC was accounted for as a component of the overall purchase price for TRC. Accordingly, using the tender offer price of $7.20 per share, the value of this component of total consideration was $2.3 million, with the difference between this calculated fair value and our cost basis in the 4.8% interest recognized as a $0.8 million gain in our condensed consolidated statement of income at the time of the acquisition in accordance with the applicable accounting rules.

Purchase Accounting Related to the 2011 Acquisitions

We completed a comprehensive study of the fair value of intangibles related to the 2011 Acquisitions, causing a change in our preliminary allocation of intangibles previously disclosed. As a result of this change, the amount allocated to intangibles increased by $0.1 million with a corresponding decrease to goodwill.

New Revolving Credit Facility

On August 4, 2011, we entered into a new $250.0 million, five-year revolver credit facility agreement with an accordion feature that allows us to increase our borrowings by an additional $50.0 million (the “Revolving Credit Facility”). The Revolving Credit Facility gives us greater flexibility than our former credit facility in many respects. See “Management’s Discussion and Analysis—Liquidity and Capital Resources-Revolving Credit Facility.”

Consolidated Results of Operations

The 2011 Acquisitions are included in our condensed consolidated results of operations beginning from each respective acquisition date. Accordingly, the consolidated statement of operations for the three and nine months ended September 30, 2011 includes six months of operations for the assets acquired in connection with the TDE acquisition, approximately 19 weeks of operations for the assets acquired in connection with both the FCWC and CWC acquisitions, and approximately five months of operations related to the acquisition of TRC. The consolidated statement of operations for the three and nine months ended September 30, 2010 does not include the impact of the 2011 Acquisitions.

In addition to net income determined in accordance with GAAP, we use certain non-GAAP measures in assessing our operating performance. These non-GAAP measures used by management include: (1) EBITDA, which we define as net income before net interest, income taxes, depreciation and amortization expense (“EBITDA”), (2) Adjusted EBITDA, which is our measure of EBITDA adjusted to exclude the impact of certain specifically identified items (“Adjusted EBITDA”), and (3) Adjusted earnings per share, which we calculate as diluted earnings per share adjusted to exclude the estimated per share impact of the same specifically identified items used to calculate Adjusted EBITDA (“Adjusted EPS”). For the periods presented in this report, the specifically identified items include share-based compensation expense, acquisition-related costs, asset impairments, restructuring charges, losses on the extinguishment of our 2012 Senior Notes in the first quarter of 2010, the gain on available for sale securities recorded in the second quarter of 2011 relative to our investment in TRC at the date of the acquisition, and foreign currency transaction gains and losses recorded at our Canadian subsidiary.

We believe both EBITDA and Adjusted EBITDA serve as appropriate measures to be used in evaluating the performance of our business. We use these measures in the preparation of our annual operating budgets and in determining levels of operating and capital investments. We believe both EBITDA and Adjusted EBITDA allow us to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. The usefulness of both EBITDA and Adjusted EBITDA as performance measures is limited by the fact that they both exclude the impact of interest expense, depreciation and amortization expense, and taxes. Due to these limitations, we do not, and you should not, use either EBITDA or Adjusted EBITDA as the only measures of our performance. We also use, and recommend that you consider, net income in accordance with GAAP as a measure of our performance. Finally, other companies may define EBITDA and Adjusted EBITDA differently and, as a result, our measure of EBITDA and Adjusted EBITDA may not be directly comparable to EBITDA and Adjusted EBITDA measures of other companies.

The following tables, which reconcile our measure of Adjusted EPS to diluted earnings per share, and Adjusted EBITDA to net income, respectively, should be used along with the below statements of income for the periods presented, and the accompanying results of operations review.


Diluted earnings per share, as determined in accordance with GAAP, to Adjusted EPS	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(unaudited)
Earnings per share	$	0.37		$	0.18		$	0.91		$	0.14
Asset impairments (1)		—			0.01			—			0.01
Restructuring charges (2)		0.04			0.01			0.04			0.06
Loss on extinguishment of debt (3)		—			—			—			0.31
Gain on available for sale securities (4)		—			—			(0.04	)		—
Other loss (income), net (5)		0.01			(0.01	)		0.01			0.00
Share-based compensation expense (income) (6)		(0.03	)		0.02			0.10			0.06
Acquisition-related costs(7)		0.01			—			0.12			—

Adjusted diluted earnings per share	$	0.40		$	0.21		$	1.14		$	0.58


Net income (loss), as determined in accordance with GAAP, to EBITDA and Adjusted EBITDA	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(unaudited)
	(Thousands)						(Thousands)
Net income	$	6,480		$	3,108		$	16,082		$	2,393
Interest expense		7,086			6,969			21,183			20,471
Income tax expense		2,637			1,259			7,023			621
Depreciation and amortization expense (a)		5,137			4,377			14,057			13,562

EBITDA	$	21,340		$	15,713		$	58,345		$	37,047

Asset impairments (1)		—			202			—			202
Restructuring charges (2)		1,061			235			1,256			1,560
Loss on extinguishment of debt (3)		—			—			—			8,566
Gain on available for sale securities (4)		—			—			(753	)		—
Other loss (income), net (5)		418			(170	)		332			(56	)
Share-based compensation expense (income) (6)		(739	)		631			2,781			1,715
Acquisition-related costs(7)		223			—			2,801			—

ADJUSTED EBITDA	$	22,303		$	16,611		$	64,762		$	49,034

(a)	Depreciation and amortization expense shown in the above schedule excludes amortization of debt issuance costs, which are included as a component of interest expense.

