-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GUJk1DitP0t6LuPSv5aUgwoBAm2N/6C7w+Tm2Y2sRAPggnOYxLa4mHv9Da3nak5l nKcIAIfg91x6hqIqCqeuyg== 0000950152-98-002668.txt : 19980331 0000950152-98-002668.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950152-98-002668 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL CABLE CORP /DE/ CENTRAL INDEX KEY: 0000886035 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 311351333 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-12983 FILM NUMBER: 98577706 BUSINESS ADDRESS: STREET 1: 4 TESSENEER DRIVE CITY: HIGHLAND HEIGHTS STATE: KY ZIP: 41076 BUSINESS PHONE: 6065728000 10-K405 1 GENERAL CABLE CORPORATION 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1997 Commission File No. 1-12983 GENERAL CABLE CORPORATION (Exact name of registrant as specified in its charter) Delaware 06-1398235 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4 Tesseneer Drive Highland Heights, KY 41076 (Address of principal executive offices) (606) 572-8000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Each Class Name of Each Exchange on which registered - ------------------- ------------------------------------------ Common Stock, $.01 Par Value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulation S-K is not contained herein, and need not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [X] As of March 2, 1998, there were 24,536,870 shares of the Registrant's Common Stock outstanding. The aggregate market value of Common Stock held by non-affiliates was $1,000 million (based upon non-affiliate holdings of 24,303,759 shares and a market price of $41.13 per share). DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement for the 1998 Annual Meeting of Shareholders (portions of which are incorporated by reference in Part III hereof). PAGE 1 2 GENERAL CABLE CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K
PART I Page - ------ ---- Item 1. Business 3 Item 2. Properties 11 Item 3. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 14 PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters 15 Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 22 Item 8. Financial Statements and Supplementary Data 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 23 PART III Item 10. Directors and Executive Officers of the Registrant 24 Item 11. Executive Compensation 25 Item 12. Security Ownership of Certain Beneficial Owners and Management 25 Item 13. Certain Relationships and Related Transactions 25 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K 26 Signatures 28
2 3 PART I. ITEM 1. BUSINESS General Cable Corporation (General Cable or The Company) is a leader in the development, design, manufacture, marketing and distribution of copper, aluminum and optical fiber wire and cable products for the communications and electrical markets. Communications wire and cable transmits low voltage signals for voice, data, video and control applications. Electrical wire and cable conducts electrical current for power and control applications. General Cable believes that its principal competitive strengths include its breadth of product line; brand recognition; distribution strength; customer selection, sales and service; and improved operating efficiency. General Cable is a Delaware corporation and was incorporated in April 1994. Its principal executive offices are located at 4 Tesseneer Drive, Highland Heights, Kentucky 41076 and its telephone number is (606) 572-8000. General Cable and its predecessors have served the communications and electrical markets for over 150 years. The Company's immediate predecessor (the Predecessor) was formed in April 1992 to hold the wire and cable and heavy equipment businesses of American Premier Underwriters, Inc. (American Premier), then known as The Penn Central Corporation (PCC). American Premier entered the wire and cable business in 1981, when it acquired the successor to the original General Cable Corporation, and significantly expanded the business between 1988 and 1991 by acquiring Carol Cable Company, Inc. and other wire and cable businesses and facilities. In July 1992, American Premier distributed 88% of the outstanding common stock of General Cable to American Premier's stockholders and retained the balance of General Cable's common stock. As a result, General Cable, which owned wire and cable and heavy equipment businesses, became a public company with its common stock traded on the Nasdaq Market. In June 1994, a subsidiary of Wassall PLC (Wassall) acquired General Cable by private purchases of a $169.8 million General Cable subordinated promissory note and the General Cable common stock held by American Premier and its affiliate and a tender offer for the publicly-held General Cable common stock (the Acquisition). On May 20, 1997, Wassall completed a public offering of 19,435,000 shares of General Cable common stock at a price of $21.00 per share which represented 80% of the common stock of General Cable. On August 22, 1997, a second offering of 4,815,000 shares of common stock at a price of $31.00 per share was completed. These shares represented all of Wassall's remaining holdings of General Cable common stock. 3 4 The principal markets, products, distribution channels and end-users of each of General Cable's seven product categories are summarized below:
================================================================================================================================== PRINCIPAL PRODUCT CATEGORY PRINCIPAL MARKETS PRINCIPAL PRODUCTS DISTRIBUTION PRINCIPAL END-USERS CHANNELS ================================================================================================================================== COMMUNICATIONS GROUP: - ---------------------------------------------------------------------------------------------------------------------------------- Outside Voice and Data Telecom Local Loop PIC; Outside Service Direct; Telecommunications Wire Distributors System Operators - ---------------------------------------------------------------------------------------------------------------------------------- Datacom Computer Networking Multi-Conductor/Multi- Distributors; Contractors; Original And Multimedia Pair; Fiber Optic Direct Equipment Manufacturers Applications Cable ("OEMs"); Systems Integrators - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Building Management; Multi-Conductor; Distributors; Contractors; Consumers; Instrumentation and Entertainment; Coaxial Cable Retailers; Direct Industrial Control Equipment Control - ---------------------------------------------------------------------------------------------------------------------------------- Communication Telecommunication Cable Harness Direct Communications and Assemblies Industrial Equipment Manufacturers - ---------------------------------------------------------------------------------------------------------------------------------- ELECTRICAL GROUP: - ---------------------------------------------------------------------------------------------------------------------------------- Building Wire Non-Residential and THHN; Romex(R) Distributors; Contractors; Consumers Residential Products Retailers Construction - ---------------------------------------------------------------------------------------------------------------------------------- Portable Cord Industrial Power Rubber and Plastic- Distributors; Industrial; Consumers; and Jacketed Wire and Retailers; Contractors; OEMs Control Cable Direct - ---------------------------------------------------------------------------------------------------------------------------------- Cordset and Power DIY; Construction; Consumer Cordsets; Retailers; Direct; Consumers; Contractors; Assemblies Industrial Equipment OEM Cordsets; Distributors OEMs Assemblies - ---------------------------------------------------------------------------------------------------------------------------------- Automotive Parts Aftermarket Ignition Wire Sets; Retailers; Consumers Booster Cables Distributors - -------------------------- ------------------------ ------------------------- --------------------- ---------------------------
