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 June 30, 2013
¨ | 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
(Registrants 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):
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
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 August 6, 2013: 18,478,613
2
ITEM 1. | Financial Statements |
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except per share data)
(unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
NET SALES |
$ | 233,798 | $ | 231,232 | $ | 456,311 | $ | 451,723 | ||||||||
COST OF GOODS SOLD |
198,159 | 195,249 | 386,374 | 385,070 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
GROSS PROFIT |
35,639 | 35,983 | 69,937 | 66,653 | ||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
15,365 | 15,744 | 32,861 | 31,474 | ||||||||||||
INTANGIBLE ASSET AMORTIZATION |
1,976 | 1,742 | 4,161 | 3,566 | ||||||||||||
RESTRUCTURING CHARGES |
151 | 23 | 369 | 356 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
OPERATING INCOME |
18,147 | 18,474 | 32,546 | 31,257 | ||||||||||||
INTEREST EXPENSE |
6,887 | 7,023 | 13,812 | 14,045 | ||||||||||||
OTHER (INCOME) LOSS |
(125 | ) | (71 | ) | (233 | ) | 3 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
INCOME BEFORE INCOME TAXES |
11,385 | 11,522 | 18,967 | 17,209 | ||||||||||||
INCOME TAX EXPENSE |
4,045 | 3,893 | 6,375 | 5,853 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
NET INCOME |
$ | 7,340 | $ | 7,629 | $ | 12,592 | $ | 11,356 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
EARNINGS PER COMMON SHARE DATA |
||||||||||||||||
NET INCOME PER SHARE: |
||||||||||||||||
Basic |
$ | 0.42 | $ | 0.44 | $ | 0.72 | $ | 0.66 | ||||||||
Diluted |
0.41 | 0.44 | 0.72 | 0.65 | ||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
||||||||||||||||
Basic |
17,445 | 17,086 | 17,269 | 17,072 | ||||||||||||
Diluted |
17,675 | 17,309 | 17,433 | 17,308 | ||||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE |
$ | 0.04 | $ | 0.02 | $ | 0.06 | $ | 0.02 |
See notes to condensed consolidated financial statements.
3
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands)
(unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
NET INCOME |
$ | 7,340 | $ | 7,629 | $ | 12,592 | $ | 11,356 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
OTHER COMPREHENSIVE (LOSS) |
||||||||||||||||
Foreign currency translation adjustments, net of tax of $118 and $76, $196 and $9, respectively |
(335 | ) | (233 | ) | (551 | ) | (48 | ) | ||||||||
Pension adjustments, net of tax of $1, $, $2, $, respectively |
(2 | ) | | (4 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
OTHER COMPREHENSIVE (LOSS) |
(337 | ) | (233 | ) | (555 | ) | (48 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
COMPREHENSIVE INCOME |
$ | 7,003 | $ | 7,396 | $ | 12,037 | $ | 11,308 | ||||||||
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
4
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands, except per share data)
(unaudited)
June 30, 2013 |
December 31, 2012 |
|||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 6,408 | $ | 9,562 | ||||
Accounts receivable, net of allowances of $3,013 and $3,046, respectively |
134,455 | 125,982 | ||||||
Inventories |
117,309 | 112,590 | ||||||
Deferred income taxes |
4,789 | 4,271 | ||||||
Assets held for sale |
1,072 | 1,074 | ||||||
Prepaid expenses and other current assets |
10,864 | 4,071 | ||||||
|
|
|
|
|||||
Total current assets |
274,897 | 257,550 | ||||||
|
|
|
|
|||||
PROPERTY, PLANT AND EQUIPMENT, NET |
77,526 | 78,914 | ||||||
GOODWILL |
66,450 | 66,535 | ||||||
INTANGIBLE ASSETS, NET |
33,252 | 37,417 | ||||||
DEFERRED INCOME TAXES |
563 | 329 | ||||||
OTHER ASSETS |
8,639 | 8,595 | ||||||
|
|
|
|
|||||
TOTAL ASSETS |
$ | 461,327 | $ | 449,340 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Current portion of long-term debt |
$ | 18,603 | $ | 35,566 | ||||
Accounts payable |
27,805 | 25,748 | ||||||
Accrued liabilities |
33,833 | 38,208 | ||||||
|
|
|
|
|||||
Total current liabilities |
80,241 | 99,522 | ||||||
|
|
|
|
|||||
LONG-TERM DEBT |
293,804 | 288,273 | ||||||
OTHER LONG-TERM LIABILITIES |
4,286 | 3,693 | ||||||
DEFERRED INCOME TAXES |
9,670 | 6,687 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
SHAREHOLDERS EQUITY: |
||||||||
Common stock, par value $0.001; 75,000 authorized; 18,196 and 16,998 issued and outstanding on June 30, 2013 and December 31, 2012, respectively |
18 | 17 | ||||||
Treasury stock, at cost: 484 and 443 shares, respectively |
(4,690 | ) | (3,918 | ) | ||||
Additional paid-in capital |
106,496 | 94,470 | ||||||
Accumulated deficit |
(27,910 | ) | (39,371 | ) | ||||
Accumulated other comprehensive loss |
(588 | ) | (33 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
73,326 | 51,165 | ||||||
|
|
|
|
|||||
TOTAL LIABILITIES AND EQUITY |
$ | 461,327 | $ | 449,340 | ||||
|
|
|
|
See notes to condensed consolidated financial statements.
5
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(unaudited)
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 12,592 | $ | 11,356 | ||||
Adjustments to reconcile net income to net cash flow from operating activities: |
||||||||
Depreciation and amortization |
11,952 | 11,236 | ||||||
Stock-based compensation |
2,879 | 712 | ||||||
Foreign currency transaction (gain) loss |
(234 | ) | 3 | |||||
Excess tax benefits from stock-based compensation |
(2,855 | ) | (625 | ) | ||||
Deferred taxes |
2,417 | 1,328 | ||||||
Loss (gain) on disposal of fixed assets |
67 | (41 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(8,083 | ) | (4,322 | ) | ||||
Inventories |
(4,719 | ) | (11,680 | ) | ||||
Prepaid expenses and other assets |
(6,797 | ) | 1,231 | |||||
Accounts payable |
2,305 | (6,708 | ) | |||||
Accrued liabilities |
(4,255 | ) | (5,103 | ) | ||||
|
|
|
|
|||||
Net cash flow provided by (used in) operating activities |
5,269 | (2,613 | ) | |||||
|
|
|
|
|||||
CASH FLOW FROM INVESTING ACTIVITIES: |
||||||||
Capital expenditures |
(5,611 | ) | (23,138 | ) | ||||
Proceeds from sale of fixed assets |
| 24 | ||||||
Acquisition of businesses, net of cash acquired |
| (32,842 | ) | |||||
|
|
|
|
|||||
Net cash flow used in investing activities |
(5,611 | ) | (55,956 | ) | ||||
|
|
|
|
|||||
CASH FLOW FROM FINANCING ACTIVITIES: |
||||||||
Borrowings under revolving loan facility |
73,395 | 253,028 | ||||||
Repayments under revolving loan facility |
(84,975 | ) | (198,723 | ) | ||||
Repayment of long-term debt |
(97 | ) | (83 | ) | ||||
Treasury stock purchases |
(772 | ) | (297 | ) | ||||
Excess tax benefits from stock-based compensation |
2,855 | 625 | ||||||
Proceeds from option exercises |
8,841 | | ||||||
Dividends paid |
(1,131 | ) | (352 | ) | ||||
|
|
|
|
|||||
Net cash flow (used in) provided by financing activities |
(1,884 | ) | 54,198 | |||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(928 | ) | 93 | |||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(3,154 | ) | (4,278 | ) | ||||
CASH AND CASH EQUIVALENTS Beginning of period |
9,562 | 9,746 | ||||||
|
|
|
|
|||||
CASH AND CASH EQUIVALENTS End of period |
$ | 6,408 | $ | 5,468 | ||||
|
|
|
|
|||||
NONCASH ACTIVITY |
||||||||
Unpaid capital expenditures |
80 | 90 | ||||||
SUPPLEMENTAL CASH FLOW INFORMATION |
||||||||
Income taxes paid, net |
5,848 | 1,647 | ||||||
Cash interest paid |
13,155 | 13,222 |
See notes to condensed consolidated financial statements.
6
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, 2012 |
16,939 | $ | 17 | $ | (2,789 | ) | $ | 92,871 | $ | (61,819 | ) | $ | (185 | ) | $ | 28,095 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Stock awards |
179 | | | | | | | |||||||||||||||||||||
Stock options exercised |
| | | | | | | |||||||||||||||||||||
Treasury shares repurchased |
(32 | ) | (297 | ) | (297 | ) | ||||||||||||||||||||||
Other Comprehensive income |
| | | | | (48 | ) | (48 | ) | |||||||||||||||||||
Net Income |
11,356 | 11,356 | ||||||||||||||||||||||||||
Cash dividends $0.02 |
(352 | ) | (352 | ) | ||||||||||||||||||||||||
Stock-based compensation |
| | | 1,252 | | | 1,252 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
BALANCE June 30, 2012 |
17,086 | $ | 17 | $ | (3,086 | ) | $ | 94,123 | $ | (50,815 | ) | $ | (233 | ) | $ | 40,006 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
BALANCE January 1, 2013 |
16,998 | $ | 17 | $ | (3,918 | ) | $ | 94,470 | $ | (39,371 | ) | $ | (33 | ) | $ | 51,165 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Stock awards |
484 | | | | | | | |||||||||||||||||||||
Stock options exercised |
756 | 1 | | 8,841 | | | 8,842 | |||||||||||||||||||||
Treasury shares repurchased |
(42 | ) | | (772 | ) | | | | (772) | |||||||||||||||||||
Other Comprehensive income |
| | | | | (555 | ) | (555 | ) | |||||||||||||||||||
Net income |
12,592 | 12,592 | ||||||||||||||||||||||||||
Cash dividends $0.06 per share |
(1,131 | ) | (1,131 | ) | ||||||||||||||||||||||||
Stock-based compensation |
| | | 3,185 | | | 3,185 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
BALANCE June 30, 2013 |
18,196 | $ | 18 | $ | (4,690 | ) | $ | 106,496 | $ | (27,910 | ) | $ | (588 | ) | $ | 73,326 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
7
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 generally accepted accounting principles (U.S. 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 Companys Form 10-K for the fiscal year ended December 31, 2012. 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 PRONOUNCEMENT
Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU No. 2013 -02)
ASU No. 2013-02 requires entities to disclose additional information about reclassification adjustments, including changes in Accumulated Other Comprehensive Income (AOCI) and significant items reclassified out of AOCI. The new disclosure requirements do not amend any existing requirements for reporting net income or Other Comprehensive Income (OCI). An entity is required to disaggregate the total change of each component of OCI and separately present (1) reclassification adjustments and (2) current-period OCI. Additionally, the amendments require an entity to present information about significant items reclassified out of AOCI by component either (1) on the face of the statement where net income is presented or (2) as a separate disclosure in the notes to the financial statements. ASU 2013-02 does not change the current requirements for interim financial statement reporting or comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted this provision during the first quarter ended March 31, 2013 and it did not have material impact on the Companys results of operations, financial position and cash flows.
Accounting Standards Update No. 2012-04 Technical Corrections and Improvements (ASU No. 2012 -04)
ASU No. 2012-04 contains amendments to clarify the Accounting Standards Codification (ASC), correct unintended application of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create significant administrative cost to most entities. Additionally, the amendments are intended to make the ASC easier to understand and the fair value measurement guidance easier to apply by eliminating inconsistencies and providing needed clarifications. The amendments that do not have transition guidance were effective upon issuance. The amendments that are subject to the transition guidance are effective for fiscal periods beginning after December 15, 2012. The Company adopted these amendments during the first quarter ended March 31, 2013 and they did not have a material impact on the Companys results of operations, financial position, and cash flows.
Accounting Standards Update No. 2011-11 Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU No. 2011-11)
ASU No. 2011-11 amends existing guidance by enhancing disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with Section 201-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with Section 210-20-45 or Section 815-10-45. This information will enable users of an entitys financial statements to evaluate the effect or potential effect of netting arrangements on an entitys financial position, including the effect or potential effect of rights of setoff associated with certain derivatives, sale and repurchase agreements and reverse sale repurchase agreements, and securities borrowing and securities lending arrangements. ASU No. 2011-11 requires retrospective application, and it is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The Company adopted the provisions in ASU No. 2011-11 and the clarifying amendments included in ASU No. 2013-01 during the first quarter ended March 31, 2013 and they did not have a material impact on the Companys results of operations, financial position and cash flows.
8
3. ACQUISITIONS
On May 31, 2012, Coleman, through a 100%-owned subsidiary, completed the acquisition of most of the operating assets (and assumed certain liabilities) of Watteredge, Inc., (WE) an Ohio corporation that designs, manufactures and sells secondary power connectors, including electric arc furnace cables, resistance welding cables, industrial high-performance copper bus and accessories, and other high performance power conduction devices and accessories. WE serves the steel, chemical, chlorine, power generation, fiberglass and automotive industries and sells its products and services worldwide. Coleman retained WEs workforce and has continued all of WEs production at its current manufacturing plant in Avon Lake, Ohio. We believe the acquisition of WE has strengthened and provided for greater diversification of our overall portfolio.
The acquisition of the assets of WE was structured as an all-cash transaction valued at approximately $33,922 (equal to a $35,000 preliminary purchase price adjusted by a $1,078 working capital adjustment). The transaction was funded with proceeds from Colemans existing credit facility. WE has been included as a component of our Engineered Solutions segment reported herein.
Purchase Price Allocations
WE was accounted for under the purchase method of accounting. Accordingly, we have allocated the purchase price to the net assets acquired based on the related estimated fair values at the acquisition date. The expected long-term growth, increased market position and expected synergies to be generated from the acquisition are the primary factors which gave rise to acquisition price for WE, which resulted in the recognition of goodwill.
The purchase price allocation for WE was finalized during the third quarter of 2012.
The table below summarizes the final allocations of purchase price related to WE.
WE | ||||
Accounts receivable |
2,720 | |||
Inventories |
2,249 | |||
Prepaid expenses and other current assets |
59 | |||
Property, plant and equipment |
3,363 | |||
Deferred income tax asset |
170 | |||
Intangible assets |
17,020 | |||
Goodwill |
10,742 | |||
|
|
|||
Total assets acquired |
36,323 | |||
Current liabilities |
(2,401 | ) | ||
|
|
|||
Total liabilities assumed |
(2,401 | ) | ||
|
|
|||
Net assets acquired |
33,922 |
All goodwill attributable to WE is deductible for income tax purposes and has been allocated to our Engineered Solutions segment. 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 |
WE | |||||||
Customer relationships |
6 | $ | 9,000 | |||||
Trademarks and trade names |
6 | 6,600 | ||||||
Developed technology |
3 | 970 | ||||||
Backlog |
1 | 450 | ||||||
|
|
|||||||
Total intangible assets |
$ | 17,020 | ||||||
|
|
9
Unaudited Selected Pro Forma Financial Information
The following unaudited pro forma financial information summarizes our estimate of combined results of operations assuming that the WE business combination had taken place on January 1, 2011. The unaudited pro forma combined results of operations were prepared using historical financial information of WE, and we make no representation with respect to the accuracy of such information.
Three Months Ended June 30, | Six Months Ended June 30, | |||||
2012 | 2012 | |||||
Net sales |
$ | 235,232 | $461,991 | |||
Net income |
7,791 | 11,874 |
4. RESTRUCTURING ACTIVITIES
We incurred restructuring costs of $151 and $23 during the three months ended June 30, 2013 and 2012, respectively. We incurred restructuring costs of $369 and $356 during the six months ended June 30, 2013 and 2012, respectively. The majority of these charges related to relocation costs associated with our plant consolidations.
Our restructuring reserve was $1,095 as of June 30, 2013, recorded within accrued liabilities and other long-term liabilities, which represents our estimate of the remaining liability existing relative to a 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 properties. 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. Restructuring expense is not segregated by reportable segment as our operating segments generally share common production processes and manufacturing facilities, as discussed in Note 17.