The nature of each individual item listed in the table above, which has been excluded from EBITDA in order to arrive at our measure of Adjusted EBITDA for each of the periods presented, is detailed in the analysis of operating results that follows.

Earnings and Performance Summary

We recorded net income of $6.5 million (or $0.37 per diluted share) in the third quarter of 2011, as compared to net income of $3.1 million (or $0.18 per diluted share) for the third quarter of 2010. For the third quarter of 2011, we recorded EBITDA of $21.3 million, as compared to $15.7 million in EBITDA for the third quarter of 2010.

We recorded net income of $16.1 million (or $0.91 per diluted share) in the nine months ended September 30, 2011, as compared to net income of $2.4 million (or $0.14 per diluted share) for the first nine months of 2010. For the nine months ended September 30, 2011, we recorded EBITDA of $58.3 million, as compared to $37.0 million in EBITDA for the nine months ended September 30, 2010.

As set forth below, results for these periods were impacted by certain significant items, the magnitude of which may vary significantly from period to period and, thereby, have a disproportionate effect on the earnings reported for any given period. The income-statement review below contains further detail regarding these items.

(1)	Asset impairments: Our results for the three and nine months ended September 30, 2010 included $0.2 million ($0.1 million after tax or $0.01 per diluted share) for non-cash asset impairment charges.

(2)

Restructuring charges: We recorded restructuring charges of $1.1 million ($0.6 million after tax, or $0.04 per diluted share) and $1.3 million ($0.8 million after tax, or $0.04 per diluted share) during the three and nine months ended September 30, 2011, respectively. These expenses were primarily comprised of severance costs related to an announced realignment of our Canadian operations, including the planned elimination of certain support positions in our Toronto distribution center and headquarters, which we expect to complete during the fourth quarter of 2011. Our results for the three and nine months ended September 30, 2010 included $0.2 million ($0.1 million after tax or $0.01 per diluted share) and $1.6 million ($1.0 million after tax or $0.06 per diluted share), respectively, in restructuring charges. These expenses were primarily comprised of holding costs associated with nine facilities closed throughout 2008 and 2009.

(3)	Loss on extinguishment of debt: In 2010, we refinanced our 2012 Senior Notes by issuing $275.0 million in 2018 Senior Notes. As a result of the transaction, we recorded an associated loss of $8.6 million ($5.3 million after tax, or $0.31 per diluted share).

(4)

Gain on available for sale securities: We held a 4.8% interest in TRC at the time we acquired TRC. The fair value of our 4.8% pre-existing interest at the merger date was included in the total purchase price for TRC. As a result, we recorded a non-taxable gain of $0.8 million ($0.8 million after tax, or $0.04 per diluted share) in the second quarter of 2011 which represented the impact of re-measuring to fair value the 4.8% equity interest in TRC we held before the business combination.

(5)

Other (income) loss, net: Other income primarily consists of foreign currency transactions gains and losses and are related to the impact of exchange rate fluctuations on our Canadian subsidiary. We recorded a foreign currency transaction loss of $0.4 million ($0.3 million after tax, or $0.01 per diluted share) and $0.3 million ($0.2 million after tax, or $0.01 per diluted share) for the three and nine months ended September 30, 2011, respectively. We recorded a foreign currency transaction gain of $0.2 million ($0.1 million after tax, or $0.01 per diluted share) and $0.1 million ($0.0 million after tax, or $0.00 per diluted share) for the three and nine months ended September 30, 2010, respectively.

(6)

Share-based compensation expense (income): We recorded stock compensation income of $0.7 million ($0.5 million after tax, or $0.03 per diluted share) in the three months ended September 30, 2011 and expense of $2.8 million ($1.7 million after tax, or $0.10 per diluted share) during the nine months ended September 30, 2011. Our results for the three and nine month periods ended September 30, 2010 included $0.6 million ($0.4 million after tax or $0.02 per diluted share) and $1.7 million ($1.1 million after tax or $0.06 per diluted share), respectively, of stock-based compensation expense. Stock-based compensation expense is excluded from our measures of Adjusted EBITDA and Adjusted EPS to represent normalized operational results due to the periodic fluctuations in the value of the underlying instruments.