The following table sets forth summarized financial information by product category for the years ended December 31 (in millions):
1997 1996 1995 ---- ---- ----- Net sales: Communications $ 415.8 $ 375.5 $ 357.1 Electrical 718.7 668.1 704.2 -------- -------- -------- $1,134.5 $1,043.6 $1,061.3 ======== ======== ======== Operating income: Communications $ 53.0 $ 51.3 $ 27.7 Electrical 51.5 27.2 16.8 -------- -------- -------- $ 104.5 $ 78.5 $ 44.5 ======== ======== ========
4 5 COMMUNICATIONS GROUP The Communications Group manufactures and sells wire and cable products for voice, data and video transmission applications (Outside Voice and Data Products), multi-conductor/multi-pair cables used for computer and telephone interconnections in telephone company central offices and customer premises (Datacom Products) and specialty products for use in machinery and instrument interconnection, audio, computer, security and other applications (Industrial Instrumentation and Control Products), and cable harnesses for telecommunications equipment manufacturers (OEM Products). Outside Voice and Data Products General Cable's principal Outside Voice and Data Products are plastic insulated cable (PIC) and outside service wire. PIC is short haul trunk, feeder or distribution cable from a telephone company central office to the subscriber premises. It consists of multiple paired conductors (ranging from six pairs to 4,200 pairs) and various types of sheathing, water-proofing, foil wraps and metal jacketing. Outside service wire is used to connect telephone subscriber premises to curbside distribution cable. General Cable sells its Outside Voice and Data Products primarily to telecommunications system operators through its direct sales force under supply contracts of varying lengths, and also to telecommunications distributors. In 1997, 1996 and 1995, approximately 8.5%, 10.4% and 8.9%, respectively, of the Company's net sales were generated by sales of Outside Voice and Data and (to a lesser extent) Datacom products to its largest customer, US West, pursuant to a ten-year supply agreement that took effect on November 1, 1994. The agreement does not guarantee a minimum level of sales. Product prices are subject to periodic adjustment based upon changes in the cost of copper and other factors. The agreement is terminable by US West prior to its scheduled expiration date if the Company does not meet certain performance criteria. In 1995, 1996 and 1997, sales of Outside Voice and Data Products accounted for approximately 21%, 24% and 22%, respectively, of the Company's net sales. Datacom Products The Company's Datacom Products are high-bandwidth twisted pair copper and fiber optic cable for the customer premises, local area networks, central office and OEM telecommunications equipment markets. Customer premises products are used for wiring at subscriber premises, and include computer, riser rated and plenum rated wire and cable. Riser cable runs between floors and plenum cable runs in air spaces, primarily above ceilings in non-residential structures. Local area network cables run between computers along horizontal race ways and in backbones between servers. Central office products interconnect components within central office switching systems and public branch exchanges. General Cable sells Datacom Products primarily through distributors and agents under the General Cable(R) brand name. In 1995, 1996 and 1997, sales of Datacom Products accounted for approximately 9%, 10% and 11%, respectively, of the Company's net sales. 5 6 In December 1996, subsidiaries of the Company and SpecTran formed General Photonics LLC (General Photonics), an equally-owned joint venture, for the design, development, manufacture and marketing of communications-grade fiber optic cable for the customer premises market in the United States, Canada and Mexico. SpecTran is a developer, manufacturer and marketer of glass optical fiber and specialty value-added fiber optic components and assemblies. Under the joint venture arrangement, fiber optic cable and other products manufactured by General Photonics are marketed primarily through General Cable's sales force with some direct sales and customer support provided by General Photonics personnel. Industrial Instrumentation and Control Products The Company's Industrial Instrumentation and Control Products include multi-conductor, multi-pair, coaxial, hook-up, audio and microphone cables, speaker and television lead wire, high temperature and shielded electronic wire, and harness assemblies. Primary uses for these products are various applications within the commercial, industrial instrumentation and control, and residential markets. These markets require a broad range of multi-conductor products for applications involving programmable controllers, robotics, process control and computer integrated manufacturing, sensors and test equipment, as well as cable for fire alarm, smoke detection, sprinkler control, entertainment and security systems. Many industrial and commercial environments require cables with exterior armor and/or jacketing materials that can endure exposure to chemicals, extreme temperatures and outside elements. The Company offers products that are specially designed for these applications. Harness assemblies are used in communications switching systems and industrial control applications. These assemblies are used in such products as data processing equipment, telecommunications network switches, office machines and industrial machinery. General Cable's Industrial Instrumentation and Control Products are sold primarily through distributors and agents under the Carol(R) brand name. ELECTRICAL GROUP The Electrical Group manufactures and sells wire and cable products (typically for applications at 600 volts or less) for use in non-residential and residential structures and in a wide variety of capital goods and consumer uses. General Cable has four principal Electrical product categories: building wire, portable cord, cordsets and OEM assemblies, and automotive products. 