Lease Holding Costs |
Severance & Other Closing Costs |
Total | ||||||||||
BALANCE December 31, 2012 |
$ | 1,200 | $ | 45 | $ | 1,245 | ||||||
Provision |
32 | 337 | 369 | |||||||||
Cash payments |
(137 | ) | (382 | ) | (519 | ) | ||||||
|
|
|
|
|
|
|||||||
BALANCE June 30, 2013 |
$ | 1,095 | $ | | $ | 1,095 | ||||||
|
|
|
|
|
|
5. INVENTORIES
Inventories consisted of the following:
June 30, 2013 |
December 31, 2012 |
|||||||
FIFO cost: |
||||||||
Raw materials |
$ | 42,383 | $ | 44,874 | ||||
Work in progress |
4,675 | 3,391 | ||||||
Finished products |
70,251 | 64,325 | ||||||
|
|
|
|
|||||
Total |
$ | 117,309 | $ | 112,590 | ||||
|
|
|
|
10
6. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
June 30, 2013 |
December 31, 2012 |
|||||||
Salaries, wages and employee benefits |
$ | 7,974 | $ | 9,597 | ||||
Sales incentives |
7,747 | 10,694 | ||||||
Interest |
9,381 | 9,427 | ||||||
Other |
8,731 | 8,490 | ||||||
|
|
|
|
|||||
Total |
$ | 33,833 | $ | 38,208 | ||||
|
|
|
|
7. DEBT
June 30, 2013 |
December 31, 2012 |
|||||||
Revolving Credit Facility expiring October 2016 |
$ | 38,850 | $ | 50,430 | ||||
9% Senior Notes due February 2018, including unamortized discount of $2,061 and $2,286, respectively |
272,939 | 272,714 | ||||||
Capital lease obligations |
618 | 695 | ||||||
|
|
|
|
|||||
312,407 | 323,839 | |||||||
Less current portion |
(18,603 | ) | (35,566 | ) | ||||
|
|
|
|
|||||
Long-term debt |
$ | 293,804 | $ | 288,273 | ||||
|
|
|
|
Senior Secured Revolving Credit Facility (the Revolving Credit Facility)
At June 30, 2013, we had $38,850 in borrowings under the Revolving Credit Facility, with $159,880 in remaining excess availability. At December 31, 2012, we had $50,430 in borrowings under the Revolving Credit Facility, with $131,635 in remaining excess availability. The $38,850 in borrowings under the Revolving Credit Facility approximates the fair value of such debt at June 30, 2013 (Level 2).
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 0.50% and the lenders prime rate) plus a range of 0.25% to 0.75% or the LIBOR 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. We currently have $30,700 in appraised real estate and certain appraised equipment in our borrowing base. Our current availability includes additional availability that may be generated by adding appraised real estate and/or appraised equipment not exceed $62,500 to the borrowing base.
11
The Revolving Credit Facility is guaranteed by CCI International Inc. (CCI International), Technology Research Corporation (TRC) (excluding TRCs 100%-owned foreign subsidiary, TRC Honduras, S.A. de C.V.), Patco Electronics (Patco), and WE, 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, Patco, and WE 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, Patco, and WE and 65% of the capital stock of our Canadian foreign subsidiary, but not our Chinese 100%-owned entity.
As of June 30, 2013, we were in compliance with all of the covenants of our Revolving Credit Facility.
9% Senior Notes due 2018 (the Senior Notes)
The Indenture relating to our Senior Notes contains customary covenants that limit us and our restricted subsidiaries with respect to, 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 transactions 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. TRC, Patco and WE became subsidiary guarantors of the Senior Notes following the acquisition of those businesses.
As of June 30, 2013, 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 term of the Senior Notes. As of June 30, 2013, we were in compliance with all of the covenants of our Senior Notes.
Senior Notes | June 30, 2013 | |||
Face Value |
$ | 275,000 | ||
Fair Value (Level 1) |
$ | 292,188 | ||
Interest Rate |
9 | % | ||
Interest Payment |
|
Semi-Annually February 15th and August 15th |
| |
Maturity Date |
February 15, 2018 |
Guarantee | Jointly and severally guaranteed fully and unconditionally by our 100% owned subsidiaries, CCI International, Inc., Patco, TRC, and WE |
Optional redemption (1)
Beginning Date |
Percentage | |
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). |
12
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 Companys losses, and therefore, participating securities are not allocated a portion of these losses in periods where a net loss is recorded. As of June 30, 2013 and 2012, 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 June 30, |
Six Months Ended June 30, |
|||||||||||||||
Components of Basic and Diluted Earnings per Share | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Basic EPS Numerator: |
||||||||||||||||
Net income |
$ | 7,340 | $ | 7,629 | $ | 12,592 | $ | 11,356 | ||||||||
Less: Earnings allocated to participating securities |
(49 | ) | (70 | ) | (84 | ) | (104 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income allocated to common shareholders |
$ | 7,291 | $ | 7,559 | $ | 12,508 | $ | 11,252 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic EPS Denominator: |
||||||||||||||||
Weighted average shares outstanding |
17,445 | 17,086 | 17,269 | 17,072 | ||||||||||||
Basic earnings per common share |
$ | 0.42 | $ | 0.44 | $ | 0.72 | $ | 0.66 | ||||||||
Diluted EPS Numerator: |
||||||||||||||||
Net income |
$ | 7,340 | $ | 7,629 | $ | 12,592 | $ | 11,356 | ||||||||
Less: Earnings allocated to participating securities |
(48 | ) | (70 | ) | (83 | ) | (104 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income allocated to common shareholders |
$ | 7,292 | $ | 7,559 | $ | 12,509 | $ | 11,252 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted EPS Denominator: |
||||||||||||||||
Weighted average shares outstanding |
17,445 | 17,086 | 17,269 | 17,072 | ||||||||||||
Dilutive common shares issuable upon exercise of stock options |
230 | 223 | 164 | 236 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted average shares outstanding |
17,675 | 17,309 | 17,433 | 17,308 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per common share |
$ | 0.41 | $ | 0.44 | $ | 0.72 | $ | 0.65 |
Options
Options with respect to 55 and 771 common shares were not included in the computation of diluted earnings per share for the three months ended June 30, 2013 and 2012, respectively, and 283 and 771 for the six months ended June 30, 2013 and 2012, 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 $1,273 and $2,879 in stock compensation expense for the three and six months ended June 30, 2013, respectively. We recorded $114 and $712 for the three and six months ended June 30, 2012, respectively.
13
Stock Options
No stock options were issued during the first six months of 2013 and 2012.
Changes in stock options were as follows:
Shares | Weighted-Average Exercise Price |
Weighted-Average Remaining Contractual Terms |
Aggregate Intrinsic Value |
|||||||||||||
Outstanding January 1, 2013 |
1,388 | $ | 11.09 | 4.8 | $ | 2,352 | ||||||||||
Granted |
| | | |||||||||||||
Exercised |
(756 | ) | 19.51 | 1,100 | ||||||||||||
Forfeited or expired |
| | | |||||||||||||
|
|
|
|
|||||||||||||
Outstanding June 30, 2013 |
632 | 10.33 | 4.7 | 5,189 | ||||||||||||
Vested or expected to vest |
615 | 10.49 | 4.7 | 4,962 | ||||||||||||
Exercisable |
560 | 9.20 | 4.7 | 2,837 |
Intrinsic value for stock options is defined as the difference between the current market value of the Companys 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. For the period ended June 30, 2013 there were 756 stock option shares exercised. There were no stock option exercises for the six month period ended June 30, 2012. As of June 30, 2013 and December 31, 2012, there were 615 and 1,372 vested options with an aggregate intrinsic value of $4,962 and $2,271, respectively.
Stock Awards
In the first quarter of 2013, the Company awarded unvested common shares to non-management members of its Board of Directors. In total, 53 unvested shares were awarded with an approximate aggregate fair value of $500. 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 six months of 2013 were as follows:
Shares | Weighted-Average Grant-Date Fair Value |
|||||||
Nonvested at January 1, 2013 |
558 | $ | 4.79 | |||||
Granted |
53 | 9.44 | ||||||
Vested |
(494 | ) | 4.41 | |||||
Forfeited |
| | ||||||
|
|
|
|
|||||
Nonvested at June 30, 2013 |
117 | $ | 8.61 |
In addition, in the first quarter of 2010, 775 performance shares were granted to certain executives and key employees. Of the total performance shares awarded, 517 are settled in stock, on a one-to-one basis, which were, contingent upon future stock price performance. The remaining 258 performance shares vest under the same terms as the performance awards settled in stock, but are settled in cash rather than stock. The first tranche of performance shares vested in a prior period resulting in the issuance of 117 shares settled in stock and 58 shares settled in cash. During the second quarter ended June 30, 2013, the second and third tranches vested as a result of the stock price reaching predetermined levels. Accordingly, 358 shares were settled in stock net of 42 shares returned back to the Company to satisfy income tax requirements. Additionally, the equivalent of 200 shares were issued and settled in cash. The Company recorded $898 and $2,362 of compensation cost for the three and six months ended June 30, 2013, respectively, related to the performance shares.
14
Treasury Stock
On August 3, 2011, our Board of Directors authorized the purchase of up to 500 shares of the Companys common stock in open market or privately-negotiated transactions. The repurchase plan expires in August 2013. To date, we have purchased 426 shares pursuant to this repurchase program. We did not repurchase any shares pursuant to this repurchase program during the first and second quarters of 2013. During the three and six months ended June 30, 2013, we repurchased 42 shares of common stock at a total cost of $772 from employees of the Company that were withheld to satisfy the tax withholding obligation due upon vesting of performance share awards. During the three and six months ended June 30, 2012, we repurchased 23 and 32 shares of common stock at a total cost of $199 and $297, respectively, including commissions and shares repurchased from employees of the Company that were withheld to satisfy the tax withholding obligation due upon vesting of restricted stock awards. 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 Companys debt instruments, the price of our common stock, overall market and business conditions, and managements assessment of competing alternatives for capital deployment.
Subsequent Event
On August 6, 2013, our Board of Directors declared a quarterly dividend of $0.04 per common share, payable on August 30, 2013, to stockholders of record as of the close of business on August 16, 2013. Future declarations of quarterly dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.
10. RELATED PARTIES
Three of our directors and one of our former executive officers own our corporate office facility and lease to the company. The company recorded rental expense of $106 and $211 for the three and six months ended June 30, 2013, respectively. We made rental payments of $103 and $206 for the three and six months ended June 30, 2012, respectively. In addition, we previously leased three manufacturing facilities from an entity in which one of our executive officers has a minority interest. Subsequently, we purchased these three manufacturing facilities for $6,505 in the first quarter of 2012.
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 $1,314 and $2,632 for the three and six months ended June 30, 2013, respectively, and was $1,298 and $2,628 for the three and six months ended June 30, 2012, 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 June 30, 2013 and December 31, 2012 we had a $333 and $331 accrual, respectively, recorded for this liability in accordance with ASC 450.
We recently received a civil complaint for $2,300 plus attorneys fees and expenses related to a recent acquisition. We believe the civil complaint lacks merit and is not payable by us. We have not provided for this claim in accordance with ASC 450 as we do not believe an unfavorable outcome is probable and estimable at this time.
Though no assurances are possible, we believe that our accruals related to legal matters are sufficient and that these items and our rights to available insurance and indemnities will be resolved without material effect on our financial position, results of operations or cash flows.
15
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 June 30, 2013 or June 30, 2012 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.
As our derivatives are part of a legally enforceable master netting agreement, for purposes of presentation within our condensed consolidated balance sheets, gross values are netted and classified within Prepaid expense and other current assets or Accrued liabilities depending upon our aggregate net position at the balance sheet date.
Contract Position (In Total Pounds) |
Cash Collateral Posted |
Fair Value | ||||||||||||||||||
Commodity Derivatives | Long | Short | Asset (2) | Liability (3) | ||||||||||||||||
Copper futures contracts outstanding as of (1): |
||||||||||||||||||||
Three months ended June 30, 2013 |
350 | 625 | $ | 162 | $ | 1 | $ | | ||||||||||||
Three months ended June 30, 2012 |
150 | 625 | $ | 172 | $ | | $ | 78 |
(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 June 30, 2013 and June 30, 2012, 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 June 30, 2013, no associated losses or gains have been recorded within OCI.
Derivatives Not Accounted for as Hedges Under the Accounting Rules |
Gain Recognized in Income |
Location of Gain Recognized in Income |
||||||
Copper commodity contracts: |
||||||||
Three months ended June 30, 2013 |
$ | 61 | Cost of goods sold | |||||
Three months ended June 30, 2012 |
71 | Cost of goods sold | ||||||
Six months ended June 30, 2013 |
96 | Cost of goods sold | ||||||
Six months ended June 30, 2012 |
24 | Cost of goods sold |
13. INCOME TAXES
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Effective Tax Rate |
35.5 | % | 33.8 | % | 33.6 | % | 34.0 | % |
We recorded income tax expense of $4,045 and $3,893 for the three months ended June 30, 2013 and 2012, respectively. The increase in our effective tax rate for the three months ended June 30, 2013, as compared to the three months ended June 30, 2012, is primarily due to the mix of pre-tax income among foreign jurisdictions.
We recorded income tax expense of $6,375 and $5,853 for the six months ended June 30, 2013 and 2012, respectively. The decrease in our effective tax rate for the six months ended 2013, as compared to the six months ended 2012, is primarily due to a discrete item recorded in the first quarter of 2013 following the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013.
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 $343 and $789 related to these savings plans during the three and six months ended June 30, 2013, respectively. We recorded $267 and $689 for the three and six months ended June 30, 2012, respectively.
16
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 June 30, 2013 and December 31, 2012, we utilized Level 1 inputs to determine the fair value of cash and cash equivalents and derivatives.
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 | ||||||||||||||||||||||||||||||||
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||
Cash and Cash Equivalents |
$ | 6,408 | $ | | $ | | $ | 6,408 | $ | 9,562 | $ | | $ | | $ | 9,562 | ||||||||||||||||
Derivative Assets, Inclusive of Collateral |
163 | | | 163 | 127 | | | 127 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 6,571 | $ | | $ | | $ | 6,571 | $ | 9,689 | $ | | $ | | $ | 9,689 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. OTHER INCOME / LOSS
We recorded other income of $125 and $233 for the three and six months ended June 30, 2013, respectively, primarily reflecting exchange rate impacts on our Canadian subsidiary. We recorded other income of $71 and loss of $3 for the three and six months ended June 30, 2012, respectively, primarily reflecting the exchange rate impact on our Canadian subsidiary.
17
17. BUSINESS SEGMENT INFORMATION
We have three reportable segments: (1) Distribution, (2) Original Equipment Manufacturers (OEM) and (3) Engineered Solutions. Our reportable segments are a function of how we are organized internally to market our customer groups and measure our financial performance. The Distribution and OEM segment serves our customers in distribution, retail and OEM businesses. Our Engineered Solutions segment is comprised of our most recent acquisitions, made in 2011 and 2012, serving a variety of customers such as military contractors, independent distributions, and various end markets utilizing secondary power connectors.
Financial data for the Companys reportable segments is as follows:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net Sales: |
||||||||||||||||
Distribution Segment |
$ | 162,058 | $ | 164,310 | $ | 313,961 | $ | 319,370 | ||||||||
OEM Segment |
59,195 | 56,327 | 116,986 | 114,242 | ||||||||||||
Engineered Solutions |
12,545 | 10,595 | 25,364 | 18,111 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 233,798 | $ | 231,232 | $ | 456,311 | $ | 451,723 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income: |
||||||||||||||||
Distribution Segment |
$ | 17,170 | $ | 17,706 | $ | 31,898 | $ | 29,901 | ||||||||
OEM Segment |
5,111 | 5,047 | 10,389 | 9,646 | ||||||||||||
Engineered Solutions |
1,227 | 1,111 | 2,137 | 1,827 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total segments |
23,508 | 23,864 | 44,424 | 41,374 | ||||||||||||
Corporate |
(5,361 | ) | (5,390 | ) | (11,878 | ) | (10,117 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Consolidated operating income |
$ | 18,147 | $ | 18,474 | $ | 32,546 | $ | 31,257 | ||||||||
|
|
|
|
|
|
|
|
Our Distribution, OEM, and Engineered Solutions 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.
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, and intangible amortization.
18. SUPPLEMENTAL GUARANTOR INFORMATION
The following unaudited supplemental financial information sets forth, on a combined basis, balance sheets, statements of income, statements of comprehensive income 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. The Senior Notes and the Revolving Credit Facility are instruments of the parent, and are reflected in their respective balance sheets. As of June 30, 2013, our payment obligations under the Senior Notes and the Revolving Credit Facility (see Note 7) were guaranteed by our 100% owned subsidiaries, CCI International, Patco, TRC, and WE (the Guarantor Subsidiaries). Such guarantees are full, unconditional, and joint and several.