(7)

Acquisition-related costs: Our results for 2011 included acquisition-related costs of $0.2 million ($0.1 million after tax or $0.01 per diluted share) in the three months ended September 30, 2011 and $2.8 million ($2.0 million after tax or $0.12 per diluted share) during the nine months ended September 30, 2011. Acquisition-related costs include outside legal, consulting and other fees, and direct expenses incurred in 2011 relative to acquisition-related activities. These costs are excluded from our measures of Adjusted EBITDA and Adjusted EPS so that such measures may more closely reflect underlying operational results.

The following sets forth, for the periods indicated, our consolidated results of operations and related data in thousands of dollars and as a percentage of net sales.

Three Months Ended September 30, 2011 Compared with Three Months Ended September 30, 2010


	Three Months Ended September 30,											Period-over-Period Change
	2011					2010						2011 vs. 2010
	Amount		%			Amount			%			$ Change			% Change
	(unaudited)
	(Thousands, except per share data)
Distribution net sales	$	170,312		72.5	%	$	142,222			75.8	%	$	28,090			19.8	%
OEM net sales		55,782		23.8			45,375			24.2			10,407			22.9
TRC net sales		8,757		3.7			—			—			8,757			—

Consolidated net sales		234,851		100.0			187,597			100.0			47,254			25.2
Gross profit		34,618		14.7			24,674			13.2			9,944			40.3
Selling, general and administrative expenses		14,986		6.4			11,465			6.1			3,521			30.7
Intangible amortization expense		1,950		0.8			1,606			0.9			344			21.4
Asset impairments		—		0.0			202			0.1			(202	)		(100.0	)
Restructuring charges		1,061		0.5			235			0.1			826			351.5

Operating income		16,621		7.1			11,166			6.0			5,455			48.9
Interest expense		7,086		3.0			6,969			3.7			117			1.7
Other (income) loss, net		418		0.2			(170	)		(0.1	)		588			345.9

Income before income taxes		9,117		3.9			4,367			2.3			4,750			108.8
Income tax expense		2,637		1.1			1,259			0.7			1,378			109.5

Net income	$	6,480		2.8		$	3,108			1.7		$	3,372			108.5

Diluted income per share	$	0.37				$	0.18

Nine Months Ended September 30, 2011 Compared with Nine Months Ended September 30, 2010


	Nine Months Ended September 30,												Period-over-Period Change
	2011						2010						2011 vs. 2010
	Amount			%			Amount			%			$ Change			% Change
	(unaudited)
	(Thousands, except per share data)
Distribution net sales	$	475,271			72.0	%	$	383,091			74.0	%	$	92,180			24.1	%
OEM net sales		171,826			26.0			134,497			26.0			37,329			27.8
TRC net sales		13,405			2.0			—			—			13,405			—

Consolidated net sales		660,502			100.0			517,588			100.0			142,914			27.6
Gross profit		96,885			14.7			73,509			14.2			23,376			31.8
Selling, general and administrative expenses		46,480			7.0			34,524			6.7			11,956			34.6
Intangible amortization expense		5,282			0.8			5,228			1.0			54			1.0
Asset impairments		—			—			202			0.0			(202	)		—
Restructuring charges		1,256			0.2			1,560			0.3			(304	)		(19.5	)

Operating income		43,867			6.6			31,995			6.2			11,872			37.1
Interest expense		21,183			3.2			20,471			4.0			712			3.5
Loss on extinguishment of debt		—			—			8,566			1.7			(8,566	)		—
Gain on available for sale securities		(753	)		(0.1	)		—			—			(753	)		—
Other (income) loss, net		332			0.1			(56	)		0.0			388			(692.9	)

Income before income taxes		23,105			3.5			3,014			0.6			20,091			666.6
Income tax expense		7,023			1.1			621			0.1			6,402			1,030.9

Net income	$	16,082			2.4		$	2,393			0.5		$	13,689			572.0

Diluted income per share	$	0.91					$	0.14

Segments

As a result of the TRC acquisition, we now have three reportable segments: (1) Distribution, (2) OEM and (3) TRC. The Distribution segment serves our customers in distribution businesses, who are resellers of our products, while our OEM segment serves our OEM customers, who generally purchase more tailored products from us, which are used as inputs into subassemblies of manufactured finished goods. TRC, which was acquired in 2011, provides engineered electrical, power management and battery products.

Net sales

The increase in net sales for the three and nine months ended September 30, 2011, as compared to the three and nine months ended September 30, 2010, reflected the following factors:

•

Increased selling prices, partially due to increased copper prices, accounted for increased net sales of approximately $30.1 million and $107.2 million, respectively. In particular, average COMEX copper prices increased by 23.3% and 28.8%, respectively, in the third quarter and first nine months of 2011, as compared to the third quarter and first nine months of 2010;

•

Increased sales volumes (measured in total pounds shipped as set forth below), primarily due to overall market demand growth across a number of end markets, accounted for approximately $8.4 million and $22.3 million in increased net sales, respectively; and,

•

The TRC acquisition, consummated in the second quarter of 2011, accounted for $8.8 million and $13.4 million in increased net sales, respectively. Our 2010 results did not include TRC.