6 7 Building Wire General Cable manufactures and sells a broad line of thermosetting, thermoplastic and elastomeric insulated wire and cable products for the distribution of electrical power to and within non-residential and residential structures. The Company's principal building wire products are THHN, a copper conductor used in non-residential construction and industrial applications, Romex(R) brand residential circuit, intermediate and feeder sized cables, and value-added specialty cables for industrial applications. An increasing portion of the Company's building wire sales consists of sales of high value-added products that meet more demanding service requirements or reduce installation costs. These products include tray cable, armored cable, aluminum utility service cable and control cable used in the operation and interconnection of protective and signaling devices in electrical distribution systems. General Cable sells its building wire products primarily to electrical distributors for resale to electrical contractors, industrial customers and OEMs. Sales are also made through hardware and home center retail chains and other retail stores. In 1995, 1996 and 1997, sales of Building Wire accounted for approximately 43%, 40% and 41%, respectively, of the Company's net sales. Portable Cord The Company manufactures and sells a wide variety of rubber and plastic insulated portable cord products for power and control applications serving industrial, mining, entertainment, OEM, farming and other markets. Portable cord products have electrical characteristics similar to building wire, but are designed and constructed to be used in more dynamic and severe environmental conditions where a flexible but durable power supply is required. Portable cord products include both standard commercial cord and cord products designed to customer specifications. Portable rubber-jacketed power cord, the Company's largest selling cord product line, is typically manufactured without a connection device at either end and is sold in standard and customer-specified lengths. Portable cord is also sold to OEMs for use as power cords on their products and in other applications, in which case the cord is made to the OEMs' specifications. The Company also manufactures portable cord for use with moveable heavy equipment and machinery. General Cable's portable cord products are sold under the Carol(R) brand name, primarily through electrical distributors and electrical retailers to industrial customers, OEMs, contractors and consumers. General Cable's portable cords are used in the installation of new industrial equipment and the maintenance of existing equipment, and to supply electrical power at temporary venues such as festivals, sporting events, concerts and construction sites. The Company expects demand for portable cord to grow in response to general economic activity and the development of higher specification products for more environmentally demanding industrial applications. 7 8 Cordsets and OEM Assemblies General Cable focuses primarily on high-performance, value-added cordsets, including extension cords and multiple outlet power centers, appliance cords for ranges and dryers, portable lights, and cordsets with surge protection and ground fault interruption devices for use by consumers, contractors and OEMs. Cordsets are manufactured with connection devices at one or both ends, with standard indoor and outdoor, single or multiple outlet extension cords being the most common example. Jackets for cordset products are typically thermoplastic. The Company has developed many high-performance plastic and premium rubber cordsets for use in a wide variety of demanding applications, such as outdoor locations or rugged job sites. OEM assemblies are used in a variety of demanding applications such as power delivery to office modules and for such products as power hand tools, floor care products and other appliances. The Company targets customers who require premium cordsets or assemblies that require innovative engineering and for whom the Company's vertical integration in high-performance wire and cable provides a competitive cost advantage. General Cable sells its cordsets and cable harness assemblies primarily to OEMs and to hardware and home center retail chains, hardware distributors and mass merchants for resale to consumers and contractors. In addition, an increasing portion of the Company's cordset sales are to electrical distributors for resale to retail outlets, electrical contractors, industrial companies and OEMs. Automotive Products General Cable's principal automotive products are ignition wire sets and booster cables for sale to the automotive aftermarket. Booster cable sales are affected by the severity of weather conditions and related promotional activity by retailers. As a result, a majority of booster cable sales occur between September and December. General Cable sells its automotive wire and cable primarily to automotive parts retailers and distributors, mass merchants, hardware and home center retail chains and hardware distributors. The Company's automotive products are also sold on a private label basis to retailers and other automotive parts manufacturers. Other Operations Genca Corporation (Genca), a subsidiary of General Cable, designs, manufacturers and sells extruders, extrusion tooling and equipment and synthetic and carbide wire drawing dies for sale to third parties and for use by General Cable. Genca's product line of extrusion tooling and equipment includes generic and specialty crossheads, extrusion and mixing screws, small tools and complete extrusion equipment systems, including components and related technical services. These products are used principally for the manufacture of insulated wire and cable, and the fabrication of plastic tubing and various hoses and pipes. Genca's products are primarily sold through Genca's agents and direct sales force to end users. 8 9 COMPETITION The markets for all of General Cable's products are highly competitive, and the Company experiences competition from at least one major competitor within each market. Due to the diversity of its product lines, however, the Company believes that no single competitor competes with the Company across the entire spectrum of the Company's product lines. General Cable believes that it has developed strong customer relations as a result of its ability to supply customer needs across a broad range of products, its commitment to quality control and continuous improvement, its continuing investment in information technology, its emphasis on customer service, and its substantial product and distribution resources. Although the primary competitive factors for General Cable's products vary somewhat across the different product categories, the principal factors influencing competition are generally breadth of product line, inventory availability and delivery time, price, quality and customer service. Price is a highly significant factor for certain lines within the Company's Electrical product categories. Many of the Company's products are made to industry specifications, and are therefore essentially functionally interchangeable with those of competitors. However, the Company believes that significant opportunities exist to differentiate all of its products on the basis of quality, consistent availability, conformance to manufacturer's specifications and customer service. Within the communications market, conformance to manufacturer's specifications and technological superiority are also important competitive factors. Brand recognition is also a primary differentiating factor in the portable cord market and, to a lesser extent, in the Company's other product groups. RAW MATERIALS The principal raw material used by General Cable in the manufacture of its wire and cable products is copper. General Cable purchases copper in either cathode, rod or wire form from a number of major domestic and foreign producers, generally through annual supply contracts. In 1997, the Company produced approximately 31% of the copper rod used in its manufacturing operations at its cast copper rod mill, which uses both cathode and recycled copper. Copper is available from many sources, and General Cable