18
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
JUNE 30, 2013
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET SALES |
$ | 209,615 | $ | 12,545 | $ | 16,051 | $ | (4,413 | ) | $ | 233,798 | |||||||||
COST OF GOODS SOLD |
179,239 | 9,179 | 14,154 | (4,413 | ) | 198,159 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
GROSS PROFIT |
30,376 | 3,366 | 1,897 | | 35,639 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
11,838 | 2,535 | 992 | | 15,365 | |||||||||||||||
INTANGIBLE ASSET AMORTIZATION |
937 | 1,037 | 2 | | 1,976 | |||||||||||||||
RESTRUCTURING CHARGES |
143 | 8 | | | 151 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
17,458 | (214 | ) | 903 | | 18,147 | ||||||||||||||
INTEREST EXPENSE |
6,872 | | 15 | | 6,887 | |||||||||||||||
OTHER INCOME, NET |
| | (125 | ) | | (125 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
10,586 | (214 | ) | 1,013 | | 11,385 | ||||||||||||||
INCOME FROM SUBSIDIARIES |
581 | | | (581 | ) | | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
3,827 | (76 | ) | 294 | | 4,045 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME (LOSS) |
$ | 7,340 | $ | (138 | ) | $ | 719 | $ | (581 | ) | $ | 7,340 | ||||||||
|
|
|
|
|
|
|
|
|
|
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
JUNE 30, 2012
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET SALES |
$ | 207,199 | $ | 8,609 | $ | 20,103 | $ | (4,679 | ) | $ | 231,232 | |||||||||
COST OF GOODS SOLD |
176,065 | 6,561 | 17,302 | (4,679 | ) | 195,249 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
GROSS PROFIT |
31,134 | 2,048 | 2,801 | | 35,983 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
12,447 | 2,070 | 1,227 | | 15,744 | |||||||||||||||
INTANGIBLE ASSET AMORTIZATION |
1,176 | 340 | 226 | | 1,742 | |||||||||||||||
RESTRUCTURING CHARGES |
(15 | ) | 41 | (3 | ) | | 23 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
17,526 | (403 | ) | 1,351 | | 18,474 | ||||||||||||||
INTEREST EXPENSE |
7,008 | | 15 | | 7,023 | |||||||||||||||
OTHER INCOME, NET |
| | (71 | ) | | (71 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
10,518 | (403 | ) | 1,407 | | 11,522 | ||||||||||||||
INCOME FROM SUBSIDIARIES |
909 | | | (909 | ) | | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
3,798 | (134 | ) | 229 | | 3,893 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME (LOSS) |
$ | 7,629 | $ | (269 | ) | $ | 1,178 | $ | (909 | ) | $ | 7,629 | ||||||||
|
|
|
|
|
|
|
|
|
|
19
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 2013
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET SALES |
$ | 406,855 | $ | 25,364 | $ | 32,584 | $ | (8,492 | ) | $ | 456,311 | |||||||||
COST OF GOODS SOLD |
347,395 | 18,936 | 28,535 | (8,492 | ) | 386,374 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
GROSS PROFIT |
59,460 | 6,428 | 4,049 | | 69,937 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
25,539 | 5,128 | 2,194 | | 32,861 | |||||||||||||||
INTANGIBLE ASSET AMORTIZATION |
2,083 | 2,075 | 3 | | 4,161 | |||||||||||||||
RESTRUCTURING CHARGES |
278 | 91 | | | 369 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
31,560 | (866 | ) | 1,852 | | 32,546 | ||||||||||||||
INTEREST EXPENSE |
13,783 | | 29 | | 13,812 | |||||||||||||||
OTHER (INCOME) LOSS, NET |
| | (233 | ) | | (233 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
17,777 | (866 | ) | 2,056 | | 18,967 | ||||||||||||||
INCOME FROM SUBSIDIARIES |
989 | | | (989 | ) | | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
6,174 | (300 | ) | 501 | | 6,375 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME (LOSS) |
$ | 12,592 | $ | (566 | ) | $ | 1,555 | $ | (989 | ) | $ | 12,592 | ||||||||
|
|
|
|
|
|
|
|
|
|
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 2012
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET SALES |
$ | 404,627 | $ | 16,318 | $ | 39,928 | $ | (9,150 | ) | $ | 451,723 | |||||||||
COST OF GOODS SOLD |
347,229 | 12,423 | 34,568 | (9,150 | ) | 385,070 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
GROSS PROFIT |
57,398 | 3,895 | 5,360 | | 66,653 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
25,404 | 3,763 | 2,307 | | 31,474 | |||||||||||||||
INTANGIBLE ASSET AMORTIZATION |
2,606 | 732 | 228 | | 3,566 | |||||||||||||||
RESTRUCTURING CHARGES |
(208 | ) | 262 | 302 | | 356 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
29,596 | (862 | ) | 2,523 | | 31,257 | ||||||||||||||
INTEREST EXPENSE |
14,016 | | 29 | | 14,045 | |||||||||||||||
OTHER (INCOME) LOSS, NET |
| (1 | ) | 4 | | 3 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
15,580 | (861 | ) | 2,490 | | 17,209 | ||||||||||||||
INCOME FROM SUBSIDIARIES |
1,523 | | | (1,523 | ) | | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
5,747 | (297 | ) | 403 | | 5,853 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME (LOSS) |
$ | 11,356 | $ | (564 | ) | $ | 2,087 | $ | (1,523 | ) | $ | 11,356 | ||||||||
|
|
|
|
|
|
|
|
|
|
20
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR
THE THREE MONTHS ENDED JUNE 30, 2013
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET INCOME (LOSS) |
$ | 7,340 | $ | (138 | ) | $ | 719 | $ | (581 | ) | $ | 7,340 | ||||||||
OTHER COMPREHENSIVE LOSS |
||||||||||||||||||||
Foreign currency translation adjustments, net of tax of $118 |
| | (335 | ) | | (335 | ) | |||||||||||||
Pension adjustments, net of tax $1 |
(2 | ) | | | | (2 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OTHER COMPREHENSIVE LOSS |
(2 | ) | | (335 | ) | | (337 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
COMPREHENSIVE INCOME (LOSS) |
$ | 7,338 | $ | (138 | ) | $ | 384 | $ | (581 | ) | $ | 7,003 | ||||||||
|
|
|
|
|
|
|
|
|
|
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR
THE THREE MONTHS ENDED JUNE 30, 2012
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET INCOME (LOSS) |
$ | 7,629 | $ | (269 | ) | $ | 1,178 | $ | (909 | ) | $ | 7,629 | ||||||||
OTHER COMPREHENSIVE LOSS |
||||||||||||||||||||
Foreign currency translation adjustments, net of tax of $76 |
| | (233 | ) | | (233 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OTHER COMPREHENSIVE LOSS |
| | (233 | ) | | (233 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
COMPREHENSIVE INCOME (LOSS) |
$ | 7,629 | $ | (269 | ) | $ | 945 | $ | (909 | ) | $ | 7,396 | ||||||||
|
|
|
|
|
|
|
|
|
|
21
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 2013
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET INCOME (LOSS) |
$ | 12,592 | $ | (566 | ) | $ | 1,555 | $ | (989 | ) | $ | 12,592 | ||||||||
OTHER COMPREHENSIVE LOSS |
||||||||||||||||||||
Foreign currency translation adjustments, net of tax provision of $196 |
| | (551 | ) | | (551 | ) | |||||||||||||
Pension adjustments, net of tax $2 |
(4 | ) | (4 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OTHER COMPREHENSIVE LOSS |
(4 | ) | | (551 | ) | | (555 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
COMPREHENSIVE INCOME (LOSS) |
$ | 12,588 | $ | (566 | ) | $ | 1,004 | $ | (989 | ) | $ | 12,037 | ||||||||
|
|
|
|
|
|
|
|
|
|
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 2012
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
NET INCOME (LOSS) |
$ | 11,356 | $ | (564 | ) | $ | 2,087 | $ | (1,523 | ) | $ | 11,356 | ||||||||
OTHER COMPREHENSIVE LOSS |
||||||||||||||||||||
Foreign currency translation adjustments, net of tax provision of $9 |
| | (48 | ) | | (48 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OTHER COMPREHENSIVE LOSS |
| | (48 | ) | | (48 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
COMPREHENSIVE INCOME (LOSS) |
$ | 11,356 | $ | (564 | ) | $ | 2,039 | $ | (1,523 | ) | $ | 11,308 | ||||||||
|
|
|
|
|
|
|
|
|
|
22
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2013
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
ASSETS |
||||||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 1,330 | $ | 5,078 | $ | | $ | 6,408 | ||||||||||
Accounts receivablenet of allowances |
121,593 | 5,781 | 7,081 | | 134,455 | |||||||||||||||
Intercompany receivable |
| 5,510 | 5,486 | (10,996 | ) | | ||||||||||||||
Inventories |
103,177 | 9,376 | 4,756 | | 117,309 | |||||||||||||||
Deferred income taxes |
3,714 | 931 | 144 | | 4,789 | |||||||||||||||
Assets held for sale |
1,072 | | | | 1,072 | |||||||||||||||
Prepaid expenses and other current assets |
9,373 | 1,011 | 480 | | 10,864 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
238,929 | 23,939 | 23,025 | (10,996 | ) | 274,897 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
PROPERTY, PLANT AND EQUIPMENT, NET |
69,264 | 6,581 | 1,681 | | 77,526 | |||||||||||||||
GOODWILL |
30,842 | 34,147 | 1,461 | | 66,450 | |||||||||||||||
INTANGIBLE ASSETS, NET |
14,312 | 18,866 | 74 | | 33,252 | |||||||||||||||
DEFERRED INCOME TAXES |
| | 563 | | 563 | |||||||||||||||
OTHER ASSETS |
8,528 | | 111 | | 8,639 | |||||||||||||||
INVESTMENT IN SUBSIDIARIES |
91,299 | | | (91,299 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL ASSETS |
$ | 453,174 | $ | 83,533 | $ | 26,915 | $ | (102,295 | ) | $ | 461,327 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||||||
Current portion of long-term debt |
$ | 18,603 | $ | | $ | | $ | | $ | 18,603 | ||||||||||
Accounts payable |
24,933 | 1,524 | 1,348 | | 27,805 | |||||||||||||||
Intercompany payable |
1,429 | 5,274 | 4,293 | (10,996 | ) | | ||||||||||||||
Accrued liabilities |
28,224 | 3,437 | 2,172 | | 33,833 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
73,189 | 10,235 | 7,813 | (10,996 | ) | 80,241 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LONG-TERM DEBT |
293,804 | | | | 293,804 | |||||||||||||||
OTHER LONG-TERM LIABILITIES |
4,221 | | 65 | | 4,286 | |||||||||||||||
DEFERRED INCOME TAXES |
8,634 | 1,036 | | | 9,670 | |||||||||||||||
SHAREHOLDERS EQUITY: |
||||||||||||||||||||
Common stock |
18 | | 928 | (928 | ) | 18 | ||||||||||||||
Treasury stock |
(4,690 | ) | | | | (4,690 | ) | |||||||||||||
Additional paid-in capital |
106,496 | 75,302 | 1,472 | (76,774 | ) | 106,496 | ||||||||||||||
(Accumulated deficit) retained earnings |
(27,910 | ) | (3,040 | ) | 17,158 | (14,118 | ) | (27,910 | ) | |||||||||||
Accumulated other comprehensive loss |
(588 | ) | | (521 | ) | 521 | (588 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders equity |
73,326 | 72,262 | 19,037 | (91,299 | ) | 73,326 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL LIABILITIES AND EQUITY |
$ | 453,174 | $ | 83,533 | $ | 26,915 | $ | (102,295 | ) | $ | 461,327 | |||||||||
|
|
|
|
|
|
|
|
|
|
23
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2012
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
ASSETS |
||||||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 3,417 | $ | 1,709 | $ | 4,436 | $ | | $ | 9,562 | ||||||||||
Accounts receivable net of allowances |
109,421 | 5,906 | 10,655 | | 125,982 | |||||||||||||||
Intercompany receivable |
829 | 6,738 | 5,945 | (13,512 | ) | | ||||||||||||||
Inventories |
99,839 | 8,123 | 4,628 | | 112,590 | |||||||||||||||
Deferred income taxes |
3,332 | 811 | 128 | | 4,271 | |||||||||||||||
Assets held for sale |
1,074 | | | | 1,074 | |||||||||||||||
Prepaid expenses and other current assets |
1,895 | 1,488 | 688 | | 4,071 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
219,807 | 24,775 | 26,480 | (13,512 | ) | 257,550 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
PROPERTY, PLANT AND EQUIPMENT, NET |
70,158 | 6,908 | 1,848 | | 78,914 | |||||||||||||||
GOODWILL |
30,842 | 34,147 | 1,546 | | 66,535 | |||||||||||||||
INTANGIBLE ASSETS, NET |
16,394 | 20,941 | 82 | | 37,417 | |||||||||||||||
DEFERRED INCOME TAXES |
| | 329 | | 329 | |||||||||||||||
OTHER ASSETS |
8,475 | | 120 | | 8,595 | |||||||||||||||
INVESTMENT IN SUBSIDIARIES |
93,589 | | | (93,589 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL ASSETS |
$ | 439,265 | $ | 86,771 | $ | 30,405 | $ | (107,101 | ) | $ | 449,340 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||||||
Current portion of long-term debt |
$ | 35,566 | $ | | $ | | $ | | $ | 35,566 | ||||||||||
Accounts payable |
22,854 | 1,196 | 1,698 | | 25,748 | |||||||||||||||
Intercompany payable |
| 5,945 | 7,567 | (13,512 | ) | | ||||||||||||||
Accrued liabilities |
32,817 | 2,352 | 3,039 | | 38,208 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
91,237 | 9,493 | 12,304 | (13,512 | ) | 99,522 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LONG-TERM DEBT |
288,273 | | | | 288,273 | |||||||||||||||
OTHER LONG-TERM LIABILITIES |
3,625 | | 68 | | 3,693 | |||||||||||||||
DEFERRED INCOME TAXES |
4,965 | 1,722 | | | 6,687 | |||||||||||||||
SHAREHOLDERS EQUITY: |
||||||||||||||||||||
Common stock |
17 | | 928 | (928 | ) | 17 | ||||||||||||||
Treasury stock |
(3,918 | ) | | | | (3,918 | ) | |||||||||||||
Additional paid-in capital |
94,470 | 78,030 | 1,472 | (79,502 | ) | 94,470 | ||||||||||||||
(Accumulated deficit) retained earnings |
(39,371 | ) | (2,474 | ) | 15,603 | (13,129 | ) | (39,371 | ) | |||||||||||
Accumulated other comprehensive (loss) income |
(33 | ) | | 30 | (30 | ) | (33 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders equity |
51,165 | 75,556 | 18,033 | (93,589 | ) | 51,165 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL LIABILITIES AND EQUITY |
$ | 439,265 | $ | 86,771 | $ | 30,405 | $ | (107,101 | ) | $ | 449,340 | |||||||||
|
|
|
|
|
|
|
|
|
|
24
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 2013
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net income (loss) |
$ | 12,592 | $ | (566 | ) | $ | 1,555 | $ | (989 | ) | $ | 12,592 | ||||||||
Adjustments to reconcile net income (loss) to net cash flow from operating activities: |
||||||||||||||||||||
Depreciation and amortization |
9,228 | 2,556 | 168 | | 11,952 | |||||||||||||||
Stock-based compensation |
2,879 | | | | 2,879 | |||||||||||||||
Foreign currency transaction gain |
| | (234 | ) | | (234 | ) | |||||||||||||
Deferred taxes |
3,289 | (807 | ) | (65 | ) | | 2,417 | |||||||||||||
Excess tax benefits from stock-based compensation |
(2,855 | ) | | | | (2,855 | ) | |||||||||||||
Loss on disposal of fixed assets |
36 | 19 | 12 | | 67 | |||||||||||||||
Equity in consolidated subsidiaries |
(989 | ) | | | 989 | | ||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||
Accounts receivable |
(12,171 | ) | 127 | 3,961 | | (8,083 | ) | |||||||||||||
Inventories |
(3,339 | ) | (1,252 | ) | (128 | ) | | (4,719 | ) | |||||||||||
Prepaid expenses and other assets |
(7,487 | ) | 477 | 213 | | (6,797 | ) | |||||||||||||
Accounts payable |
2,273 | 327 | (295 | ) | | 2,305 | ||||||||||||||
Intercompany accounts |
4,819 | (2,172 | ) | (2,647 | ) | | | |||||||||||||
Accrued liabilities |
(4,369 | ) | 1,084 | (970 | ) | | (4,255 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flow provided by (used in) operating activities |
3,906 | (207 | ) | 1,570 | | 5,269 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH FLOW FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Capital expenditures |
(5,439 | ) | (172 | ) | | | (5,611 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flow used in investing activities |
(5,439 | ) | (172 | ) | | | (5,611 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Borrowings under revolving loan facilities |
73,395 | | | | 73,395 | |||||||||||||||
Repayments under revolving loan facilities |
(84,975 | ) | | | | (84,975 | ) | |||||||||||||
Purchase of treasury stock |
(772 | ) | | | | (772 | ) | |||||||||||||
Repayment of long-term debt |
(97 | ) | | | | (97 | ) | |||||||||||||
Excess tax benefits from stock-based compensation |
2,855 | | | | 2,855 | |||||||||||||||
Proceed from option exercises |
8,841 | | | | 8,841 | |||||||||||||||
Dividends paid |
(1,131 | ) | | | | (1,131 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flow used in financing activities |
(1,884 | ) | | | | (1,884 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate on cash and cash equivalents |
| | (928 | ) | | (928 | ) | |||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(3,417 | ) | (379 | ) | 642 | | (3,154 | ) | ||||||||||||
CASH AND CASH EQUIVALENTS Beginning of period |
3,417 | 1,709 | 4,436 | | 9,562 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH AND CASH EQUIVALENTS End of period |
$ | | $ | 1,330 | $ | 5,078 | $ | | $ | 6,408 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NONCASH ACTIVITY |
||||||||||||||||||||
Unpaid capital expenditures |
80 | | | | 80 | |||||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION |
||||||||||||||||||||
Income taxes paid (refunded), net |
5,523 | 19 | 306 | | 5,848 | |||||||||||||||
Cash interest paid |
13,130 | | 25 | | 13,155 |
25
COLEMAN CABLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 2012
Parent | Guarantor Subsidiaries |
Non Guarantor Subsidiaries |
Eliminations | Total | ||||||||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net income (loss) |
$ | 11,356 | $ | (564 | ) | $ | 2,087 | $ | (1,523 | ) | $ | 11,356 | ||||||||
Adjustments to reconcile net income (loss) to net cash flow from operating activities: |
||||||||||||||||||||
Depreciation and amortization |
9,576 | 1,271 | 389 | | 11,236 | |||||||||||||||
Stock-based compensation |
712 | | | | 712 | |||||||||||||||
Foreign currency transaction gain |
| | 3 | | 3 | |||||||||||||||
Deferred taxes |
1,307 | (60 | ) | 81 | | 1,328 | ||||||||||||||
Excess tax benefits from stock-based compensation |
(625 | ) | | | | (625 | ) | |||||||||||||
Gain on disposal of fixed assets |
(31 | ) | (10 | ) | | | (41 | ) | ||||||||||||
Equity in consolidated subsidiaries |
(1,523 | ) | | | 1,523 | | ||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||
Accounts receivable |
(3,655 | ) | (1,453 | ) | 786 | | (4,322 | ) | ||||||||||||
Inventories |
(8,030 | ) | (734 | ) | (2,916 | ) | | (11,680 | ) | |||||||||||
Prepaid expenses and other assets |
1,454 | (300 | ) | 77 | | 1,231 | ||||||||||||||
Accounts payable |
(5,246 | ) | (513 | ) | (949 | ) | | (6,708 | ) | |||||||||||
Intercompany accounts |
(8,486 | ) | 4,754 | 3,732 | | | ||||||||||||||
Accrued liabilities |
(5,337 | ) | 271 | (37 | ) | | (5,103 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flow (used in) provided by operating activities |
(8,528 | ) | 2,662 | 3,253 | | (2,613 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH FLOW FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Capital expenditures |
(17,795 | ) | (1,617 | ) | (3,726 | ) | | (23,138 | ) | |||||||||||
Proceeds from sale of fixed assets |
24 | | | | 24 | |||||||||||||||
Acquisition of businesses, net of cash acquired |
(32,842 | ) | | | | (32,842 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flow used in investing activities |
(50,613 | ) | (1,617 | ) | (3,726 | ) | | (55,956 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Borrowings under revolving loan facilities |
253,028 | | | | 253,028 | |||||||||||||||
Repayments under revolving loan facilities |
(198,723 | ) | | | | (198,723 | ) | |||||||||||||
Purchase of treasury stock |
(297 | ) | | | | (297 | ) | |||||||||||||
Repayment of long-term debt |
(83 | ) | | | | (83 | ) | |||||||||||||
Excess tax benefits from stock-based compensation |
625 | | | | 625 | |||||||||||||||
Dividends paid |
(352 | ) | | | | (352 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flow provided by financing activities |
54,198 | | | | 54,198 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate on cash and cash equivalents |
| | 93 | | 93 | |||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(4,943 | ) | 1,045 | (380 | ) | | (4,278 | ) | ||||||||||||
CASH AND CASH EQUIVALENTS Beginning of period |
4,086 | 724 | 4,936 | | 9,746 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH AND CASH EQUIVALENTS End of period |
$ | (857 | ) | $ | 1,769 | $ | 4,556 | $ | | $ | 5,468 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NONCASH ACTIVITY |
||||||||||||||||||||
Unpaid capital expenditures |
90 | | | | 90 | |||||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION |
||||||||||||||||||||
Income taxes paid (refunded), net |
1,822 | (212 | ) | 37 | | 1,647 | ||||||||||||||
Cash interest paid |
13,222 | | | | 13,222 |
26
ITEM 2. | Managements 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, 2012. 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 can be volatile, and fluctuations in copper prices can significantly affect our sales and profitability. The average copper price on the COMEX was $3.25 per pound for the second quarter of 2013, as compared to $3.55 per pound for the second quarter of 2012, which represented a decrease of 8.5%.