The following table sets forth our sales volume by segment, measured in thousands of total pounds shipped, as well as average COMEX copper prices for the periods presented:


Total Sales Volume in Pounds (1)	Three Months Ended September 30,							Nine Months Ended September 30,
	2011		2010		% Change			2011		2010		% Change
	(Thousands)				% Change			(Thousands)				% Change
Distribution		44,425		43,333		2.5	%		123,242		121,272		1.6	%
OEM		21,010		18,986		10.7			62,890		56,181		11.9

Consolidated		65,435		62,319		5.0			186,132		177,453		4.9

Average COMEX Copper (2)	$	4.07	$	3.30		23.3		$	4.20	$	3.26		28.8

(1)	TRC does not currently track volume through total pounds shipped.

(2)	Represents the average price for one pound of copper on the COMEX for the period indicated.

We believe the total volume increases noted above are generally indicative of an overall improvement in market conditions, as we have experienced broad-based demand increases across most areas of our business. The higher degree of volume growth experienced in 2011 within our OEM segment reflects both an expansion of our OEM customer base and increased demand from existing customers, which we believe is a function of the relative strength of the industrial-related end markets served by our OEM segment as compared to the broader U.S. economy.

Gross profit

Our gross profit for three and nine months ended September 30, 2011, included $2.1 million and $3.1 million in gross profit recorded for TRC, which was acquired during the second quarter of 2011. Excluding the impact of TRC, gross profit increased by $7.8 million and $20.3 million for the third quarter and first nine months of 2011, as compared to the same periods in 2010, with the vast majority of these increases attributable to incremental gross profit generated from the above-noted sales increases. To a lesser degree, the increased gross profit reflects an improvement in our gross profit as a percentage of net sales (“gross profit rate”). For the third quarter of 2011, our gross profit rate improved by 1.5 percent (as a percentage of net sales), as compared to the third quarter of 2010, which in turn resulted in a 0.5 percent improvement in our gross profit rate for the first nine months of 2011, as compared to the first nine months of 2010. This improvement in our gross profit rate primarily reflected customer acceptance of product price increases across a number of end markets during the third quarter of 2011 which outpaced increases in the related costs of such products. The impact of such improved product pricing across our business during the third quarter built on the relative pricing strength we have experienced throughout 2011 within our OEM segment, which we believe continues to reflect the underlying demand strength in such markets.

Selling, general and administrative (“SG&A”) expense

For the three and nine months ended September 30, 2011, we incurred $2.5 million and $4.6 million, respectively, in SG&A expenses arising directly from the 2011 Acquisitions, primarily TRC, which accounted for approximately $2.5 million and $3.6 million, respectively, of the total, as well as $0.2 million and $2.8 million, respectively, of outside legal, consulting and other fees, and direct expenses incurred relative to the 2011 Acquisitions. We incurred no such acquisition-related costs in 2010. Excluding the impact of such acquisition-related costs, our SG&A expenses increased $0.8 and $4.6 million in the third quarter and first nine months of 2011, respectively, as compared to the same periods in 2010, primarily due to increased payroll and related costs of $1.6 million and $2.8 million, respectively. These increases were offset by the share based compensation income of $0.7 million recorded for the third quarter of 2011.

Intangible amortization expense

The increase in intangible amortization for the three and nine months ended September 30, 2011, as compared to the three and nine months ended September 30, 2010, reflects the impact of amortization recorded in relation to the 2011 Acquisitions partially offset by lower amortization expense recorded in relation to acquisitions made in prior years. Amortization expense relative to intangible assets reflects the fact that such assets are generally amortized using an accelerated amortization method, which reflects our estimate of the pattern in which the economic benefit derived from such assets is to be consumed and, accordingly, results in lower amortization in periods further removed from the period of initial recognition.

Restructuring charges

We recorded $1.1 million and $1.3 million in restructuring costs in the third quarter and first nine months of 2011, respectively, including most notably, $0.9 million of severance costs related to the realignment of our Toronto distribution facility. As part of this realignment, at the end of the fourth quarter of 2011, we plan to vacate our current Toronto-based distribution and headquarters facility, with a majority of our Canadian distribution being transitioned to our existing distribution facility in Wisconsin and a new, smaller Toronto-based distribution facility. In addition to the $0.9 million in severance recorded in the third quarter of 2011, we anticipate incurring approximately $0.5 million in costs during the fourth quarter of 2011 associated with termination of the existing Toronto-based facility lease and other related closing costs. Restructuring costs also included lease termination and other holding costs related to facilities closed in prior years, currently consisting of one leased and one owned facility for which we continue to pay holding costs. In 2010, we incurred $0.2 million and $1.6 million for the third quarter and first nine months of 2010, respectively, primarily comprised of holding costs associated with facilities closed throughout 2008 and 2009.

Operating income

The following table sets forth operating income by segment, in thousands of dollars and segment operating income as a percentage of segment net sales.