believes that it is not dependent on any single supplier of copper. In 1997, the Company's largest supplier of copper accounted for approximately 26% of the Company's copper purchases. General Cable has centralized its copper purchasing to capitalize on economies of scale and to facilitate the negotiation of favorable purchase terms from suppliers. The cost of copper has been subject to considerable volatility over the past several years. However, as a result of a number of practices intended to match copper purchases with sales, the Company's profitability has generally not been significantly affected by changes in copper prices. The Company does not engage in speculative metals trading or other speculative activities, nor does it engage in activities to hedge the underlying value of its copper inventory. Other raw materials utilized by the Company include nylon, PVC resin and compounds, polyethylene and plasticizers, fluoropolymer compounds, a variety of filling, binding and sheathing materials, and aluminum wire. The Company believes that all of these materials are available in sufficient quantities through purchases in the open market. 9 10 PATENTS AND TRADEMARKS General Cable believes that the success of its business depends more on the technical competence, creativity and marketing abilities of its employees than on any individual patent, trademark or copyright. Nevertheless, General Cable has a policy of seeking patents when appropriate on inventions concerning new products and product improvements as part of its ongoing research, development and manufacturing activities. General Cable owns 35 U.S. patents, which expire in 1999 through 2017, and has six patent applications pending in the U.S. In addition, the Company owns 25 foreign patents, which expire in 1998 through 2015. The Company also owns 82 registered trademarks and 37 trademarks for which application for registration is pending. Although in the aggregate these patents and trademarks are of considerable importance to the manufacturing and marketing of many of the Company's products, the Company does not consider any single patent or trademark or group of patents or trademarks to be material to its business as a whole. While General Cable occasionally obtains patent licenses from third parties, none are deemed to be significant. Trademarks which are considered to be important are Carol(R), Genca(R), General Cable(R), Romex(R), Vutron(R) and DreamLan(TM), and the General Cable triangle symbol. General Cable believes that the Company's products bearing these trademarks have achieved significant brand recognition within the industry. General Cable also relies on trade secret protection for its confidential and proprietary information. General Cable routinely enters into confidentiality agreements with its employees. There can be no assurance, however, that others will not independently obtain similar information and techniques or otherwise gain access to the Company's trade secrets or that the Company will be able to effectively protect its trade secrets. ENVIRONMENTAL MATTERS The Company is subject to numerous federal, state, local and foreign laws and regulations relating to the storage, handling, emission and discharge of materials into the environment, including CERCLA, the Clean Water Act, the Clean Air Act (including the 1990 amendments) and the Resource Conversation and Recovery Act. Subsidiaries of the Company have been identified as potentially responsible parties (PRPs) with respect to several sites designated for cleanup under CERCLA or similar state laws, which impose liability for cleanup of certain waste sites and for related natural resource damages without regard to fault or the legality of waste generation or disposal. Persons liable for such costs and damages generally include the site owner or operator and persons that disposed or arranged for the disposal of hazardous substances found at those sites. Although CERCLA imposes joint and several liability on all PRPs, in application, the PRPs typically allocate the investigation and cleanup costs based, among other things, upon the volume of waste contributed by each PRP. Settlements can often be achieved through negotiations with the appropriate environmental agency 10 11 or the other PRPs. PRPs that contributed small amounts of waste (typically less than 1% of the waste) are often given the opportunity to settle as "de minimis" parties, resolving their liability for a particular site. The Company does not own or operate any of the waste sites with respect to which it has been named as a PRP by the government. Based on its review and other factors, the Company believes that costs to the Company relating to environmental clean-up at these sites will not have a material adverse effect on its results of operations, cash flows or financial position. American Premier, in connection with the Acquisition, agreed to indemnify General Cable against liabilities (including all environmental liabilities) arising out of General Cable's or its predecessors' ownership or operation of the Indiana Steel & Wire Company and Marathon Manufacturing Holdings, Inc. businesses (which were divested), without limitation as to time or amount. American Premier also agreed to indemnify General Cable against 66 2/3% of all other environmental liabilities arising out of General Cable's or its predecessors' ownership or operation of other properties and assets in excess of $10 million but not in excess of $33 million which are identified during the seven year period ending June 2001. General Cable also has claims against third parties with respect to some of these liabilities. While it is difficult to estimate future environmental liabilities accurately, the Company does not currently anticipate any material adverse effect on its results of operations, financial condition or cash flows as a result of compliance with federal, state, local or foreign environmental laws or regulations or cleanup costs of the sites discussed above. EMPLOYEES At December 31, 1997, approximately 4,400 persons were employed by General Cable, and collective bargaining agreements covered approximately 2,600 employees at 14 locations. During the last five years, the Company has experienced two strikes affecting a total of three facilities; both were settled on satisfactory terms. Union contracts will expire at six facilities in 1998 and two facilities in 1999. The Company believes that its relationships with employees are good. ITEM 2. PROPERTIES General Cable operates 17 manufacturing facilities in the U.S. The Company owns 14 of the facilities, which encompass approximately 3.6 million square feet. The remaining three facilities, totaling approximately 216,000 square feet, are leased under agreements with expiration dates ranging from 1998 to 2000. In addition, General Cable operates two manufacturing facilities outside the U.S., totaling approximately 51,000 square feet. General Cable also leases four regional distribution centers, totaling approximately 917,000 square feet, located in Anaheim, CA; Dallas, TX; Vineland, NJ and Atlanta, GA, and a 64,000 square foot warehouse in Des Plaines, Illinois. These leases expire in 2001 and 2002. One additional regional distribution center is managed by a company agent in Chicago, IL. 11 12 General Cable's principal properties are listed below. The Company believes that its properties are generally well maintained and are adequate for the Company's current level of operations.