Acquisition
On May 31, 2012, Coleman, through a 100%-owned subsidiary, completed the acquisition of most of the operating assets (and assumed certain liabilities) of Watteredge, Inc. (WE), an Ohio corporation that designs, manufactures and sells secondary power connectors, including electric arc furnace cables, resistance welding cables, industrial high-performance copper bus and accessories, and other high performance power conduction devices and accessories. WE serves the steel, chemical, chlorine, power generation, fiberglass and automotive industries and sells its products and services worldwide. Coleman retained WEs workforce and has continued all of WEs production at its current manufacturing plant in Avon Lake, Ohio. We believe the acquisition of WE strengthens and provides for greater diversification of our overall portfolio.
The acquisition of the assets of WE was structured as an all-cash transaction valued at approximately $33.9 million (equal to a $35.0 million preliminary purchase price adjusted by a $1.1 million working capital adjustment). The transaction was funded with proceeds from Colemans existing credit facility. WE has been included as a component of our Engineered Solutions segment reported herein.
27
Purchase Accounting Related to the WE Acquisition
The WE acquisition was accounted for under the purchase method of accounting. Accordingly, we have allocated the purchase price 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 WE are the primary factors which gave rise to the acquisition price. The purchase price allocation was finalized as of September 30, 2012.
Consolidated Results of Operations
The results of operations attributed from WE is included in our condensed consolidated results of operations beginning from the acquisition date. Accordingly, the consolidated statement of income for the three and six months ended June 30, 2013 includes operations related to the WE acquisition. The consolidated statement of income for the three and six months ended June 30, 2012 includes the impact of one month of operations related to WE.
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 restructuring charges, share-based compensation expense, and acquisition-related costs.
We believe both EBITDA and Adjusted EBITDA, when presented in conjunction with comparable GAAP measures, is useful because that information is used in evaluating the performance of our business. We use these measures in the preparation of our annual operating budgets and serve as an indicator of business performance and managements effectiveness with specific reference to these indicators. 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.
Similarly, we believe our use of Adjusted EPS provides an appropriate measure to use in assessing our performance across periods given that this measure provides an adjustment for certain significant items, the magnitude of which may vary significantly from period to period. However, we do not, and do not recommend that you solely use Adjusted EPS to assess our financial and earnings performance. We also use, and recommend that you use, diluted earnings per share in addition to Adjusted EPS in assessing our earnings performance. Finally, other companies may define Adjusted EPS differently and, as a result, our measure of Adjusted EPS may not be directly comparable to Adjusted EPS measures of other companies.
The following tables, which reconcile our measure of Adjusted EPS to diluted earnings per share, EBITDA, and Adjusted EBITDA to net income, should be used along with the below statements of income for the periods presented, and the accompanying results of operations review.
28
Diluted earnings per share, as determined in accordance with GAAP, to Adjusted EPS
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Diluted earnings per share, as determined in accordance with GAAP, to Adjusted EPS | (unaudited) | |||||||||||||||
Earnings per share |
$ | 0.41 | $ | 0.44 | $ | 0.72 | $ | 0.65 | ||||||||
Restructuring charges (1) |
0.01 | | 0.01 | 0.01 | ||||||||||||
Share-based compensation expense (2) |
0.05 | | 0.11 | 0.03 | ||||||||||||
Acquisition-related costs (3) |
| 0.02 | | 0.02 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted diluted earnings per share |
$ | 0.47 | $ | 0.46 | $ | 0.84 | $ | 0.71 | ||||||||
|
|
|
|
|
|
|
|
Net income, as determined in accordance with GAAP, to EBITDA and Adjusted EBITDA
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income, as determined in accordance with GAAP, to EBITDA and Adjusted EBITDA | (unaudited) (Thousands) |
|||||||||||||||
Net income |
$ | 7,340 | $ | 7,629 | $ | 12,592 | $ | 11,356 | ||||||||
Interest expense |
6,887 | 7,023 | 13,812 | 14,045 | ||||||||||||
Income tax expense |
4,045 | 3,893 | 6,375 | 5,853 | ||||||||||||
Depreciation and amortization expense (a) |
5,362 | 5,083 | 11,102 | 10,414 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
$ | 23,634 | $ | 23,628 | $ | 43,881 | $ | 41,668 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Restructuring charges (1) |
151 | 23 | 369 | 356 | ||||||||||||
Share-based compensation expense (2) |
1,273 | 114 | 2,879 | 712 | ||||||||||||
Acquisition-related costs(3) |
| 364 | | 366 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
ADJUSTED EBITDA |
$ | 25,058 | $ | 24,129 | $ | 47,129 | $ | 43,102 | ||||||||
|
|
|
|
|
|
|
|
(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 $7.3 million (or $0.41 per diluted share) and $12.6 million (or $0.72 per diluted share) for the three and six months ended June 30, 2013, respectively, as compared to net income of $7.6 million (or $0.44 per diluted share) and $11.4 million (or $0.65 per diluted share) for the three and six months ended June 30, 2012, respectively. We recorded EBITDA of $23.6 million and $43.9 million for the three and six months ended June 30, 2013, respectively, as compared to $23.6 million and $41.7 million in EBITDA for the three and six months ended June 30, 2012.
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) | Restructuring charges: We recorded restructuring charges of $0.2 million ($0.1 million after tax, or $0.01 per diluted share) and $0.4 million ($0.2 million or after tax, or $0.01 per diluted share) during the three and six months ended June 20, 2013, respectively, as compared to $0.0 million ($0.0 million after tax, or $0.00 per diluted share) and $0.4 million ($0.2 million after tax, or $0.01 per diluted share) during the three and six months ended June 30, 2012, respectively. The majority of these charges relate to relocation costs associated with our plant moves. Restructuring costs are excluded from our measures of Adjusted EBITDA and Adjusted EPS in order for such measures to more closely reflect a measure of underlying operating results. |
29
(2) | Share-based compensation expense: We recorded share-based compensation of $1.3 million ($0.8 million after tax, or $0.05 per diluted share) and $2.9 million ($1.9 million, or $0.11 per diluted share) during the three and six months ended June 30, 2013, respectively. We recorded share-based compensation of $0.1 million ($0.1 million after tax, or $0.00 per diluted share) and $0.7 million ($0.4 million after tax, or $0.03 per diluted share) for the three and six months ended June 30, 2012, respectively. Share-based compensation expense is excluded from our measures of Adjusted EBITDA and Adjusted EPS in order for such measures to more closely reflect a measure of underlying operating results given periodic fluctuations in the estimated fair value of a significant portion of the underlying share-based instruments. The increase in recorded stock-based compensation expense in the current period as compared to the prior year is primarily a result of performance share awards that vested upon achieving certain stock price targets. As these awards have now all vested, there will be no impact on stock-based compensation expense from these awards in future periods. |
(3) | Acquisition-related costs: Our results for 2012 included acquisition-related costs of $0.4 million ($0.4 million after tax, or $0.02 per diluted share) for the three and six months ended June 30, 2012. Acquisition-related costs include outside legal, consulting and other fees, and direct expenses incurred 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. |
30
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 June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||||||||||||
Total Sales Volume in Pounds (1) | (Thousands) | (Thousands) | ||||||||||||||||||||||
Distribution |
45,777 | 44,189 | 3.6 | % | 87,456 | 86,169 | 1.5 | % | ||||||||||||||||
OEM |
22,543 | 21,624 | 4.2 | 44,400 | 44,185 | 0.5 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Distribution and OEM |
68,320 | 65,813 | 3.8 | 131,856 | 130,354 | 1.2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Average COMEX Copper (2) |
$ | 3.25 | $ | 3.55 | (8.5 | ) | $ | 3.43 | $ | 3.67 | (6.5 | ) |
(1) | Engineered Solutions segment 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. |
The increase in volume related to both the Distribution and OEM segments for the three and six months ended June 30, 2013, was primarily attributable to increases in demand across a variety of product categories reflective of generally overall better market conditions including volume increases recorded within both industrial and construction-related categories. These increases were offset by declines from planned volume reductions in other product categories.
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 June 30, 2013 Compared with Three Months Ended June 30, 2012
Three Months Ended June 30, | Period-over-Period Change | |||||||||||||||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||||||||||||||
Amount | % | Amount | % | $ Change | % Change | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(Thousands, except per share data) | ||||||||||||||||||||||||
Distribution net sales |
162,058 | 69.3 | % | $ | 164,310 | 71.1 | % | $ | (2,252 | ) | (1.4 | )% | ||||||||||||
OEM net sales |
59,195 | 25.3 | 56,327 | 24.4 | 2,868 | 5.1 | ||||||||||||||||||
Engineered Solutions net sales |
12,545 | 5.4 | 10,595 | 4.5 | 1,950 | 18.4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Consolidated net sales |
233,798 | 100.0 | 231,232 | 100.0 | 2,566 | 1.1 | ||||||||||||||||||
Gross profit |
35,639 | 15.2 | 35,983 | 15.6 | (344 | ) | (1.0 | ) | ||||||||||||||||
Selling, general and administrative expenses |
15,365 | 6.6 | 15,744 | 6.8 | (379 | ) | (2.4 | ) | ||||||||||||||||
Intangible amortization expense |
1,976 | 0.8 | 1,742 | 0.8 | 234 | 13.4 | ||||||||||||||||||
Restructuring charges |
151 | 0.0 | 23 | 0.0 | 128 | 556.5 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
18,147 | 7.8 | 18,474 | 8.0 | (327 | ) | (1.8 | ) | ||||||||||||||||
Interest expense |
6,887 | 2.9 | 7,023 | 3.0 | (136 | ) | (1.9 | ) | ||||||||||||||||
Other income |
(125 | ) | 0.0 | (71 | ) | 0.0 | (54 | ) | 76.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income before income taxes |
11,385 | 4.9 | 11,522 | 5.0 | (137 | ) | (1.2 | ) | ||||||||||||||||
Income tax expense |
4,045 | 1.7 | 3,893 | 1.7 | 152 | 3.9 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 7,340 | 3.2 | $ | 7,629 | 3.3 | $ | (289 | ) | (3.8 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Diluted income per share |
$ | 0.41 | $ | 0.44 |
Net sales
Our 1.1% increase in net sales for the three months ended June 30, 2013, as compared to 2012, reflected the following factors:
| $2.9 million attributable to our OEM segment due to increases in demand across a variety of product categories and $2.0 million attributable to our Engineered Solutions segment, including results for WE which included only one month of activity for the three months ended June 30, 2012. This increase was offset by a decline of $2.3 million from our Distribution segment, primarily due to a decline in copper prices. |
31
| Overall volumes measured in pounds shipped increased 3.8%, or $8.1 million, for the second quarter 2013 as compared to 2012 due to increases in demand across a variety of product categories. We measure volume in pounds shipped in our Distribution and OEM segments but not for our Engineered Solutions segment, for which such a metric is not as meaningful given the different nature of products offered. |
| Sales dollars per pound shipped declined 3.4% during the quarter, as compared to the second quarter of 2012, which, in part, reflects both a shift in the mix of products sold and the fact that average copper prices declined 8.5% during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. These factors accounted for a $7.5 million decline in our sales dollars. |
Gross profit
The $0.3 million total decrease in gross profit for the three months ended June 30, 2013, as compared to the three months ended June 30, 2012, was comprised of $0.8 million from our Distribution segment primarily, offset by an increase of $0.5 million from our Engineered Solutions segment which includes the impact of three months from WE, as compared to only one month for the quarter ended June 30, 2012. Gross profit in the OEM segment was flat during the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. Our gross profit as a percentage of net sales (gross profit rate) decreased to 15.2% for the three months ended June 30, 2013, as compared to 15.6% for the three months ended June 30, 2012. Both the decrease in gross margin dollars and gross profit rate are due to the impact of additional plant costs including increased health care costs, which have increased our manufacturing overhead expense, and incremental training and labor costs associated with our plant consolidations, which we expect will be eliminated with the completion of such consolidation efforts in early 2014.
Selling, general and administrative (SG&A) expense
SG&A expenses decreased $0.4 million for the three months ended June 30, 2013, as compared to the three months ended June 30, 2012. Our Engineered Solutions segment accounted for a $0.4 million increase to our overall SG&A resulting from our WE acquisition whose results are included in the three months ended June 30, 2013, while only one month for the three months ended June 30, 2012. Excluding the impact of our Engineered Solutions segment, our SG&A decreased by $0.8 million. This overall decrease came from a variety of expense categories, most notably payroll and related benefits.