	Three Months Ended September 30,												Year-over-Year Change
	2011						2010						2011 vs. 2010
	Amount			% Net Sales			Amount			% Net Sales			$ Change			% Change
	(Thousands)
Operating Income:
Distribution	$	17,519			10.3	%	$	12,561			8.8	%	$	4,958			39.5	%
OEM		4,040			7.2			3,099			6.8			941			30.4
TRC		(1,013	)		(11.6	)		—			—			(1,013	)		—
Corporate		(3,925	)					(4,494	)

Consolidated operating income	$	16,621			7.1	%	$	11,166			6.0	%	$	5,455			48.9


	Nine Months Ended September 30,												Year-over-Year Change
	2011						2010						2011 vs. 2010
	Amount			%Net Sales			Amount			%Net Sales			$ Change			% Change
	(Thousands)
Operating Income (Loss):
Distribution	$	48,894			10.3	%	$	36,507			9.5	%	$	12,387			33.9	%
OEM		14,365			8.4			10,388			7.7			3,977			38.3
TRC		(1,817	)		(13.6	)		—			—			(1,817	)		—

Corporate		(17,575	)					(14,900	)

Consolidated operating income	$	43,867			6.6	%	$	31,995			6.2	%	$	11,872			37.1

Segment operating income represents income from continuing operations before interest income or expense, other income or expense, and income taxes. Corporate consists of items not charged or allocated to the segments, including costs for employee relocation, discretionary bonuses, professional fees, restructuring expenses, asset impairments, share-based compensation expense, and intangible amortization. Our Distribution and OEM segments have common production processes, and manufacturing and distribution capacity. Accordingly, we do not identify net assets to our segments. Depreciation expense is not allocated to segments, but is included in manufacturing overhead cost pools and is absorbed into product cost (and inventory) as each product passes through our numerous manufacturing work centers. Accordingly, as products are sold across our segments, it is impracticable to determine the amount of depreciation expense included in the operating results of each segment.

Distribution operating income improvement for the three and nine months ended September 30, 2011, as compared to the third quarter and first nine months of 2010, primarily reflected the favorable gross profit impact of the above-noted increased sales and volume in 2011. The operating income rate improvement primarily reflects increased fixed-cost leverage, as such costs were spread over a higher overall net sales base for 2011.

OEM operating income improvement for the three and nine months ended September 30, 2011, as compared to the third quarter and first nine months of 2010, primarily reflected the favorable gross profit impact of the above-noted increased sales and volume in 2011. The operating income rate improvement reflects increased fixed-cost leverage, as such costs were spread over a higher overall net sales base for 2011.

TRC recorded an operating loss of $1.8 million for the approximate 19 week period from its acquisition through the September 30, 2011 quarter end, which is primarily reflective of the impact of amortization expense brought about by the recognition of intangible assets as part of purchase accounting for the acquisition, and restructuring expenses.

Interest expense

We incurred increased interest expense due to higher average outstanding borrowings for the nine months ended September 30, 2011 compared to the same period last year.

Loss on extinguishment of debt

We recorded an $8.6 million loss in the first quarter of 2010 resulting from our issuance of $275.0 million in 2018 Senior Notes and the corresponding extinguishment of our outstanding 2012 Senior Notes.

Gain on available for sale securities

In the second quarter of 2011, prior to the acquisition of TRC, the Company owned 0.3 million shares of TRC common stock worth $7.20 per share as a result of the agreed upon purchase price. In accordance with relevant accounting guidance, the fair value of the previously owned investment was included in the total purchase price. As a result of the acquisition of TRC, we recognized a gain of $0.8 million on the difference between our cost basis and the fair value at the acquisition date.

Other income (loss), net

We recorded other income (loss) reflecting the impact of exchange rate changes on our Canadian subsidiary.

Income tax expense (benefit)

The increase in our tax rate for the third quarter and first nine months of 2011, as compared to the same respective periods of 2010, reflects an increase in our pre-tax income in 2011 offset by the impact of a $0.8 million non-taxable gain on our approximate 4.8% equity holdings in TRC at the time of the acquisition, as previously discussed.

The following is a reconciliation for the periods indicated of cash flow from operating activities, as determined in accordance with GAAP, to EBITDA.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(unaudited)
	(Thousands)						(Thousands)
Net cash flow from operating activities	$	9,345		$	(10,242	)	$	(5,374	)	$	(17,615	)
Interest expense		7,086			6,969			21,183			20,471
Income tax expense		2,637			1,259			7,023			621
Excess tax benefits from stock-based compensation		512			—			512			—
Deferred taxes		1,405			(1,355	)		3,982			(698	)
Gain (loss) on disposal of fixed assets		(166	)		81			(161	)		(395	)
Share-based compensation expense		739			(631	)		(2,781	)		(1,715	)
Loss on extinguishment of debt		—			—			—			(8,566	)
Gain on available for sale securities		—			—			753			—
Asset impairments		—			(202	)		—			(202	)
Foreign currency transaction gain (loss)		(418	)		170			(332	)		56
Amortization of debt issuance costs (a)		(512	)		(543	)		(1,544	)		(1,579	)
Changes in operating assets and liabilities		712			20,207			35,084			46,669

EBITDA	$	21,340		$	15,713		$	58,345		$	37,047

(a)	Amortization of debt issuance costs are included within depreciation and amortization for cash flow presentation, and are included as a component of interest expense for income statement presentation.