SQUARE USE/PRODUCT OWNED LOCATION FEET LINE(S) OR LEASED - -------- ------ ----------- --------- MANUFACTURING FACILITIES Manchester, NH 533,000 Electronic and Datacom Products Owned Plano, TX 404,000 Electrical Products and Rod Mill Owned Lincoln, RI 398,000 Electrical Products and Automotive Owned Bonham, TX 360,000 Outside Voice and Data Products Owned Montoursville, PA 318,000 Cordsets and Electrical Products Owned Monticello, IL 250,000 Outside Voice and Data Products Owned Kingman, AZ 243,000 Electrical Products Owned Watkinsville, GA 224,000 Electrical Products Owned Altoona, PA 195,000 Automotive Products Owned Lawrenceburg, KY 190,000 Outside Voice and Data Products and Datacom Products Owned Williamstown, MA 167,000 Electrical Products and Cordsets Owned Taunton, MA 138,000 Wire Fabricating Leased Sanger, CA 105,000 Datacom Products Owned Cass City, MI 100,000 Datacom Products Owned Clearwater, FL 72,000 Extrusion Systems and Tooling Owned Kenly, NC 50,000 Electrical OEM Products Leased Ft. Wayne, IN 28,000 Wire Drawing Dies Leased Piedras Negras, Mexico 40,000 Communications Assemblies Leased Wellingborough, UK 11,000 Automotive and Electrical OEM Products Leased DISTRIBUTION AND OTHER FACILITIES: Atlanta, GA 328,000 Distribution Center Leased Dallas, TX 200,000 Distribution Center Leased Vineland, NJ 200,000 Distribution Center Leased Anaheim, CA 189,000 Distribution Center Leased Highland Heights, KY 166,000 Corporate Headquarters and Laboratory Owned Des Plaines, IL 64,000 Warehouse Leased Toronto, Ontario Canada 24,000 Sales Office and Warehouse Leased
12 13 ITEM 3. LEGAL PROCEEDINGS General Cable is subject to numerous federal, state, local and foreign laws and regulations relating to the storage, handling, emission and discharge of materials into the environment, including CERCLA, the Clean Water Act, the Clean Air Act (including the 1990 amendments) and the Resource Conservation and Recovery Act. Subsidiaries of General Cable have been identified as PRPs with respect to several sites designated for cleanup under CERCLA or similar state laws, which impose liability for cleanup of certain waste sites and for related natural resource damages without regard to fault or the legality of waste generation or disposal. General Cable does not own or operate any of the waste sites with respect to which it has been named as a PRP by the government. Based on its review and other factors, management believes that costs to the Company relating to environmental clean-up at these sites will not have a material adverse effect on its results of operations, cash flows or financial position. American Premier, in connection with the Acquisition, agreed to indemnify General Cable against liabilities (including all environmental liabilities) arising out of General Cable's or its predecessors' ownership or operation of the Indiana Steel & Wire Company and Marathon Manufacturing Holdings, Inc. businesses (which were divested by the Predecessor prior to the Acquisition), without limitation as to time or amount. American Premier also agreed to indemnify General Cable against 66 2/3% of all other environmental liabilities arising out of General Cable's or its predecessors' ownership or operation of other properties and assets in excess of $10 million but not in excess of $33 million which are identified during the seven year period ending June 2001. General Cable also has claims against third parties with respect to some of these liabilities. While it is difficult to estimate future environmental liabilities accurately, the Company does not currently anticipate any material adverse effect on its results of operations, financial condition or cash flows as a result of compliance with federal, state, local or foreign environmental laws or regulations or cleanup costs of the sites discussed above. There are approximately 4,792 pending non-maritime asbestos cases involving subsidiaries of General Cable. The overwhelming majority of these cases involve employees in shipyards alleging exposure to asbestos-contaminated shipboard cable manufactured by General Cable's predecessors. In addition to the Company's subsidiaries, numerous other wire and cable manufacturers have been named as defendants. Most cases previously filed have been dismissed with prejudice and without imposition of liability against General Cable. In some instances, individual cases have settled on a nominal basis. In addition, subsidiaries of the Company have been named, together with numerous other wire and cable manufacturers, as defendants in approximately 18,500 suits brought by plaintiffs alleging asbestos-related injury from the maritime industry (MARDOC cases), under the supervision of the U.S. District Court for the District of Easter Pennsylvania (the District Court). On May 1, 1996 the District Court ordered that 9,373 of such MARDOC cases be dismissed without prejudice for failure to plead sufficient facts. Pursuant to that order of dismissal, plaintiffs' attorney was permitted to bring future MARDOC cases only if the cases were brought in admiralty under the Merchant Marine Act of 1920 (commonly known as the Jones Act) and if counsel paid a filing fee for each new complaint and pleaded sufficient facts showing an asbestos-related injury as well as product identification specific as to each defendant. Based upon its experience to date, the Company does not believe that the outcome of the pending non-maritime and MARDOC asbestos cases will have a material adverse effect on its results of operations, cash flows or financial position. 13 14 In January 1994, General Cable entered into a settlement agreement with certain principal primary insurers concerning liability for the costs of defense, judgments and settlements, if any, in all of the asbestos litigation described above. Subject to the terms and conditions of the settlement agreement, the insurers are responsible for a substantial portion of the costs and expenses incurred in the defense or resolution of such litigation. Accordingly, based on (i) the terms of the insurance settlement agreement; (ii) the relative costs and expenses incurred in the disposition of past asbestos cases; (iii) reserves established on the books of the Company which are believed to be reasonable; and (iv) defenses available to the Company in the litigation, the Company believes that the resolution of the present asbestos litigation will not have a material adverse effect on its results of operations, cash flows or financial position. Liabilities incurred in connection with asbestos litigation are not covered by the American Premier indemnification. On May 13, 1997, the Company notified the U.S. Consumer Product Safety Commission (CPSC) under Section 15(b) of the Consumer Product Safety Act that it had initiated a product recall of certain outdoor power center units manufactured at one of its facilities between April 7, 1997 and May 5, 1997 because of potential problems with the electrical insulation for such units. The Company filed certain follow-up reports with the CPSC as required by applicable regulations and filed a final report terminating administrative reporting as of September 30, 1997. As of that date, the Company had recovered or located the substantial majority of the units and was not aware of any claim or incident of personal injury or property damage involving the units. However, there can be no assurance that there will be no such claims or incidents. General Cable is also involved in various routine legal proceedings and administrative actions. In the opinion of the Company's management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on its results of operations, cash flows or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None during the fourth quarter of 1997. PART II. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS All statements, other than statements of historical fact, included in this Report, including without limitation the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations", are, or may be considered, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements (Cautionary Statements) include: price competition, particularly in certain segments of the building wire and cordset markets, and other competitive pressures; general economic conditions, particularly those affecting the non-residential construction industry; the Company's ability to retain key customers and distributors; the Company's ability to increase manufacturing capacity; the cost of raw materials, including copper; the level of growth in demand for products serving various segments of the communications markets; the Company's ability to introduce successfully new or enhanced products; the impact of qualified 14 15 technological changes; the Company's ability to achieve productivity improvements; and the impact of changes in industry standards and the regulatory environment. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such Cautionary Statements. ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS General Cable's common stock, $0.01 par value (Common Stock), commenced trading on the New York Stock Exchange (NYSE) on May 16, 1997, under the symbol "GCN". The following table sets forth the high and low daily sales prices for the Common Stock as reported on the NYSE for the period from May 16, 1997, when the Common Stock was first traded, to December 31, 1997:
Stock Price ------------------ High Low ---- --- Second Quarter (commencing May 16) $26 1/4 $20 3/4 Third Quarter $36 1/4 $25 3/8 Fourth Quarter $39 1/8 $31 15/16
General Cable paid a $0.05 per share dividend in the fourth quarter of 1997 and intends to pays a $0.05 quarterly dividend in the future. The payment of dividends is subject to the discretion of the Board of Directors and the requirements of Delaware law and will depend upon general business conditions, the financial performance of the Company and other factors the Board of Directors may deem relevant. The Credit Facility contains certain provisions that restrict the ability of the Company to pay dividends or to repurchase its Common Stock. ITEM 6. SELECTED FINANCIAL DATA The selected financial data set forth in the following table for the years ended December 31, 1997, 1996, 1995 and the period June 9, 1994 to December 31, 1994 were derived from audited consolidated financial statements after the Acquisition. The selected financial data set forth in the following table for the periods including January 1, 1994 to June 8, 1994 and the year ended December 31, 1993 were derived from the audited consolidated financial statements of the Predecessor. As a result of the Acquisition, which was accounted for as a purchase, the Company's results of operations, cash flows and financial position for the periods after June 8, 1994 are not comparable to prior periods. The pro forma statement of operations data give pro forma effect to the refinancing of the Company's debt under a new Credit Facility as if it had occurred on January 1, 1996. The pro forma financial adjustments are based upon available information and certain assumptions that the Company believes are reasonable. Such pro forma data are for informational purposes only and may not be indicative of the results of operations of the Company had the debt refinancing actually occurred on such date. 15 16 The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations", the consolidated financial statements of the Company and related notes thereto (in millions, except per share data). Certain reclassifications have been made to conform to current years presentation.
THE COMPANY PREDECESSOR ------------------------------------------------------ ------------------------- JUNE 9 JANUARY 1 YEAR ENDED DECEMBER 31, TO DECEMBER 31, TO JUNE 8, 1997 1996 1995 1994 1994 1993 ---- ---- ---- ---- ---- ---- STATEMENT OF OPERATIONS DATA: Net sales $1,134.5 $1,043.6 $1,061.3 $ 543.3 $355.0 $794.2 Gross profit 225.4 188.3 138.7 73.4 44.2 97.7 Operating income 104.5 78.5 44.5 20.3 1.1 2.3 Interest expense, net (17.3) (19.6) (20.7) (11.0) (12.1) (29.0) Earnings(loss) before income taxes 87.2 58.9 23.8 9.3 (11.0) (26.3) Loss from discontinued operations(1) -- -- -- -- -- (31.3) Income tax benefit (provision) (34.0) (19.7) 1.5(2) (6.5) 0.1 - Net income (loss) 53.2 39.2 25.3 2.8 (10.9) (57.6) Earnings per common share (3) $ 2.18 $ 1.62 $ 1.04 $ 0.12 Earnings per common share - assuming dilution(3) $ 2.16 $ 1.62 $ 1.04 $0.12 Weighted average shares outstanding (3) 24.4 24.3 24.3 24.3 Weighted average shares outstanding - assuming dilution(3) 24.6 24.3 24.3 24.3 PRO FORMA STATEMENT OF OPERATIONS DATA: Net income $54.6 $42.5 Earnings per common share (3) $2.24 $1.75 Earnings per common share- assuming dilution (3) $2.22 $1.75 OTHER DATA: Average daily COMEX price per pound of copper cathode $1.04 $ 1.06 $ 1.35 $ 1.20 $ 0.91(4) $ 0.85 Capital expenditures $42.6 $ 30.0 $ 26.2 $ 9.1 $ 6.2 $ 11.7
DECEMBER 31, DECEMBER 31, ------------------------------------------------------ ----------------------- BALANCE SHEET DATA: 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Working Capital $225.9 $ 205.6 $ 234.4 $ 224.8 $ 227.7 Net assets of discontinued operations(1) - - - - 48.4 Total assets 563.7 513.6 535.6 518.7 620.4 Long-term debt 238.5 205.1 205.9 206.5 293.4 Dividends to shareholders 43.8 55.1 - - - Shareholders' equity 122.4 107.4 122.9 97.6 139.9 - ----------------------------- Footnotes (1) Represents the Predecessor's loss from operations and loss on the sale of the assets of its Marathon LeTourneau Company heavy equipment manufacturing subsidiary. The net assets sold are reflected as net assets of discontinued operations. (2) At December 31, 1995, the Company recognized the full value of its net deferred tax assets; accordingly, goodwill recorded in the Acquisition was eliminated and the Company recognized a tax benefit of $1.7 million. (3) Earnings per share was computed based on the weighted average common shares outstanding for each period, adjusted for a 121,250-for-1 stock split. Earnings per common share - assuming dilution were computed after giving effect to the dilutive effect of stock options. (4) The average daily COMEX price per pound for the full year 1994 was $1.07.