Intangible amortization expense
The increase of $0.2 million in intangible amortization for the three months ended June 30, 2013, as compared to 2012, reflects the impact of amortization recorded in relation to the WE acquisition, 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 $0.2 million in restructuring costs for the three months ended June 30, 2013. The majority of these charges related to relocation costs associated with our plant consolidations.
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 June 30, | Year-over-Year Change | |||||||||||||||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||||||||||||||
Amount | %Net Sales | Amount | %Net Sales | $ Change | % Change | |||||||||||||||||||
(Thousands) | ||||||||||||||||||||||||
Operating Income: |
||||||||||||||||||||||||
Distribution |
$ | 17,170 | 10.6 | % | $ | 17,706 | 10.8 | % | $ | (536 | ) | (3.0 | )% | |||||||||||
OEM |
5,111 | 8.6 | 5,047 | 9.0 | 64 | 1.3 | ||||||||||||||||||
Engineered Solutions |
1,227 | 9.8 | 1,111 | 10.5 | 116 | 10.4 | ||||||||||||||||||
Corporate |
(5,361 | ) | (5,390 | ) | 29 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Consolidated operating income |
$ | 18,147 | 7.8 | % | $ | 18,474 | 8.0 | % | $ | (327 | ) | (1.8 | )% | |||||||||||
|
|
|
|
|
|
32
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, share-based compensation expense, and intangible amortization. Our Distribution, OEM, and Engineered Solutions 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.
The Distribution segment operating income decreased for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012, primarily reflecting the impact of lower gross profit due to increased health care costs which have increased our manufacturing overhead expense temporarily, incremental training and labor costs associated with our plant consolidations, and the mix of products sold. This decline was offset by increases in both our Engineered Solutions and OEM segments. The Engineered Solutions segment operating income increased for the three months ended June 30, 2013, primarily reflecting the contribution provided by our acquisition of WE, which only contributed one month of operations for the three months ended June 30, 2012. This increase was offset by a decline from TRCs military business, which was adversely impacted by the U.S. Government sequestration. The increase in operating income from the OEM segment is primarily attributable to increased sales volume and lower operating costs.
Interest expense
We incurred decreased interest expense due to lower average outstanding borrowings for second quarter of 2013 compared to the second quarter of 2012.
Other income, net
We recorded other income in the second quarter of 2013 and 2012 reflecting the impact of exchange rate changes on our Canadian subsidiary.
Income tax expense
We recorded income tax expense of $4.0 million for the first three months ended June 30, 2013 as compared to income tax expense of $3.9 million for the three months ended June 30, 2012. Our effective tax rate is 35.5% for the three months ended June 30, 2013 as compared to 33.8% for the three months ended June 30, 2012, primarily due to the mix of pre-tax income among foreign jurisdictions.
Six Months Ended June 30, 2013 Compared with Six Months Ended June 30, 2012
Six Months Ended June 30, | Period-over-Period Change | |||||||||||||||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||||||||||||||
Amount | % | Amount | % | $ Change | % Change | |||||||||||||||||||
(unaudited) (Thousands, except per share data) |
||||||||||||||||||||||||
Distribution net sales |
$ | 313,961 | 68.8 | % | $ | 319,370 | 70.7 | % | $ | 5,409 | (1.7 | )% | ||||||||||||
OEM net sales |
116,986 | 25.6 | 114,242 | 25.3 | 2,744 | 2.4 | ||||||||||||||||||
Engineered Solutions net sales |
25,364 | 5.6 | 18,111 | 4.0 | 7,253 | 40.0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Consolidated net sales |
456,311 | 100.0 | 451,723 | 100.0 | 4,588 | 1.0 | ||||||||||||||||||
Gross profit |
69,937 | 15.3 | 66,653 | 14.8 | 3,284 | 4.9 | ||||||||||||||||||
Selling, general and administrative expenses |
32,861 | 7.2 | 31,474 | 7.0 | 1,387 | 4.4 | ||||||||||||||||||
Intangible amortization expense |
4,161 | 0.9 | 3,566 | 0.8 | 595 | 16.7 | ||||||||||||||||||
Restructuring charges |
369 | 0.1 | 356 | 0.2 | 13 | 3.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
32,546 | 7.1 | 31,257 | 6.9 | 1,289 | 4.1 | ||||||||||||||||||
Interest expense |
13,812 | 3.0 | 14,045 | 3.1 | (233 | ) | (1.7 | ) | ||||||||||||||||
Other (income) loss |
(233 | ) | (0.1 | ) | 3 | 0.0 | (236 | ) | 787 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income before income taxes |
18,967 | 4.2 | 17,209 | 3.8 | 1,758 | 10.2 | ||||||||||||||||||
Income tax expense |
6,375 | 1.4 | 5,853 | 1.3 | 522 | 8.9 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
$ | 12,592 | 2.8 | $ | 11,356 | 2.5 | $ | 1,236 | 10.9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Diluted income per share |
$ | 0.72 | $ | 0.65 |
33
Net sales
The 1.0% increase in net sales for the first six months of 2013 as compared to the first six months of 2012 reflected the following factors:
| $7.3 million increase attributable to our Engineered Solutions segment, including results from our acquisition of WE for the six months ended June 30, 2013 yet only one month of results for the six months ended June 30, 2012. Sales from our OEM segment contributed an increase of $2.7 million due to generally better overall market conditions. These increases were offset by a $5.4 million decline in sales from our Distribution segment due to planned volume reductions from certain product categories. |
| Overall volumes measured in pounds shipped increased 1.2%, or $5.1 million. We measure volume in pounds shipped in our Distribution and OEM segments but not in our Engineered Solutions segment for which such a metric is not as meaningful given the different nature of products offered. |
| Sales dollar per pound shipped declined 1.8% during the first six months of 2013 as compared to the same period in 2012, which, in part, reflects both a shift in the mix of products sold and the fact that average copper prices declined 6.5% during the same time period. These factors accounted for an $8.5 million decline in our sale dollars. |
34
Gross profit
The $3.3 million total increase in gross profit for the six months ended June 30, 2013, as compared to the six months ended June 30, 2012, comprised of an increase of $1.6 million within our Engineered Solutions segment, which includes contributions from our WE acquisition. Our results for the six months ended June 30, 2013 include six months of operations from WE while our results for the six months ended June 30, 2012 only include one month of operations from WE. The remaining increase in our gross profit includes $1.1 million and $0.6 million from our Distribution and OEM segments, respectively. Additionally, our gross profit rate increased to 15.3% from 14.8%. The increase in gross profit dollars from Distribution and OEM segments and the relative impact on our overall gross profit rate is due to increased sales volume and also customer rationalization of certain low margin customers in the first quarter of 2013. These increases were offset by the factors described above pertaining to the three months ended June 30, 2013.
SG&A expense
The $1.4 million increase in SG&A expenses for the six months ended June 30, 2013, as compared to the six months ended June 30, 2012, was primarily related to the Engineered Solutions segment. Our recorded expenses include the impact from our WE acquisition, which contributed six months of expenses in 2013 and only one month of expenses in 2012. Overall, our Engineered Solutions segment contributed an increase of $1.3 million of expenses. Excluding the impact of our Engineered Solutions segment, our SG&A increased by $0.1 million. The largest increase was $2.2 million related to stock compensation expense. A critical component in determining stock compensation expense for certain unvested awards is the companys stock price. The growth in the our stock price during the six months ended June 30, 2013 as compared to a stock price decline for the six months ended June 30, 2012 drove the year-over-year increase in total stock compensation expense. This increase was offset by decreases across several expense categories including payroll and related benefits of $1.1 million due in part from the factors described above for the three months ended June 30, 2013. We have further decreases attributable to acquisition costs of $0.4 million, advertising costs of $0.3 million and other costs of $0.3 million.
Intangible amortization expense
The increase of $0.6 million in intangible amortization reflects the impact of amortization recorded in relation to the WE acquisition, 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.
35
Restructuring charges
We recorded $0.4 million in restructuring costs in the first six months of 2013. The majority of these charges relate to relocation costs associated with our plant consolidations and severance costs.
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.
Six Months Ended June 30, | Year-over-Year Change | |||||||||||||||||||||||
2013 | 2012 | 2013 vs. 2012 | ||||||||||||||||||||||
Amount | %Net Sales | Amount | %Net Sales | $ Change | % Change | |||||||||||||||||||
(Thousands) | ||||||||||||||||||||||||
Operating Income (Loss): |
||||||||||||||||||||||||
Distribution |
$ | 31,898 | 10.2 | % | $ | 29,901 | 9.4 | % | $ | 1,997 | 6.7 | % | ||||||||||||
OEM |
10,389 | 8.9 | 9,646 | 8.4 | 743 | 7.7 | ||||||||||||||||||
Engineered Solutions |
2,137 | 8.4 | 1,827 | 10.1 | 310 | 17.0 | ||||||||||||||||||
Corporate |
(11,878 | ) | (10,117 | ) | (1,761 | ) | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Consolidated operating income |
$ | 32,546 | 7.1 | % | $ | 31,257 | 6.9 | % | $ | 1,289 | 4.1 | % |
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, share-based compensation expense, and intangible amortization. Our Distribution, OEM, and Engineered Solutions 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.
The increase in operating income of $1.3 million for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 includes increased contributions from all three reportable segments. The $2.0 million increase from our Distribution primarily reflected an improvement in gross profit, resulting from increased volume, and lower operating expenses. The $0.7 million increase from the OEM segment primarily reflected an improvement in gross profit due to increased volumes, the rationalization of certain low margin customers, and to a lesser extent, lower operating expenses. The $0.3 million increase from the Engineered Solutions segment primarily reflected the contribution provided by our acquisition of WE, which contributed six months of operations during 2013 while only one month during the same period in 2012. This increase was offset by a decline from TRCs military business, which was adversely impacted by the U.S. Government sequestration.
Interest expense
We incurred decreased interest expense due to lower average outstanding borrowings for the second quarter of 2013 compared to the second quarter of 2012.
Other (income) loss, net
We recorded other income for the six months ended June 30, 2013 reflecting the impact of exchange rate changes on our Canadian subsidiary as compared to a loss recorded for the six months ended June 30, 2012.
Income tax expense
We recorded income tax expense of $6.4 million for the six months ended 2013 compared to income tax expense of $5.9 million for the six months ended June 30, 2012, with the increase primarily reflecting increased pre-tax income. Our effective tax rate, however, declined to 33.6% from 34.0% due primarily to a discrete item recorded in the first quarter of 2013 following the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013.
36
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 June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited) (Thousands) |
||||||||||||||||
Net cash flow from operating activities |
$ | 7,769 | $ | 18,393 | $ | 5,269 | $ | (2,613 | ) | |||||||
Interest expense |
6,887 | 7,023 | 13,812 | 14,045 | ||||||||||||
Income tax expense |
4,045 | 3,893 | 6,375 | 5,853 | ||||||||||||
Excess tax benefits from stock-based compensation |
2,621 | (26 | ) | 2,855 | 625 | |||||||||||
Deferred taxes |
(2,525 | ) | (774 | ) | (2,417 | ) | (1,328 | ) | ||||||||
(Loss)Gain on disposal of fixed assets |
(58 | ) | 13 | (67 | ) | 41 | ||||||||||
Share-based compensation expense |
(1,273 | ) | (114 | ) | (2,879 | ) | (712 | ) | ||||||||
Foreign currency transaction gain (loss) |
97 | 71 | 234 | (3 | ) | |||||||||||
Amortization of debt issuance costs (a) |
(426 | ) | (411 | ) | (850 | ) | (822 | ) | ||||||||
Changes in operating assets and liabilities |
6,497 | (4,440 | ) | 21,549 | 26,582 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
$ | 23,634 | $ | 23,628 | $ | 43,881 | $ | 41,668 | ||||||||
|
|
|
|
|
|
|
|
(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. |
Outlook
Looking towards the second half of 2013, we anticipate modest growth in overall demand for our products measured in total pounds shipped. We continue to monitor industrial market demand, U.S. housing starts statistics and commercial construction forecasts. We believe our platform and capital investments position us well for growth in one or more of these areas, particularly any meaningful and sustained growth in housing starts given our diversified product offerings which we believe will serve increased customer demand brought about by such growth in housing. Visibility with respect to the timing and magnitude of such growth, however, remains limited and, as such, the benefits from such factors may not significantly impact our results in the second half of 2013.
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 June 30, 2013 |
As of December 31, 2012 |
|||||||
Revolving Credit Facility expiring October 2016 |
$ | 38,850 | $ | 50,430 | ||||
Senior notes due February 15, 2018 |
272,939 | 272,714 | ||||||
Capital lease obligations |
618 | 695 | ||||||
|
|
|
|
|||||
Total long-term debt, including current portion |
$ | 312,407 | $ | 323,839 | ||||
|
|
|
|
As of June 30, 2013, we had a total of $6.4 million in cash and cash equivalents and $38.9 million in outstanding borrowings under our Revolving Credit Facility.
37
Revolving Credit Facility
We have a $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, 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.
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 0.50% and the lenders prime rate) plus a range of 0.25% to 0.75% or LIBOR 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. We currently have $30.7 million in appraised real estate and certain appraised equipment in our borrowing base. Our current availability includes additional availability that may be generated by adding appraised real estate and/or appraised equipment not exceed $62.5 million to the borrowing base.
The Revolving Credit Facility is guaranteed by CCI International, Inc. (CCI International), TRC (excluding TRCs 100%-owned foreign subsidiary, TRC Honduras, S.A. de C.V.), Patco Electronics (Patco), and WE, 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, Patco and WE, 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, Patco, and WE and 65% of the capital stock of our Canadian foreign subsidiary, but not our Chinese 100%-owned entity.
We maintained greater than $30.0 million of monthly excess availability during the first and second quarters of 2013.
As of June 30, 2013, 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 15th and August 15th. As of June 30, 2013, 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. TRC, Patco, and WE became subsidiary guarantors of the Senior Notes following the acquisition of those businesses.
As of June 30, 2013, we were in compliance with all of the covenants of our Senior Notes.
38
Current and Future Liquidity
In general, we require cash for working capital, capital expenditures, debt repayment, dividends, and interest. Our working capital requirements tend to increase when we experience significant increased demand for products or significant copper price increases which, in turn, may require us to borrow additional amounts against our Revolving Credit Facility. 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.
As of June 30, 2013, we had $159.9 million in excess availability under the Revolving Credit Facility, and $6.4 million in cash and cash equivalents. We are permanently reinvested in our Honduran subsidiary and do not intend to repatriate funds. Cash held by our Honduran subsidiary of $3.1 million is not available to fund domestic operations unless these funds were repatriated. The Company would need to accrue and pay taxes of approximately $1.1 million if the funds were repatriated. 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.
If we experience a deficiency in earnings compared to our fixed charges in the future, we would need to fund the fixed charges through additional 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, we would need to seek additional sources of capital. 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 Senior Notes.
At June 30, 2013, we have $38.9 million outstanding against our Revolving Credit Facility. Of this total, we have classified $18.6 million as a component of our current portion of long-term borrowings based on our forecasted repayments over the next twelve months.
On August 6, 2013, our Board of Directors declared a quarterly dividend of $0.04 per common share, payable on August 30, 2013, to stockholders of record as of the close of business on August 16, 2013. Future declarations of quarterly dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.
On August 3, 2011, our Board of Directors authorized the purchase of up to 0.5 million shares of the Companys common stock in open market or privately negotiated transactions. The repurchase plan expires in August 2013. To date, we have repurchased 0.4 million shares pursuant to this repurchase program. We did not repurchase any shares pursuant to this repurchase program during the first and second quarters of 2013. There can be no assurance that any additional share purchases will be made. The number of shares actually purchased will depend on various factors, including limitations imposed by the Companys debt instruments, the price of our common stock, overall market and business conditions and managements assessment of competing alternatives for capital deployment.
Changes in Cash Flows: Six Months Ended June 30, 2013 Compared with Year Ended June 30, 2012
Net cash provided by operating activities for the six months ended June 30, 2013 was $5.3 million as compared $2.6 million of net cash used in operating activities for the six months ended June 30, 2012. The $7.9 million change in cash provided for operating activities was primarily a result of changes in working capital and, to a lesser degree, higher levels of net income. Changes in operating cash flows used to fund accounts payable decreased $9.0 million, primarily related to a lower volume of inventory purchased and a decrease in the value of our inventory due to copper price declines year-over-year. These same factors also contributed $7.0 million less in operating cash flows used to acquire inventory. These increases in operating cash flows were offset by declines of $8.0 associated with prepaid and other current assets, primarily attributable to the tax benefit recorded from our recent stock option exercises. This benefit will be recognized in a future period offsetting the amount of taxes paid. Lastly, operating cash flows provided by accounts receivable declined approximately $3.8 million dollars due to increased sales in the month of June 2013, as compared to June 2012, and a reduction in sales dollars collected due to declines in copper prices year-over-year.