Liquidity and Capital Resources

Debt

The following summarizes long-term debt (including current portion and capital lease obligations) outstanding in thousands of dollars:


	As of September 30, 2011		As of December 31, 2010
Revolving Credit Facility expiring October 2016	$	49,588	$	—
Senior notes due February 15, 2018		272,152		271,815
Capital lease obligations		7		12

Total long-term debt, including current portion	$	321,747	$	271,827

As of September 30, 2011, we had a total of $6.1 million in cash and cash equivalents and $49.6 million in outstanding borrowings under our Revolving Credit Facility. Also, as of September 30, 2011, we have no required debt repayments until our Senior Notes mature in 2018.

Revolving Credit Facility

On August 4, 2011, we entered into a new $250.0 million, five-year revolving credit facility agreement with an accordion feature that allows us to increase our borrowings by an additional $50.0 million (the “Revolving Credit Facility”). The Revolving Credit Facility replaced a $200 million revolving credit facility which was scheduled to expire in April of 2012. The Revolving Credit Facility, which expires on October 1, 2016, is an asset-based loan facility, with a $20.0 million Canadian facility sublimit, and which is secured by substantially all of our assets, as further detailed below. We incurred $1.4 million in fees and direct costs related to negotiating the Revolving Credit Facility. These respective fees will be amortized over the life of the revolver.

The interest rate charged on borrowings under the Revolving Credit Facility is based on our election of either the base rate (greater of federal funds rate plus 0.5% and the lender’s prime rate) plus a range of 0.25% to 0.75% or the Eurodollar rate plus a range of 1.50% to 2.00%, in each case based on quarterly average excess availability under the Revolving Credit Facility. In addition, we pay an unused line fee of between 0.25% and 0.50% based on quarterly average excess availability pursuant to the terms of the Revolving Credit Facility.

Pursuant to the terms of the Revolving Credit Facility, we are required to maintain a fixed charge covenant ratio of not less than 1.0 to 1.0 for any month during which our excess availability under the Revolving Credit Facility falls below $30.0 million. Borrowing availability under the Revolving Credit Facility is limited to the lesser of (1) $250.0 million or (2) the sum of 85% of eligible accounts receivable, 70% of eligible inventory, with a maximum amount of borrowing-base availability which may be generated from inventory of $150.0 million for the U.S. portion and $12.0 million Canadian for the Canadian portion, and an advance rate to be 75% of certain appraised real estate and 85% of certain appraised equipment and capped at $62.5 million, with a $15.0 million sublimit for letters of credit. Our current availability does not include additional availability that may be generated by adding real estate and certain equipment to the borrowing base.

The Revolving Credit Facility is guaranteed by CCI International, Inc. (“CCI International”), TRC (excluding TRC’s 100%-owned foreign subsidiary, TRC Honduras, S.A. de C.V.) and Patco Electronics (“Patco”), each of which are 100%-owned domestic subsidiaries, and is secured by substantially all of our assets and the assets of each of CCI International, TRC and Patco, including accounts receivable, inventory and any other tangible and intangible assets (including real estate, machinery and equipment and intellectual property) as well as by a pledge of all the capital stock of CCI International, TRC and Patco and 65% of the capital stock of our Canadian foreign subsidiary, but not our Chinese 100%-owned entity.

The Revolving Credit Facility creates greater flexibility than our previous revolving credit facility in many respects, including, without limitation, as to the representations and warranties and event of default triggers contained therein, as well as the financial covenants and the covenants that restrict our ability to pay dividends or distributions, permit liens on property, make investments, provide guarantees, enter into merger, acquisitions or consolidations, conduct asset sales, enter into leases or sale and leaseback transactions and enter into transactions with affiliates. In particular, pursuant to the Revolving Credit Facility: (i) we are no longer required to maintain a minimum of $10.0 million in excess availability at all times (ii) our general permitted indebtedness basket has been increased from $10.0 million to $25.0 million and (iii) we are now able to dispose of up to 15% of our consolidated assets in any fiscal year so long as we maintain (a) excess availability of the greater of $40.0 million and 15% of the commitments under the Revolving Credit Facility and (b) a fixed charge coverage ratio of at least 1.0 to 1.0. In addition, both the excess availability and fixed charge coverage tests that limit our ability to enter into acquisitions, make investments, repurchase the Senior Notes and pay dividends have been reduced under the Revolving Credit Facility from those set forth in the previous Revolving Credit Facility. We maintained greater than $40.0 million of monthly excess availability during the third quarter of 2011.

As of September 30, 2011, we were in compliance with all of the covenants of our Revolving Credit Facility.