16 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL General Cable's reported net sales are directly influenced by the price of copper. The price of copper has been subject to considerable volatility, with the daily selling price of copper cathode on the COMEX averaging $1.04 per pound in 1997, $1.06 per pound in 1996, and $1.35 per pound in 1995. However, as a result of a number of practices intended to match copper purchases with sales, General Cable's profitability has generally not been significantly affected by changes in copper prices. General Cable generally passes changes in copper prices along to its customers, although there are timing delays of varying lengths depending upon the type of product, competitive conditions and particular customer arrangements. General Cable does not engage in speculative metals trading or other speculative activities, nor does it engage in activities to hedge the underlying value of its copper inventory. General Cable generally experiences certain seasonal trends in sales and cash flow. Relatively significant amounts of cash are generally required during the first and second quarters of the year to build inventories in anticipation of higher demand during the spring and summer months, when construction activity increases. In general, receivables related to higher sales activity during the spring and summer months are collected during the third and fourth quarters of the year. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, statement of income data in millions of dollars and as a percentage of net sales.
Year Ended December 31, 1997 1996(1) 1995(1) ---------------------- ---------------------------- -------------------- Amount % Amount % Amount % Net Sales $1,134.5 100.0% $1,043.6 100.0% $1,061.3 100.0% Cost of sales 909.1 80.1 855.3 82.0 922.6 86.9 ------- ------ ------- ------ ------- ------ Gross profit 225.4 19.9 188.3 18.0 138.7 13.1 Selling, general and administrative expenses 120.9 10.7 109.8 10.5 94.2 8.9 ----- ------ ----- ------ -------- ------ Operating income 104.5 9.2 78.5 7.5 44.5 4.2 Interest expense, net (17.3) (1.5) (19.6) (1.9) (20.7) (2.0) ----- ------- ----- ------ -------- ------ Earnings before income taxes 87.2 7.7 58.9 5.6 23.8 2.2 Income tax benefit (provision) (34.0) (3.0) (19.7) (1.9) 1.5 0.1 ----- ------- ----- ------ --------- ------ Net income $53.2 4.7% $ 39.2 3.8% $ 25.3 2.4% ===== ======= ====== ====== ======= ======
(1) Percentages do not add due to rounding. 17 18 YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996 Net sales for 1997 increased $90.9 million, or 9%, to $1,134.5 million from 1996 net sales of $1,043.6 million. The increase reflects an increase of $40.3 million, or 11%, in the net sales of the Communications Group and an increase of $50.6 million, or 8%, in the net sales of the Electrical Group. Such amounts reflect a $0.02 decrease in the average monthly COMEX price per pound of copper in 1997 compared to 1996, which did not materially affect reported net sales. The increase in Communications Group net sales was primarily attributable to higher sales volume of datacom products, partially offset by lower selling prices of certain high speed data cables in 1997. The growth in Electrical Group net sales was primarily due to more favorable building wire pricing and increased sales volume of building wire, portable cord and OEM cordsets products in 1997 compared to 1996. Sales to General Cable's top 20 customers for 1997 were approximately 53% of total sales, and increased at the rate of 22% from 1996, when they were 47% of total sales. The increase resulted from further development of supply relationships with preferred customers who have a favorable combination of industry position, product mix, procurement practices and volume. Gross profit increased $37.1 million, or 20%, to $225.4 million in 1997 from $188.3 million in 1996. General Cable's gross profit percentage was 19.9% in 1997 compared to 18.0% in 1996. On a copper-adjusted basis (to 1997), General Cable's gross profit percentage was 18.2% in 1996. The improvement in 1997 was primarily attributable to manufacturing cost reductions combined with favorable building wire pricing, partially offset by a decrease in pricing for certain high speed data cables. The reduction in manufacturing costs in 1997 compared to 1996 primarily reflected (i) the carryover effects of production facilities rationalized in 1996; (ii) improvement in capacity utilization, including the conversion of certain facilities from five day to seven day per week continuous production schedules; (iii) product redesigns to reduce material costs; and (iv) capital investment and other improvements in manufacturing processes to improve materials usage, reduce waste, reduce labor and increase throughput. Selling, general and administrative expenses increased $11.1 million, or 10%, to $120.9 million in 1997 from $109.8 million in 1996. The increase primarily reflected higher sales volume related expenses, such as transportation and commissions and higher advertising costs, as well as increased salaries for additional staffing to support sales growth and productivity improvement. Selling, general and administrative expenses as a percentage of sales were 10.7% in 1997, compared to 10.5% in 1996 and 10.6% in 1996 on a copper adjusted basis. Net interest expense was $17.3 million in 1997 compared to $19.6 million in 1996. The reduction reflects the repayment of an $8.0 million related party note during 1996, and the impact of refinancing the remaining related party debt in May 1997 under a new credit facility at a lower effective interest rate. The effective income tax rate for 1997 was 39% compared to 33% for 1996. The lower 1996 effective tax rate reflected the impact of certain tax return reconciliation adjustments. 18 19 PRO FORMA RESULTS The following pro forma results give effect to the refinancing of related party debt as if it had occurred as of the beginning of the periods presented. The pro forma financial data are for informational purposes only and may not necessarily be indicative of the results of operations had the refinancing actually occurred on such date.