Net cash used in investing activities for the six months ended June 30, 2013 was $5.6 million as compared to $56.0 million for the six months ended June 30, 2012. Our current year spending is reflective of capital investments made at various manufacturing locations to expand our capacity and capabilities. We expect our full-year 2013 capital expenditures to be approximately $14.0 to $16.0 million. Comparatively, we used $50.4 million less in investing cash flow in 2013 versus 2012. We expended $32.8 million and $23.1 million related to our acquisition of WE and capital investments during the six months ended June 30, 2012. Our capital investments during 2012 included $6.5 million used to acquire three previously leased manufacturing facilities.
39
Net cash used in financing activities for the six months ended June 30, 2013 was $1.9 million as compared to cash provided by $54.2 million for the six months ended June 30, 2012. The increase in cash used in financing activities was primarily a result of lower net borrowings associated with our revolving line of credit. During the period, the company paid a net $11.6 million to reduce the revolver while borrowing a net $54.3 million during 2012. Additionally, payments of shareholder dividends increased $0.8 million due to $0.06 per share dividend paid in the 2013, as compared to $0.04 per share dividend paid in 2012. This increase in cash used for financing activities was offset by $8.8 million in proceeds received from stock option exercises, as compared to $0.0 million in proceeds received in 2012.
Goodwill and Other Intangible Assets
After performing our last annual goodwill impairment test as of December 31, 2012, we indicated that our TRC Military reporting unit, with recorded goodwill of $20.5 million, had excess fair value of 7% of its carrying value. At the conclusion of 2012, we were operating our business amidst a general uncertainty involving U.S. military spending including the announced automatic spending reductions, referred to as sequestration to occur throughout 2013. As of June 30, 2013, we are continuing to monitor the results of the TRC Military reporting unit. There are several projects in various stages of testing and approval which have been considered within our business assumptions. A negative outcome on any or all projects could impact future operations, which when combined with the effects of sequestration, could result in an impairment charge.
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 Managements 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, 2011 (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, including PVC and fuel; |
| increased competition from other wire and cable manufacturers, including foreign manufacturers; |
| pricing pressures causing margins to decrease; |
| our dependence on indebtedness and our ability to satisfy our debt obligations; |
| changes in the cost of labor; |
| failure to identify, finance or integrate acquisitions; |
| product liability claims and litigation resulting from the design or manufacture of our products; |
| advancements in wireless technology; |
| impairment charges related to our goodwill and long-lived assets; |
| restructuring charges; |
| disruption in the importation of raw materials and products from foreign-based suppliers; |
| our ability to maintain substantial levels of inventory; |
| increase in exposure to political and economic development crises, instability, terrorism, civil strife, expropriation, and other risks of doing business in foreign markets; 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, 2012. |
40
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.
41
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk |
Our principal market risks are exposure to changes in commodity prices, primarily copper prices, interest rates on borrowings and exchange rate risk relative to our operations in Canada.
Commodity Risk. Certain raw materials used in our products are subject to price volatility, most notably copper, which is the primary raw material used in our products. The price of copper is particularly volatile and can affect our net sales and profitability. We purchase copper at prevailing market prices and, through multiple pricing strategies, generally attempt to pass along to our customers changes in the price of copper and other raw materials. From time to time, we enter into derivative contracts, including copper futures contracts, to mitigate the potential impact of fluctuations in the price of copper on our pricing terms with certain customers. We do not speculate on copper prices. All of our copper futures contracts are tied to the COMEX copper market index and the value of our futures contracts varies directly with underlying changes in the related COMEX copper futures prices. We record these derivative contracts at fair value on our consolidated balance sheet as either an asset or liability. At June 30, 2013, we had contracts with a net aggregate fair value of $0.2 million, consisting of contracts to sell 0.3 million pounds of copper in September 2013. A hypothetical adverse movement of 10% in the price of copper at June 30, 2013, with all other variables held constant, would have resulted in an aggregate loss in the fair value of our commodity futures contracts of approximately $0.1 million as of June 30, 2013.
Interest Rate Risk. We have exposure to changes in interest rates on a portion of our debt obligations. As of June 30, 2013, approximately 12.4% of our debt was variable rate, primarily our borrowings under our Revolving Credit Facility for which interest costs are based on either the lenders prime rate or a LIBOR-based rate. Based on the amount of our variable rate borrowings at June 30, 2013, which totaled approximately $38.9 million, an immediate one percentage point change in LIBOR would change our annual interest expense by approximately $0.4 million. This estimate assumes that the amount of variable rate borrowings remains constant for an annual period and that the interest rate change occurs at the beginning of the period.
Foreign Currency Exchange Rate Risk. We have exposure to changes in foreign currency exchange rates related to our Canadian operations. Currently, we do not manage our foreign currency exchange rate risk using any financial or derivative instruments, such as foreign currency forward contracts or hedging activities. We recorded an aggregate pre-tax income of approximately $0.1 million and 0.2 million for the three and six months ended June 30, 2013, respectively, as compared to pre-tax income of $0.1 million and a pre-tax loss of $0.0 million for the three and six months ended June 30, 2012, respectively, related to exchange rate fluctuations between the U.S. dollar and Canadian dollar.
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 June 30, 2013. 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 June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
42
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.
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 June 30, 2013 and December 31, 2012, we have a $0.3 million accrual recorded for this liability in accordance with ASC 450.
We recently received a civil complaint for $2.3 million plus attorneys fees and expenses related to a recent acquisition. We believe the civil complaint lacks merit and is not payable by us. We believe that we have substantial and meritorious defenses to all currently pending matters. As a result of these and other factors, and although no assurances are possible, our currently pending matters are not expected to have a material adverse effect on our business, financial condition or results of operations.
Although no assurances are possible, we believe that our accruals related to environmental litigation and other claims are sufficient and that these items and our rights to available insurance and indemnity will be resolved without material adverse effect on our financial position, results of operations or cash flows.
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, 2012. There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Effective August 6, 2013, the Board of Directors of Coleman amended and restated the Companys Amended and Restated By-Laws (as amended and restated, the By-Laws) to reflect certain changes (including to the advanced notice by-law) and to include a new Article XII, which designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Coleman, (ii) any action asserting a claim or breach of fiduciary duty owed by any director, officer or other employee of Coleman to Coleman or Colemans stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the DGCL), or (iv) any action asserting a claim governed by the internal affairs doctrine. While Article XII became effective August 6, 2013, the Board of Directors will put the provision up for a vote of the shareholders at Colemans next Annual Meeting and the Board will rescind Article XII if not approved by the shareholders.
The foregoing summary of the By-Laws is qualified in its entirety by reference to the By-Laws, which are attached as Exhibit 3.2 to this Quarterly Report on Form 10-Q and incorporated by reference herein.
43
ITEM 6. | Exhibits |
See Index to Exhibits.
44
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: August 9, 2013 |
By | /s/ G. Gary Yetman | ||
Chief Executive Officer and President | ||||
Date: August 9, 2013 |
By | /s/ Alan C. Bergschneider | ||
Chief Financial Officer, Executive | ||||
Vice President, Secretary and Treasurer |
45
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. | |
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 June 30, 2013, formatted in XBRL: (i) the Condensed Consolidated Statements of Income; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; and iv) the Notes to Condensed Consolidated Financial Statements furnished herewith. |
46
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
COLEMAN CABLE, INC.
ARTICLE I
OFFICES
Section 1.1. REGISTERED OFFICE. The registered office of the Corporation in the State of Delaware shall be located at the principal place of business in such state of the corporation or individual acting as the Corporations registered agent in Delaware.
Section 1.2. OTHER OFFICES. In addition to its registered office in the State of Delaware, the Corporation may have an office or offices in such other places as the Board of Directors may from time to time designate or the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1. TIME AND PLACE. All meetings of the stockholders of the Corporation shall be held at such time and place, either within or without the State of Delaware, as designated by the Board of Directors and as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2.2. ANNUAL MEETING. The annual meeting of stockholders of the Corporation for the election of directors shall be held at such date, time and place, if any, either within or without the State of Delaware, as shall be determined by the Board of Directors and stated in the notice of meeting. Any other proper business may be transacted at the annual meeting. The Board of Directors may postpone, reschedule, adjourn, recess or cancel any annual meeting previously called by the Board of Directors.
Section 2.3. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of stockholders for any purpose or purposes, if not otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors and not by the stockholders of the Corporation. Business transacted at any special meeting shall be confined to the purposes stated in the notice of meeting. The Board of Directors may postpone, reschedule, adjourn, recess or cancel any special meeting previously called by the Board of Directors.
Section 2.4. NOTICE OF MEETINGS. Unless otherwise prescribed by law, notice of the time and place of every annual or special meeting of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, in the manner prescribed by Section 6.1 of these By-Laws, except that where the matter to be acted upon is a merger or consolidation of the Corporation, or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than twenty
(20) nor more than sixty (60) days prior to such meeting. The notice shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
Section 2.5. QUORUM AND ADJOURNMENT OF MEETINGS. The holders of a majority in voting power of the outstanding shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by the Certificate of Incorporation or these By-laws. If a quorum shall not be present in person or represented by proxy at any meeting of the stockholders at which action is to be taken by the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, by majority in voting power thereof, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall attend. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of adjourned meeting shall be given to each stockholder of record entitled to vote thereat.
Section 2.6. VOTE REQUIRED. At any meeting of stockholders at which a quorum is present, directors shall be elected by a plurality of the votes cast, and all other matters shall be decided by a majority of votes cast by the stockholders present in person or represented by proxy and entitled to vote, unless the matter is one for which, by express provisions of statute, of the Certificate of Incorporation, these By-Laws, the rules and regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, a different vote is called for, in which case such express provision shall govern and control the vote required for determination of such matter.
Section 2.7. VOTING. At any meeting of the stockholders, each stockholder having the right to vote shall be entitled to vote in person or by proxy. To determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date which shall be not more than sixty (60) days nor less than ten (10) days before the date of such meeting. Except as otherwise provided by the Certificate of Incorporation or by statute, each stockholder of record shall be entitled to one (1) vote for each outstanding share of capital stock standing in his or her name on the books of the Corporation as of the record date. Voting at meetings of stockholders need not be by written ballot. A complete list of the stockholders entitled to vote at any meeting of stockholders arranged in alphabetical order with the address of each and the number of shares held by each, shall be prepared by the Secretary. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting during ordinary business hours for a period of at least ten (10) days prior to the meeting, at the locations specified by the Delaware General Corporation Law. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 2.8. BUSINESS TO BE BROUGHT BEFORE A MEETING OF STOCKHOLDERS. To be properly brought before a meeting of stockholders, nominations of persons for the election to the Board of Directors and the proposal of other business to be considered by the stockholders
2
must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by or at the direction of the Board of Directors or any committee thereof, or (iii) otherwise properly brought before an annual meeting (or a special meeting called for the purpose of electing one or more directors to the Board of Directors) by a stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section. In addition to any other applicable requirements, for nominations or other business to be brought before an annual meeting by a stockholder of the Corporation, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business (other than nominations of person for election to the Board of Directors) must constitute a proper matter for stockholder action. With respect to stockholders proposals and the nomination of directors, to be timely, a stockholders notice must be delivered to the Secretary at the principal executive offices of the Corporation, (i) with respect to an election of directors to be held at the annual meeting of stockholders, not later than 120 days prior to the anniversary date of the proxy statement for the immediately preceding annual meeting of the stockholders, (ii) with respect to a stockholder proposal submitted for consideration at the annual meeting of stockholders, not later than 120 days prior to the anniversary date of the proxy statement for the immediately preceding annual meeting of the stockholders and (iii) with respect to an election of directors to be held at a special meeting of stockholders, not later than the close of business on the 10th day following the day on which such notice of the special meeting and of the nominees proposed by the Board of Directors to be elected at such special meeting was first mailed to the stockholders or public disclosure of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such special meeting was first made by the Corporation, whichever first occurs. In no event shall the public announcement of an adjournment or postponement of a meeting of the stockholders commence a new time period (or extend a time period) for the giving of a stockholders notice as described above. A stockholders notice to the Secretary shall set forth: (a) as to each matter of proposed business a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the By-laws of the Corporation, the language of the proposed amendment), and the reasons for conducting such business at the annual meeting, (b) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and (c) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the nomination is made (i) the name and address, as they appear on the Corporations books, of the stockholder proposing such business and the name and address of the beneficial owner, if any, (ii) the acquisition date, the class or series and the number of shares of voting stock of the Corporation which are owned of record and beneficially by the stockholder and such beneficial owner, (iii) any material interest of the stockholder or the beneficial owner in such business, (iv) a representation that the stockholder intends to appear in person or by proxy at the annual meeting to bring the proposed business before the meeting, (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the
3
Corporations outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, and (vi) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.8 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made or solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholders nominee or proposal in compliance with such stockholders representation as required by this Section 2.8) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 2.8, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.8, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.8_, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
Section 2.9. PROXIES. No proxy shall be valid after the expiration of three (3) years from its date, unless a longer period is provided for in the proxy. Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or his or her legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given.
Section 2.10. CONSENTS. The provision of these By-Laws covering notices and meetings to the contrary notwithstanding, any action required or permitted to be taken at any meeting of stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing by such stockholders.
Section 2.11. CONDUCT OF MEETINGS. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of the meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such
4
presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The chairman of the meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such chairman should so determine, such chairman shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
ARTICLE III
DIRECTORS
Section 3.1. BOARD OF DIRECTORS. The business and affairs of the Corporation shall be managed by or under the director of the Board of Directors. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things on its behalf as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.
Section 3.2. NUMBER; ELECTION AND TENURE. The number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by the Board of Directors. Except as provided by law, the Certificate of Incorporation or these By-Laws, directors shall be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III. The term of office of the initial Class I directors shall expire on the date of the first annual meeting of stockholders following the filing of the Amended and Restated Certificate of Incorporation (the Effective Time ), the term of office of the initial Class II directors shall expire at the second annual meeting of the stockholders after the Effective Time and the term of office of the initial Class III directors shall expire at the third annual meeting of the stockholders after the Effective Time. At each annual stockholders meeting after the Effective Time, directors to replace those of a class whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting of stockholders and until their respective successors shall have been duly elected and qualified. If the number of directors is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable.
Section 3.3. RESIGNATION AND REMOVAL. A director may resign at any time by giving written notice to the Board of Directors or to the President of the Corporation. Such resignation shall take effect upon receipt thereof by the Board of Directors or by the President, unless otherwise specified therein. Any one or more of the directors may be removed only for cause, at
5
any time by the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
Section 3.4. VACANCIES. A vacancy occurring for any reason and newly created directorships resulting from an increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other causes shall be filled solely by the affirmative vote of a majority of the directors then in office, though less than a quorum (and not by stockholders), or by the sole remaining director.
Section 3.5. COMPENSATION. Each director shall receive for services rendered as a director of the Corporation such compensation as may be fixed by the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
MEETINGS OF THE BOARD
Section 4.1. TIME AND PLACE. Meetings of the Board of Directors shall be held at such places, within or without the State of Delaware, and within or without the United States of America, as shall be determined in accordance with these By-Laws.
Section 4.2. ANNUAL MEETING. Immediately after and at the place of the annual meeting of the stockholders, or at such other place as the Board of Directors may designate, a meeting of the newly elected Board of Directors for the purpose of organization and the election of officers and otherwise may be held. Such meeting may be held without notice.
Section 4.3. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice, at such time and place as shall, from time to time, be determined by the Board of Directors.
Section 4.4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time and place as shall be determined by resolution of the Board of Directors or upon the call of the President, the Secretary, or any member of the Board of Directors on forty-eight hours notice to each director by mail or on twenty-four hours notice personally or by telecopy, telephone, telegraph or other electronic transmission. Meetings of the Board of Directors may be held at any time without notice if all the directors are present (except when a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transactions of any business because the meeting is not lawfully called or convened), or if those not present waive notice of the meeting, either before or after the meeting.
Section 4.5. QUORUM AND VOTING. A majority of the entire Board of Directors shall constitute a quorum at any meeting of the Board of Directors and the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, except as may otherwise be specifically provided by law, the Certificate of Incorporation or by these By-Laws. If at any meeting of the Board of Directors there shall be
6
less than a quorum present, the director or directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall have been obtained.
Section 4.6. CONSENTS. Unless otherwise required by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent to such action in writing or by electronic transmission, and such writing or writings or electronic transmission or electronic transmissions are filed with the minutes of the proceedings of the Board of Directors.
Section 4.7. TELEPHONIC MEETINGS OF DIRECTORS. The Board of Directors may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at such meeting.
ARTICLE V
COMMITTEES OF THE BOARD
Section 5.1. DESIGNATION AND POWERS. The Board of Directors may in its discretion designate one (1) or more committees. Each committee shall consist of one (1) or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Such committee or committees, to the extent permitted by law and to the extent provided in the resolutions of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.