9% Senior Notes due 2018 (“Senior Notes”)

Our Senior Notes mature on February 15, 2018 and have an aggregate principal amount of $275.0 million and a 9% coupon rate. Interest payments are due on February 15^th and August 15^th. As of September 30, 2011, we were in compliance with all of the covenants of our Senior Notes. Our Senior Notes were issued at a discount in 2010, resulting in proceeds of less than par value. This discount is being amortized to par value over the remaining life of the Senior Notes.

The Indenture relating to our Senior Notes contains customary covenants that limit us and our restricted subsidiaries from, among other things, incurring additional indebtedness, making restricted payments, creating liens, paying dividends, consolidating, merging or selling substantially all of their assets, entering into sale and leaseback transactions, and entering into transaction with affiliates. Additionally, all our domestic restricted subsidiaries that guarantee the Revolving Credit Facility are required under the Indenture to guarantee our obligations under the Senior Notes. Following our entry into the new Revolving Credit Facility, TRC and Patco became subsidiary guarantors of the Senior Notes.

Current and Future Liquidity

In general, we require cash for working capital, capital expenditures, debt repayment and interest. Our working capital requirements tend to increase when we experience significant increased demand for products or significant copper price increases. Accordingly, we may be required to borrow against our Revolving Credit Facility in the future upon the occurrence of various events, including increases in the price of copper, which increase our working capital requirements. Our management assesses the future cash needs of our business by considering a number of factors, including: (1) earnings and cash flow performance, (2) future working capital needs, (3) current and projected debt service expenses, and (4) planned capital expenditures.

Recently we have had to rely on borrowings from the Revolver due to higher working capital requirements, driven mainly by higher average copper prices, acquisitions, and acquisition-related costs. Based on the foregoing, we believe that our operating cash flows and borrowing capacity under the Revolving Credit Facility will be sufficient to fund our operations, meet our debt service requirements and fund our planned capital expenditures and strategic acquisitions for the foreseeable future. As of September 30, 2011, we had $49.6 million in outstanding borrowings against our $250.0 million Revolving Credit Facility and a corresponding $119.8 million in excess availability under the Revolving Credit Facility, and $6.1 million in cash and cash equivalents.

If we experience a deficiency in earnings compared to our fixed charges in the future, we would need to fund the fixed charges through a combination of cash flows from operations and borrowings under the Revolving Credit Facility. If cash flows generated from our operations, together with borrowings under our Revolving Credit Facility, are not sufficient to fund our operations, meet our debt service requirements and fund our planned capital expenditures, and we need to seek additional sources of capital, the limitations on our ability to incur debt contained in the Revolving Credit Facility and the Indenture relating to our 2018 Senior Notes could prevent us from securing additional capital through the issuance of debt. In that case, we would need to secure additional capital through other means, such as the issuance of equity. In addition, we may not be able to obtain additional debt or equity financing on terms acceptable to us, or at all. If we were not able to secure additional capital, we could be required to delay or forego capital spending or other corporate initiatives, such as the development of products, or acquisition opportunities.

Our Revolving Credit Facility permits us to redeem, retire or repurchase our Senior Notes subject to certain limitations. We may repurchase Senior Notes in the future, but whether we do so will depend on a number of factors and there can be no assurance that we will repurchase any amounts of our Senior Notes.

On August 3, 2011, our board of directors authorized the purchase over the next 24 months of up to 0.5 million shares of the Company’s common stock in open market or privately negotiated transactions. We repurchased 0.1 million shares at a total cost of $1.1 million, including commissions, of common stock during the three and nine months ended September 30, 2011. There can be no assurance that any share purchases will be made. The number of shares actually purchased will depend on various factors, including limitations imposed by the Company’s debt instruments, the price of our common stock, overall market and business conditions and management’s assessment of competing alternatives for capital deployment.

Net cash used by operating activities for the nine months ended September 30, 2011 was $5.4 million as compared to $17.6 million for the nine months ended September 30, 2010. Operating cash outflow of $5.4 million in the first nine fiscal months of 2011 reflects a net working capital use of $35.1 million driven principally by increases in accounts receivable and inventory of $15.1 million and $26.5 million, respectively, which were partially offset by increases in accounts payable and prepaid expenses of $10.0 million. The increase in inventory is primarily due to the increase in metal prices in the first six months of the year and seasonal trends in which inventories are built in anticipation of demand during the fall months when volume typically increases. The increase in accounts payable and prepaid expenses and other assets was the result of incremental manufacturing activity due to increased demand and higher raw material cost inputs. Partially offsetting this $35.1 million net working capital use of cash is $15.6 million of net income adjusted for non-cash items, primarily depreciation and amortization.

Net cash used in investing activities for the first nine months of 2011 was $69.3 million, primarily due to the 2011 Acquisitions, as discussed above. During 2011, we purchased no investments, as compared to $1.6 million in investments during the first nine months of 2010. We expect our 2011 capital expenditures to total between $13.0 million and $16.0 million for the fiscal year ending December 31, 2011. This reflects a significant increase in expected quarterly spending as compared to $4.5 million spent for the nine months ended September 30, 2010. The increase in expected capital spending reflects recent opportunities to selectively add capacity and reduce costs.