ARTICLE VI
NOTICES
Section 6.1. DELIVERY OF NOTICES. Except as otherwise provided herein or permitted by applicable law, notices to directors and stockholders shall be in writing and may be delivered personally or by mail. Notice by mail shall be deemed to be given at the time when deposited in the United States mail, postage prepaid, and addressed to directors or stockholders at their respective addresses appearing on the books of the Corporation, unless any such director or stockholder shall have filed with the Secretary of the Corporation a written request that notices intended for him or her be mailed or delivered to some other address, in which case the notice shall be mailed to or delivered at the address designated in such request. Notice to directors may also be given by telegram, by telecopy, by telephone or by electronic transmission.
7
Section 6.2. WAIVER OF NOTICE. Whenever notice is required to be given by statute, the Certificate of Incorporation or these By-Laws, a waiver thereof, given by the person or persons entitled to such notice whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance of a person at a meeting of stockholders, directors or any committee of directors, as the case may be, shall constitute a waiver of notice of such meeting, except where the person is attending for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders, directors or committee of directors need be specified in any waiver of notice.
ARTICLE VII
OFFICERS
Section 7.1. EXECUTIVE OFFICERS. At the annual meeting of directors the Board of Directors shall elect a Chairman of the Board, President, Secretary and Treasurer and may elect one (1) or more Vice Presidents, Assistant Secretaries or Assistant Treasurers and such other officers as the Board of Directors may from time to time designate or the business of the Corporation may require. Except for the Chairman of the Board, no executive officer need be a member of the Board. Any number of offices may be held by the same person, except that the office of Secretary may not be held by the Chairman of the Board or the President.
Section 7.2. OTHER OFFICERS AND AGENTS. The Board of Directors may also elect such other officers and agents as the Board of Directors may at any time or from time to time determine to be advisable, such officers and such agents to serve for such terms and to exercise such powers and perform such duties as shall be specified at any time or from time to time by the Board of Directors.
Section 7.3. TENURE; RESIGNATION; REMOVAL; VACANCIES. Each officer of the Corporation shall hold office until his or her successor is elected and qualified, or until his or her earlier resignation or removal; provided, that if the term of office of any officer elected or appointed pursuant to Section 7.2 of these By-Laws shall have been fixed by the Board of Directors, he or she shall cease to hold such office no later than the date of expiration of such term regardless of whether any other person shall have been elected or appointed to succeed him or her. Any officer elected by the Board of Directors may be removed at any time, with or without cause, by the Board of Directors; provided, that any such removal shall be without prejudice to the rights, if any, of the officer so employed under any employment contract or other agreement with the Corporation. An officer may resign at any time upon written notice to the Board of Directors. If the office of any officer becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the Board of Directors may choose a successor or successors to hold office for such term as may be specified by the Board of Directors.
Section 7.4. COMPENSATION. Except as otherwise provided by these By-Laws, the salaries of all officers and agents of the Corporation appointed by the Board of Directors shall be fixed by the Board of Directors.
8
Section 7.5. AUTHORITY AND DUTIES. All officers as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-Laws. In addition to the powers and duties hereinafter specifically prescribed for the respective officers, the Board of Directors may from time to time impose or confer upon any of the officers such additional duties and powers as the Board of Directors may see fit, and the Board of Directors may from time to time impose or confer any or all of the duties and powers hereinafter specifically prescribed for any officer upon any other officer or officers.
Section 7.6. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors, who shall be a director, shall preside at all meetings of the stockholders and at all meetings of the Board of Directors. As director, he or she shall perform such other duties as may be assigned from time to time by the Board of Directors.
Section 7.7. PRESIDENT. The President shall be the chief executive officer of the Corporation. He or she shall perform such duties as may be assigned to him or her by the Board of Directors, and in the event of disability or absence of the Chairman of the Board, perform the duties of the Chairman of the Board, including presiding at meetings of stockholders and directors. He or she shall from time to time report to the Board of Directors all matters within his or her knowledge which the interest of the Corporation may require to be brought to their notice, and shall also have such other powers and perform such other duties as may be specifically assigned to him or her from time to time by the Board of Directors. The President shall see that all resolutions and orders of the Board of Directors are carried into effect, and in connection with the foregoing, shall be authorized to delegate to the Vice President and the other officers such of his or her powers and such of his or her duties as he or she may deem to be advisable.
Section 7.8. THE VICE PRESIDENT(S). The Vice President, or if there be more than one (1), the Vice Presidents, shall perform such duties as may be assigned to them from time to time by the Board of Directors or as may be designated by the President. In case of the absence or disability of the President the duties of the office shall, if the Board of Directors or the President has so authorized, be performed by the Vice President, or if there be more than one (1) Vice President, by such Vice President as the Board of Directors or President shall designate.
Section 7.9. THE TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors or by any officer of the Corporation authorized by the Board of Directors to make such designation. The Treasurer shall exercise such powers and perform such duties as generally pertain or are necessarily incident to his or her office and shall perform such other duties as may be specifically assigned to him or her from time to time by the Board of Directors or by the President or any Vice President.
Section 7.10. THE SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for any
9
committee when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and, when necessary, of the Board of Directors. The Secretary shall exercise such powers and perform such duties as generally pertain or are necessarily incident to his or her office and he or she shall perform such other duties as may be assigned to him or her from time to time by the Board of Directors, the President or by any Vice President.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1. FORM AND SIGNATURE. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares. Any certificates of stock of the Corporation shall be in such form or forms not inconsistent with the Certificate of Incorporation as the Board of Directors shall approve. They shall be numbered, the certificates for the shares of stock of each class to be numbered consecutively, and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holders name and number of shares and shall be signed by the Chairman of the Board, the President or a Vice President and the Treasurer (or any Assistant Treasurer) or the Secretary (or any Assistant Secretary); provided, however, that any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who shall have signed, or whose facsimile signature or signatures shall have been used on any such certificate or certificates, shall cease to be such officer, transfer agent or registrar of the Corporation, whether because of death, resignation, removal or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be such officer, transfer agent or registrar of the Corporation.
Section 8.2. LOST OR DESTROYED CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or stock to be lost, stolen or destroyed (or such persons legal representative). When authorizing such issue of a new certificate or certificates, the Board of Directors may in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his or her legal representatives, to advertise the same in such manner as it shall require, and to give a bond in such sum as the Board of Directors may direct, indemnifying the Corporation, any transfer agent and any registrar against any claim that may be made against them or any of them with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8.3. REGISTRATION OF TRANSFER. Upon surrender to the Corporation of a certificate for shares, duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction on its books.
10
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.
Section 9.2. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
Section 9.3. DIVIDENDS. Dividends upon the capital stock of the Corporation shall in the discretion of the Board of Directors from time to time be declared by the Board of Directors out of funds legally available therefor.
Section 9.4. CHECKS AND NOTES. All checks and drafts on the bank accounts of the Corporation, all bills of exchange and promissory notes of the Corporation, and all acceptances, obligations and other instruments for the payment of money drawn, signed or accepted by the Corporation, shall be signed or accepted, as the case may be, by such officer or officers, agent or agents as shall be thereunto authorized from time to time by the Board of Directors or by officers of the Corporation designated by the Board of Directors to make such authorization.
Section 9.5. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by the Board of Directors.
Section 9.6. VOTING OF SECURITIES OF OTHER CORPORATIONS. In the event that the Corporation shall at any time own and have power to vote any securities (including but not limited to shares of stock) of any other issuer, such securities shall be voted by such person or persons, to such extent and in such manner, as may be determined by the Board of Directors.
Section 9.7. TRANSFER AGENT. The Board of Directors may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of stock. It may appoint one (1) or more transfer agents and one (1) or more registrars and may require all stock certificates to bear the signature of either or both.
Section 9.8. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the Corporation and the words Corporate Seal, Delaware.
11
ARTICLE X
INDEMNIFICATION
Section 10.1. INDEMNIFICATION.
The following indemnification provisions shall apply to the persons enumerated below.
(a) RIGHT TO INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an Indemnified Person ) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding ), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 10.1(c) of this Article X, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.
(b) PREPAYMENT OF EXPENSES OF DIRECTORS AND OFFICERS. The Corporation shall pay the expenses (including attorneys fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article X or otherwise.
(c) CLAIMS BY DIRECTORS AND OFFICERS. If a claim for indemnification or advancement of expenses under this Article X is not paid in full within thirty (30) days after a written claim therefor by the Indemnified Person has been received by the Corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
(d) INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership,
12
joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.
(e) ADVANCEMENT OF EXPENSES OF EMPLOYEES AND AGENTS. The Corporation may pay the expenses (including attorneys fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.
(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.
(g) OTHER INDEMNIFICATION. The Corporations obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.
(h) INSURANCE. The Board of Directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporations expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article X; and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article X.
(i) AMENDMENT OR REPEAL. Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such persons heirs, executors and administrators.
ARTICLE XI
AMENDMENTS
Section 11.1. BY THE STOCKHOLDERS. These By-Laws may be altered, amended or repealed in whole or in part, and new By-Laws may be adopted, by the affirmative vote of the holders of a majority of the shares of capital stock issued and outstanding and entitled to vote at the meeting of the stockholders, if notice thereof shall be contained in the notice of the meeting.
13
Section 11.2. BY THE BOARD OF DIRECTORS. These By-Laws may be altered, amended or repealed by the Board of Directors at any regular or special meeting of the Board of Directors.
ARTICLE XII
FORUM
Section 12.1. FORUM. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim or breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporations stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine.
14
Exhibit 31.1
Certification
I, G. Gary Yetman, certify that:
1. I have reviewed this report on Form 10-Q of Coleman Cable, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 9, 2013 |
/s/ G. Gary Yetman | |
Chief Executive Officer and President |
Exhibit 31.2
Certification
I, Alan C. Bergschneider, certify that:
1. I have reviewed this report on Form 10-Q of Coleman Cable, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 9, 2013 |
/s/ Alan C. Bergschneider | |
Chief Financial Officer, Executive Vice President, Secretary and Treasurer |
Exhibit 32.1
The following statement is being made to the Securities and Exchange Commission solely for purposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries with it certain criminal penalties in the event of a knowing or willful misrepresentation.
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Coleman Cable, Inc.
Ladies and Gentlemen:
In accordance with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), each of the undersigned hereby certifies that:
(i) this Quarterly Report on Form 10-Q, for the period ended June 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Coleman Cable, Inc.
Dated as of this 9th day of August 2013.
/s/ G. Gary Yetman | /s/ Alan C. Bergschneider | |||||
G. Gary Yetman |
Alan C. Bergschneider | |||||
Chief Executive Officer and President |
Chief Financial Officer, Executive | |||||
Vice President, Secretary and Treasurer |
Earnings Per Share
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 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 June 30, 2013 and 2012, 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:
Options Options with respect to 55 and 771 common shares were not included in the computation of diluted earnings per share for the three months ended June 30, 2013 and 2012, respectively, and 283 and 771 for the six months ended June 30, 2013 and 2012, respectively, because they were antidilutive. |
Components of Basic and Diluted Earnings Per Share (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Basic EPS Numerator: | ||||
Net income | $ 7,340 | $ 7,629 | $ 12,592 | $ 11,356 |
Less: Earnings allocated to participating securities | (49) | (70) | (84) | (104) |
Net income allocated to common shareholders | 7,291 | 7,559 | 12,508 | 11,252 |
Basic EPS Denominator: | ||||
Weighted average shares outstanding | 17,445 | 17,086 | 17,269 | 17,072 |
Basic earnings per common share | $ 0.42 | $ 0.44 | $ 0.72 | $ 0.66 |
Diluted EPS Numerator: | ||||
Net income | 7,340 | 7,629 | 12,592 | 11,356 |
Less: Earnings allocated to participating securities | (48) | (70) | (83) | (104) |
Net income allocated to common shareholders | $ 7,292 | $ 7,559 | $ 12,509 | $ 11,252 |
Diluted EPS Denominator: | ||||
Weighted average shares outstanding | 17,445 | 17,086 | 17,269 | 17,072 |
Dilutive common shares issuable upon exercise of stock options | 230 | 223 | 164 | 236 |
Diluted weighted average shares outstanding | 17,675 | 17,309 | 17,433 | 17,308 |
Diluted earnings per common share | $ 0.41 | $ 0.44 | $ 0.72 | $ 0.65 |
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Foreign currency translation adjustments, tax | $ 118 | $ 76 | $ 196 | $ 9 |
Pension adjustments, tax | $ 1 | $ 2 |
Basis Of Presentation
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Basis Of Presentation | 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 generally accepted accounting principles (“U.S. 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, 2012. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. |
Fair Value Disclosure
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosure | 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 June 30, 2013 and December 31, 2012, we utilized Level 1 inputs to determine the fair value of cash and cash equivalents and derivatives. 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:
|
Business Segment Information - Additional Information (Detail)
|
6 Months Ended |
---|---|
Jun. 30, 2013
Segment
|
|
Segment Reporting Information [Line Items] | |
Number of segments | 3 |
Changes in Stock Options (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Shares | ||
Outstanding on January 1, 2013 | 1,388 | |
Granted | ||
Exercised | (756) | |
Forfeited or expired | ||
Outstanding on June 30, 2013 | 632 | |
Vested or expected to vest | 615 | 1,372 |
Exercisable | 560 | |
Weighted-Average Exercise Price | ||
Outstanding on January 1, 2013 | $ 11.09 | |
Granted | ||
Exercised | $ 19.51 | |
Forfeited or expired | ||
Outstanding on June 30, 2013 | $ 10.33 | |
Vested or expected to vest | $ 10.49 | |
Exercisable | $ 9.20 | |
Weighted- Average Remaining Contractual Terms | ||
Outstanding on January 1, 2013 | 4 years 9 months 18 days | |
Outstanding on June 30, 2013 | 4 years 8 months 12 days | |
Vested or expected to vest | 4 years 8 months 12 days | |
Exercisable | 4 years 8 months 12 days | |
Aggregate intrinsic value | ||
Outstanding on January 1, 2013 | $ 2,352 | |
Granted | ||
Exercised | 1,100 | |
Forfeited or expired | ||
Outstanding on June 30, 2013 | 5,189 | |
Vested or expected to vest | 4,962 | 2,271 |
Exercisable | $ 2,837 |
Shareholders' Equity
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | 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 $1,273 and $2,879 in stock compensation expense for the three and six months ended June 30, 2013, respectively. We recorded $114 and $712 for the three and six months ended June 30, 2012, respectively.
Stock Options No stock options were issued during the first six months of 2013 and 2012. Changes in stock options were as follows:
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. For the period ended June 30, 2013 there were 756 stock option shares exercised. There were no stock option exercises for the six month period ended June 30, 2012. As of June 30, 2013 and December 31, 2012, there were 615 and 1,372 vested options with an aggregate intrinsic value of $4,962 and $2,271, respectively. Stock Awards In the first quarter of 2013, the Company awarded unvested common shares to non-management members of its Board of Directors. In total, 53 unvested shares were awarded with an approximate aggregate fair value of $500. 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 six months of 2013 were as follows:
In addition, in the first quarter of 2010, 775 performance shares were granted to certain executives and key employees. Of the total performance shares awarded, 517 are settled in stock, on a one-to-one basis, which were, contingent upon future stock price performance. The remaining 258 performance shares vest under the same terms as the performance awards settled in stock, but are settled in cash rather than stock. The first tranche of performance shares vested in a prior period resulting in the issuance of 117 shares settled in stock and 58 shares settled in cash. During the second quarter ended June 30, 2013, the second and third tranches vested as a result of the stock price reaching predetermined levels. Accordingly, 358 shares were settled in stock net of 42 shares returned back to the Company to satisfy income tax requirements. Additionally, the equivalent of 200 shares were issued and settled in cash. The Company recorded $898 and $2,362 of compensation cost for the three and six months ended June 30, 2013, respectively, related to the performance shares.