Net cash provided by financing activities for the first nine months of 2011 was $48.1 million. During the first nine months of 2011, a net $49.6 million was provided by borrowing against the Revolving Credit Facility, in order to fund the 2011 Acquisitions, as well as $0.8 million used to repurchase the Company’s common stock as discussed above. During the first nine months of 2010, $23.3 million was provided by financing activities, due primarily to the refinancing of our Senior Notes during the first nine months of 2010.

Cautionary Note Regarding Forward-Looking Statements

Various statements contained in this report, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this report, including certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed under “Item 1A. Risk Factors,” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (available at www.sec.gov), may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

Some of the key factors that could cause actual results to differ from our expectations include:

•

fluctuations in the supply or price of copper and other raw materials;

•

increased competition from other wire and cable manufacturers, including foreign manufacturers;

•

pricing pressures causing margins to decrease;

•

adverse changes in general economic and capital market conditions;

•

failure of customers to make expected purchases, including customers of acquired companies;

•

changes in the cost of labor or raw materials, including PVC and fuel;

•

failure to identify, finance or integrate acquisitions;

•

failure to accomplish integration activities on a timely basis;

•

failure to achieve expected efficiencies in our manufacturing and integration consolidations;

•

unforeseen developments or expenses with respect to our acquisition, integration and consolidation efforts;

•

increase in exposure to political and economic development crises, instability, terrorism, civil strife, expropriation, and other risks of doing business in foreign markets;

•

impact of foreign currency fluctuations and changes on exchange rates; and

•

other risks and uncertainties, including those described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change and, therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

ITEM 4. Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of September 30, 2011. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There were no changes in our internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(d) and 15d-15(f)) during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II —OTHER INFORMATION

ITEM 1. Legal Proceedings

We are involved in legal proceedings and litigation arising in the ordinary course of business. In those cases in which we are the defendant, plaintiffs may seek to recover large and sometimes unspecified amounts or other types of relief and some matters may remain unresolved for several years. We believe that none of the litigation that we now face, individually or in the aggregate, will have a material effect on our consolidated financial position, cash flow or results of operations. We maintain insurance coverage for litigation that arises in the ordinary course of our business and believe such coverage is adequate.

ITEM 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our annual Report on Form 10-K for the fiscal year ended December 31, 2010. There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Below are the repurchases of common stock by the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a) (3) under the Exchange Act) for the three months ended September 30, 2011:


Three Months Ended September 30, 2011	Total number of shares purchased ⁽¹⁾		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
July 1 – July 31		4,092	$	15.50		—
August 1 – August 28		15,300		9.76		15,300
September 1 – September 31		99,163		9.04		99,163

Total		118,555	$	9.36		114,463		385,537

(1)	The Company purchased all of the 4,092 shares between July 1, 2011 and July 31, 2011 from an employee of the Company that were withheld to satisfy the tax withholding obligation due upon vesting of a performance stock award.

ITEM 6. Exhibits

See Index to Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	COLEMAN CABLE, INC.
	(Registrant)

Date: November 4, 2011	By	/s/ G. Gary Yetman
		Chief Executive Officer and President

Date: November 4, 2011	By	/s/ Richard N. Burger
		Chief Financial Officer, Executive
		Vice President, Secretary and Treasurer

INDEX TO EXHIBITS


Item No.		Description

3.1 —		Certificate of Incorporation of Coleman Cable, Inc., as filed with the Delaware Secretary of State on October 10, 2006, incorporated herein by reference to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

3.2 —		Amended and Restated By-Laws of Coleman Cable, Inc., incorporated herein by reference to our Current Report on Form 8-K as filed on May 5, 2010.

4.1 —		First Supplemental Indenture, dated August 12, 2011 by and among Technology Research Corporation, Patco Electronics, Inc., Coleman Cable, Inc., CCI International, Inc, and Deutsche Bank National Trust Company, incorporated by reference to our Current Report on Form 8-K as filed on August 16, 2011.

10.1 —		Second Amended and Restated Credit Agreement, dated as of August 4, 2011, by and among Coleman Cable, Inc., Technology Research Corporation and Woods Industries (Canada) Inc., as borrowers, the lenders that are signatories thereto, Wells Fargo Capital Finance, LLC, as the Administrative Agent, Joint Lead Arranger and Joint Bookrunner, incorporated herein by reference to our Current Report on Form 8-K as filed on August 10, 2011.

31.1 —		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 —		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 —		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 —		Financial statements from the quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2011, filed on November 4, 2011, formatted in XBRL: (i) the Condensed Consolidated Statements of Income; (ii) the Condensed Consolidated Balance Sheets; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to Condensed Consolidated Financial Statements furnished herewith.

*	Denotes management contract or compensatory plan or arrangement.

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