Treasury Stock On August 3, 2011, our Board of Directors authorized the purchase of up to 500 shares of the Company’s common stock in open market or privately-negotiated transactions. The repurchase plan expires in August 2013. To date, we have purchased 426 shares pursuant to this repurchase program. We did not repurchase any shares pursuant to this repurchase program during the first and second quarters of 2013. During the three and six months ended June 30, 2013, we repurchased 42 shares of common stock at a total cost of $772 from employees of the Company that were withheld to satisfy the tax withholding obligation due upon vesting of performance share awards. During the three and six months ended June 30, 2012, we repurchased 23 and 32 shares of common stock at a total cost of $199 and $297, respectively, including commissions and shares repurchased from employees of the Company that were withheld to satisfy the tax withholding obligation due upon vesting of restricted stock awards. 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. Subsequent Event On August 6, 2013, our Board of Directors declared a quarterly dividend of $0.04 per common share, payable on August 30, 2013, to stockholders of record as of the close of business on August 16, 2013. Future declarations of quarterly dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change. |
Total Borrowings (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Debt Instrument [Line Items] | ||
Capital lease obligations | $ 618 | $ 695 |
Total debt | 312,407 | 323,839 |
Less current portion | (18,603) | (35,566) |
Long-term debt | 293,804 | 288,273 |
Revolving Credit Facility
|
||
Debt Instrument [Line Items] | ||
Revolving Credit Facility expiring October 2016 | 38,850 | 50,430 |
9% Senior Notes due 2018
|
||
Debt Instrument [Line Items] | ||
9% Senior Notes due February 2018, including unamortized discount of $2,061 and $2,286, respectively | $ 272,939 | $ 272,714 |
Changes in Nonvested Shares (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Shares | |
Nonvested at January 1, 2013 | 558 |
Granted | 53 |
Vested | (494) |
Forfeited | |
Nonvested at June 30, 2013 | 117 |
Weighted-Average Grant-Date Fair Value | |
Nonvested at January 1, 2013 | $ 4.79 |
Granted | $ 9.44 |
Vested | $ 4.41 |
Forfeited | |
Nonvested at June 30, 2013 | $ 8.61 |
Business Segment Information (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Data for Reportable Segments | Financial data for the Company’s reportable segments is as follows:
|
Supplemental Guarantor Information
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Guarantor Information | 18. SUPPLEMENTAL GUARANTOR INFORMATION The following unaudited supplemental financial information sets forth, on a combined basis, balance sheets, statements of income, statements of comprehensive income 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. The Senior Notes and the Revolving Credit Facility are instruments of the parent, and are reflected in their respective balance sheets. As of June 30, 2013, our payment obligations under the Senior Notes and the Revolving Credit Facility (see Note 7) were guaranteed by our 100% owned subsidiaries, CCI International, Patco, TRC, and WE (the “Guarantor Subsidiaries”). Such guarantees are full, unconditional, and joint and several.
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2013
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2012
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2013
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2012
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2013
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2012
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2013
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2012
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2013
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2012
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2013
COLEMAN CABLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2012
|
Business Segment Information
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Information | 17. BUSINESS SEGMENT INFORMATION We have three reportable segments: (1) Distribution, (2) Original Equipment Manufacturers (“OEM”) and (3) Engineered Solutions. Our reportable segments are a function of how we are organized internally to market our customer groups and measure our financial performance. The Distribution and OEM segment serves our customers in distribution, retail and OEM businesses. Our Engineered Solutions segment is comprised of our most recent acquisitions, made in 2011 and 2012, serving a variety of customers such as military contractors, independent distributions, and various end markets utilizing secondary power connectors. Financial data for the Company’s reportable segments is as follows:
Our Distribution, OEM, and Engineered Solutions 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. 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, and intangible amortization. |
Inventories (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
FIFO cost: | ||
Raw materials | $ 42,383 | $ 44,874 |
Work in progress | 4,675 | 3,391 |
Finished products | 70,251 | 64,325 |
Total | $ 117,309 | $ 112,590 |
Shareholders' Equity (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Stock Options | Changes in stock options were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Nonvested Shares | Changes in nonvested shares for the first six months of 2013 were as follows:
|
Acquisitions - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified |
1 Months Ended |
---|---|
May 31, 2012
|
|
Subsidiaries
|
|
Business Acquisition [Line Items] | |
Ownership percentage | 100.00% |
Watteredge
|
|
Business Acquisition [Line Items] | |
Net assets acquired | $ 33,922 |
Business acquisition, preliminary purchase price | 35,000 |
Working capital adjustments | $ 1,078 |
Total Borrowings (Parenthetical) (Detail) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Debt Instrument [Line Items] | ||
Senior Notes, interest rate | 9.00% | |
Senior Notes, due date | Feb. 15, 2018 | |
Revolving Credit Facility
|
||
Debt Instrument [Line Items] | ||
Revolving Credit Facility, expiration date | Oct. 01, 2016 | Oct. 01, 2016 |
9% Senior Notes due 2018
|
||
Debt Instrument [Line Items] | ||
Senior Notes, interest rate | 9.00% | 9.00% |
Senior Notes, due date | Feb. 15, 2018 | Feb. 15, 2018 |
Senior Notes, unamortized discount | $ 2,061 | $ 2,286 |
Accrued Liabilities (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | Accrued liabilities consisted of the following:
|
Benefit Plans - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Defined contribution savings plans expenses | $ 343 | $ 267 | $ 789 | $ 689 |
Income Taxes - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Income Taxes [Line Items] | ||||
INCOME TAX EXPENSE | $ 4,045 | $ 3,893 | $ 6,375 | $ 5,853 |
Unaudited Selected Pro Forma Financial Information (Detail) (Watteredge, USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2012
|
Jun. 30, 2012
|
|
Watteredge
|
||
Business Acquisition, Pro Forma Information [Line Items] | ||
Net sales | $ 235,232 | $ 461,991 |
Net income | $ 7,791 | $ 11,874 |
Condensed Consolidating Statement of Income (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Condensed Financial Statements, Captions [Line Items] | ||||
NET SALES | $ 233,798 | $ 231,232 | $ 456,311 | $ 451,723 |
COST OF GOODS SOLD | 198,159 | 195,249 | 386,374 | 385,070 |
GROSS PROFIT | 35,639 | 35,983 | 69,937 | 66,653 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 15,365 | 15,744 | 32,861 | 31,474 |
INTANGIBLE ASSET AMORTIZATION | 1,976 | 1,742 | 4,161 | 3,566 |
RESTRUCTURING CHARGES | 151 | 23 | 369 | 356 |
Operating income (loss) | 18,147 | 18,474 | 32,546 | 31,257 |
INTEREST EXPENSE | 6,887 | 7,023 | 13,812 | 14,045 |
OTHER (INCOME) LOSS, NET | (125) | (71) | (233) | 3 |
INCOME (LOSS) BEFORE INCOME TAXES | 11,385 | 11,522 | 18,967 | 17,209 |
INCOME TAX EXPENSE (BENEFIT) | 4,045 | 3,893 | 6,375 | 5,853 |
NET INCOME | 7,340 | 7,629 | 12,592 | 11,356 |
Parent Company
|
||||
Condensed Financial Statements, Captions [Line Items] | ||||
NET SALES | 209,615 | 207,199 | 406,855 | 404,627 |
COST OF GOODS SOLD | 179,239 | 176,065 | 347,395 | 347,229 |
GROSS PROFIT | 30,376 | 31,134 | 59,460 | 57,398 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 11,838 | 12,447 | 25,539 | 25,404 |
INTANGIBLE ASSET AMORTIZATION | 937 | 1,176 | 2,083 | 2,606 |
RESTRUCTURING CHARGES | 143 | (15) | 278 | (208) |
Operating income (loss) | 17,458 | 17,526 | 31,560 | 29,596 |
INTEREST EXPENSE | 6,872 | 7,008 | 13,783 | 14,016 |
INCOME (LOSS) BEFORE INCOME TAXES | 10,586 | 10,518 | 17,777 | 15,580 |
INCOME FROM SUBSIDIARIES | 581 | 909 | 989 | 1,523 |
INCOME TAX EXPENSE (BENEFIT) | 3,827 | 3,798 | 6,174 | 5,747 |
NET INCOME | 7,340 | 7,629 | 12,592 | 11,356 |
Guarantor Subsidiaries
|
||||
Condensed Financial Statements, Captions [Line Items] | ||||
NET SALES | 12,545 | 8,609 | 25,364 | 16,318 |
COST OF GOODS SOLD | 9,179 | 6,561 | 18,936 | 12,423 |
GROSS PROFIT | 3,366 | 2,048 | 6,428 | 3,895 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 2,535 | 2,070 | 5,128 | 3,763 |
INTANGIBLE ASSET AMORTIZATION | 1,037 | 340 | 2,075 | 732 |
RESTRUCTURING CHARGES | 8 | 41 | 91 | 262 |
Operating income (loss) | (214) | (403) | (866) | (862) |
OTHER (INCOME) LOSS, NET | (1) | |||
INCOME (LOSS) BEFORE INCOME TAXES | (214) | (403) | (866) | (861) |
INCOME TAX EXPENSE (BENEFIT) | (76) | (134) | (300) | (297) |
NET INCOME | (138) | (269) | (566) | (564) |
Non-Guarantor Subsidiaries
|
||||
Condensed Financial Statements, Captions [Line Items] | ||||
NET SALES | 16,051 | 20,103 | 32,584 | 39,928 |
COST OF GOODS SOLD | 14,154 | 17,302 | 28,535 | 34,568 |
GROSS PROFIT | 1,897 | 2,801 | 4,049 | 5,360 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 992 | 1,227 | 2,194 | 2,307 |
INTANGIBLE ASSET AMORTIZATION | 2 | 226 | 3 | 228 |
RESTRUCTURING CHARGES | (3) | 302 | ||
Operating income (loss) | 903 | 1,351 | 1,852 | 2,523 |
INTEREST EXPENSE | 15 | 15 | 29 | 29 |
OTHER (INCOME) LOSS, NET | (125) | (71) | (233) | 4 |
INCOME (LOSS) BEFORE INCOME TAXES | 1,013 | 1,407 | 2,056 | 2,490 |
INCOME TAX EXPENSE (BENEFIT) | 294 | 229 | 501 | 403 |
NET INCOME | 719 | 1,178 | 1,555 | 2,087 |
Eliminations
|
||||
Condensed Financial Statements, Captions [Line Items] | ||||
NET SALES | (4,413) | (4,679) | (8,492) | (9,150) |
COST OF GOODS SOLD | (4,413) | (4,679) | (8,492) | (9,150) |
INCOME FROM SUBSIDIARIES | (581) | (909) | (989) | (1,523) |
NET INCOME | $ (581) | $ (909) | $ (989) | $ (1,523) |
Other Income / Loss
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Other Income / Loss | 16. OTHER INCOME / LOSS We recorded other income of $125 and $233 for the three and six months ended June 30, 2013, respectively, primarily reflecting exchange rate impacts on our Canadian subsidiary. We recorded other income of $71 and loss of $3 for the three and six months ended June 30, 2012, respectively, primarily reflecting the exchange rate impact on our Canadian subsidiary. |
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Accounts receivable, allowances | $ 3,013 | $ 3,046 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000 | 75,000 |
Common stock, shares issued | 18,196 | 16,998 |
Common stock, shares outstanding | 18,196 | 16,998 |
Treasury stock, shares | 484 | 443 |
New Accounting Pronouncements
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
New Accounting Pronouncements | 2. NEW ACCOUNTING PRONOUNCEMENT Accounting Standards Update No. 2013-02 – “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU No. 2013 -02”) ASU No. 2013-02 requires entities to disclose additional information about reclassification adjustments, including changes in Accumulated Other Comprehensive Income (“AOCI”) and significant items reclassified out of AOCI. The new disclosure requirements do not amend any existing requirements for reporting net income or Other Comprehensive Income (“OCI”). An entity is required to disaggregate the total change of each component of OCI and separately present (1) reclassification adjustments and (2) current-period OCI. Additionally, the amendments require an entity to present information about significant items reclassified out of AOCI by component either (1) on the face of the statement where net income is presented or (2) as a separate disclosure in the notes to the financial statements. ASU 2013-02 does not change the current requirements for interim financial statement reporting or comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted this provision during the first quarter ended March 31, 2013 and it did not have material impact on the Company’s results of operations, financial position and cash flows. Accounting Standards Update No. 2012-04 – “Technical Corrections and Improvements” (“ASU No. 2012 -04”) ASU No. 2012-04 contains amendments to clarify the Accounting Standards Codification (“ASC”), correct unintended application of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create significant administrative cost to most entities. Additionally, the amendments are intended to make the ASC easier to understand and the fair value measurement guidance easier to apply by eliminating inconsistencies and providing needed clarifications. The amendments that do not have transition guidance were effective upon issuance. The amendments that are subject to the transition guidance are effective for fiscal periods beginning after December 15, 2012. The Company adopted these amendments during the first quarter ended March 31, 2013 and they did not have a material impact on the Company’s results of operations, financial position, and cash flows. Accounting Standards Update No. 2011-11 – “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” (“ASU No. 2011-11”) ASU No. 2011-11 amends existing guidance by enhancing disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with Section 201-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with Section 210-20-45 or Section 815-10-45. This information will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain derivatives, sale and repurchase agreements and reverse sale repurchase agreements, and securities borrowing and securities lending arrangements. ASU No. 2011-11 requires retrospective application, and it is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The Company adopted the provisions in ASU No. 2011-11 and the clarifying amendments included in ASU No. 2013-01 during the first quarter ended March 31, 2013 and they did not have a material impact on the Company’s results of operations, financial position and cash flows. |
Condensed Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Cash dividends per share | $ 0.06 | $ 0.02 |
Final Allocations of Purchase Price Related to Twenty Eleven Acquisitions and Provisional Allocation Related to WE Acquisition (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
Jun. 30, 2013
Watteredge
|
May 31, 2012
Watteredge
|
---|---|---|---|---|
Schedule of Business Acquisitions, Purchase Price Allocation [Line Items] | ||||
Accounts receivable | $ 2,720 | |||
Inventories | 2,249 | |||
Prepaid expenses and other current assets | 59 | |||
Property, plant and equipment | 3,363 | |||
Deferred income tax asset | 170 | |||
Intangible assets | 17,020 | 17,020 | ||
GOODWILL | 66,450 | 66,535 | 10,742 | |
Total assets acquired | 36,323 | |||
Current liabilities | (2,401) | |||
Total liabilities assumed | (2,401) | |||
Net assets acquired | $ 33,922 |
Acquisitions (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Final Allocations of Purchase Price Related to Twenty Eleven Acquisitions and Provisional Allocation Related to WE Acquisition | The table below summarizes the final allocations of purchase price related to WE.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase Price Allocation to Identifiable Amortizable Intangible Assets along with Respective Weighted-Average Amortization Periods | All goodwill attributable to WE is deductible for income tax purposes and has been allocated to our Engineered Solutions segment. 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:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Watteredge
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Selected Pro Forma Financial Information | The following unaudited pro forma financial information summarizes our estimate of combined results of operations assuming that the WE business combination had taken place on January 1, 2011. The unaudited pro forma combined results of operations were prepared using historical financial information of WE, and we make no representation with respect to the accuracy of such information.
|
Debt (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Borrowings |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine Percent Senior Notes Due Twenty Eighteen | 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 June 30, 2013, we were in compliance with all of the covenants of our Senior Notes.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Optional Redemption | Optional redemption (1)
|
Condensed Consolidating Statement of Comprehensive Income (Parenthetical) (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Condensed Financial Statements, Captions [Line Items] | ||||
Foreign currency translation adjustments, tax | $ 118 | $ 76 | $ 196 | $ 9 |
Pension adjustments, tax | $ 1 | $ 2 |
Fair Value Disclosure (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Assets Measured at Fair Value on Recurring Basis | Financial assets measured at fair value on a recurring basis are summarized below:
|
Shareholder's Equity - Additional Information (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
1 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 03, 2011
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
Jun. 30, 2013
Common Stock
|
Aug. 06, 2013
Subsequent Event
|
Jun. 30, 2013
Performance Shares
|
Mar. 31, 2010
Performance Shares
|
Jun. 30, 2013
Performance Shares
|
Jun. 30, 2013
Settled in Stock
Performance Shares
|
Mar. 31, 2010
Settled in Stock
Performance Shares
|
Mar. 31, 2010
Settled in Stock
Performance Shares
First Tranche
|
Mar. 31, 2010
Settled in Cash
Performance Shares
|
Mar. 31, 2010
Settled in Cash
Performance Shares
First Tranche
|
Mar. 31, 2013
Board of Directors
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||
Stock compensation expense (income) | $ 1,273 | $ 114 | $ 2,879 | $ 712 | $ 898 | $ 2,362 | |||||||||||
Stock options exercised | 756 | 756 | |||||||||||||||
Stock option vested or expected to vested | 615 | 615 | 1,372 | ||||||||||||||
Stock option vested or expected to vested intrinsic value | 4,962 | 4,962 | 2,271 | ||||||||||||||
Number of shares awarded | 53 | 775 | 358 | 517 | 117 | 258 | 58 | 53 | |||||||||
Estimated aggregate fair value | 500 | ||||||||||||||||
Percentage of shares vesting on first anniversary | 33.33% | ||||||||||||||||
Percentage of shares vesting on second anniversary | 33.33% | ||||||||||||||||
Percentage of shares vesting on third anniversary | 33.33% | ||||||||||||||||
Stock issued during period | 200 | ||||||||||||||||
Number of shares forfeited | 42 | ||||||||||||||||
Shares authorized to be purchased | 500 | ||||||||||||||||
Purchase plan expiration date | 2013-08 | ||||||||||||||||
Shares purchased pursuant to repurchase program | 426 | ||||||||||||||||
Shares repurchased | 42 | 23 | 42 | 32 | |||||||||||||
Aggregate value of shares repurchased | $ 772 | $ 199 | $ 772 | $ 297 | |||||||||||||
Cash dividend per share | $ 0.04 | $ 0.02 | $ 0.06 | $ 0.02 | $ 0.04 | ||||||||||||
Dividend payable date | Aug. 30, 2013 | ||||||||||||||||
Record date dividend | Aug. 16, 2013 |