Year Ended December 31, ----------------------- 1997 1996 Pro forma net income (in millions) $54.6 $42.5 ===== ===== Pro forma earnings per common share $2.24 $1.75 ===== ===== Pro forma earnings per common share- assuming dilution $2.22 $1.75 ===== =====
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995 Net sales for 1996 decreased $17.7 million, or 2%, to $1,043.6 million in 1996 from 1995 net sales of $1,061.3 million. The decrease reflects a decrease of $36.1 million, or 5%, in the net sales of the Electrical Group, partially offset by an increase of $18.4 million, or 5%, in the net sales of the Communications Group. Such amounts reflect a $0.29 decrease in the weighted average monthly COMEX price per pound of copper in 1996, partially offset by increased volume and other factors as discussed in the following paragraph. After adjusting 1995 net sales to reflect the $0.29 lower weighted average monthly COMEX price per pound of copper sold by the Company in 1996, net sales for 1996 represented an $80.6 million, or 8%, increase over 1995. The increase in copper-adjusted net sales reflected a 13% increase in the net sales of the Communications Group and a 6% increase in the net sales of the Electrical Group. The growth in Communications Group sales was primarily due to increased volume of sales of plastic insulated cable (PIC) to RBOCs and increased demand for high-bandwidth twisted pair data cables. The growth in Electrical Group sales reflected a 5% increase in copper-adjusted net sales of building wire primarily due to more favorable pricing as market conditions improved in the second half of 1996, and a 10% increase in copper-adjusted net sales of portable cord principally due to increased volume. Gross profit increased $49.6 million, or 36%, to $188.3 million in 1996 from $138.7 million in 1995. General Cable's gross margin increased to 18.0% in 1996 from 13.1% in 1995. On a copper-adjusted basis (to 1996), the Company's gross margin was 14.4% in 1995. The improvement in 1996 was primarily attributable to manufacturing cost reductions and the increases in selling prices and sales volumes discussed above. The reduction in manufacturing costs in 1996 reflected (i) continued rationalization of production facilities through the closing of two plants; (ii) improvement of capacity utilization at remaining facilities, including the conversion of four facilities from five day to seven day per week continuous production schedules; (iii) improved production efficiencies resulting from higher production levels; (iv) raw material cost reductions reflecting decreased prices for resins and other non-copper raw materials and product redesigns to lower material costs; and (v) capital investment and other improvements in manufacturing processes to improve materials usage, reduce waste, reduce labor and increase throughput. 19 20 Selling, general and administrative expenses increased $15.6 million, or 17%, to $109.8 million in 1996 from $94.2 million in 1995. Selling, general and administrative expenses as a percentage of sales were 11% in 1996, compared to 10% of copper-adjusted (to 1996) sales in 1995. The increase primarily reflected higher sales volume-related expenses such as transportation and higher salary and related expenses attributable to increases in staff to support the expansion of the Company's direct sales force and marketing function, the restructuring of its distribution processes and new product development efforts. In addition, expenses in 1996 included increases in incentive compensation and advertising expenses. The Company incurred net interest expense of $19.6 million in 1996 compared to $20.7 million in 1995. The reduction in 1996 expense reflects the repayment of an $8.0 million related party note. The provision for income taxes was $19.7 million in 1996 compared to a benefit of $1.5 million in 1995. Prior to 1995, General Cable recorded a full valuation allowance against its net deferred tax asset because of uncertainties as to the amount of taxable income that would be generated in future years. In 1995, the Company determined that it was more likely than not that future taxable income would be sufficient to enable General Cable to realize all of its deferred tax assets. In accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes", the reversal of the valuation allowance resulted in a $63.0 million reduction of goodwill and a deferred tax benefit of $1.7 million in 1995. YEAR 2000 In the fourth quarter of 1997, General Cable completed a study to determine the cost of upgrading and modifying computer software for Year 2000 compliance and initiated the program to achieve Year 2000 compliance. The Company believes that these costs will not be material to General Cable and they will be expensed as incurred during 1998 and 1999. LIQUIDITY AND CAPITAL RESOURCES In general, General Cable requires cash for working capital, capital expenditures, debt repayment, interest and taxes. General Cable's working capital requirements increase when it experiences strong incremental demand for products and/or significant copper price increases. Based upon historical experience and the expected availability of funds under the Credit Facility, the Company expects that its sources of liquidity will be sufficient to enable it to meet its cash requirements for working capital, capital expenditures, debt repayment, interest and taxes in 1998. Cash flow provided by operating activities in 1997 was $54.1 million. This principally reflected net income before depreciation and deferred taxes of $72.5 million and an $11.3 million increase in accounts payable, accrued liabilities and other long-term liabilities, partially offset by a $26.9 million increase in accounts receivable and a $2.6 million increase in inventories. The increase in accounts receivable was due to the 18% growth in net sales in the fourth quarter of 1997 compared to the same period in 1996. The increase in inventory was due to the sales growth, substantially offset by an improvement in inventory turnover. 20 21 Cash flow used in investing activities was $39.4 million in 1997, principally reflecting $42.6 million of capital expenditures. Also included in cash flow from investing activities was $5.2 million from the sale of excess real property in 1997. General Cable expended $42.6 million, $30.0 million and $26.2 million for capital projects during 1997, 1996 and 1995, respectively. Capital expenditures in 1997 consisted of projects to increase manufacturing productivity and to selectively add production capacity. Capital expenditures in 1996 consisted of projects to reduce product costs, increase capacity and modernize machinery and equipment. Cash flow used in financing activities in 1997 was $12.4 million, primarily reflecting the repayment of intercompany and other debt and the payment of dividends totaling $43.8 million, of which $42.6 million was paid to Wassall in conjunction with the initial public offering of the Company in May 1997, partially offset by proceeds of borrowings under General Cable's Credit Facility. The initial borrowing of $268.0 million in May 1997 was reduced to $230.0 million at December 31, 1997. In May 1997, as part of the initial public offering of common stock, General Cable entered into a new $350.0 million credit facility with The Chase Manhattan Bank as administrative agent, and a syndicate of banks (the Credit Facility). The Credit Facility consists of a five-year senior unsecured revolving credit and competitive advance facility in an aggregate principal amount of $350.0 million. Borrowings are guaranteed by General Cable's principal operating subsidiaries. General Cable made an initial borrowing of $268 million and used the proceeds of such borrowing to (i) repay all of its revolving bank debt, (ii) repay all intercompany debt and advances owed to Wassall and its subsidiaries; (iii) pay $42.6 million as a dividend to Wassall; (iv) pay $2.0 million for the purchase of two related companies, Carol Cable Europe Ltd. and Carol Cable Ltd., from Wassall; and (v) pay expenses of the refinancing of $0.4 million. The Credit Facility loans bear interest, at General Cable's option, at (i) a spread over LIBOR or (ii) the Alternate Base Rate, which is defined as the higher of (a) the Agent's Prime Rate, (b) the secondary market rate for certificates of deposit (adjusted for reserve requirements) plus 1% or (c) the Federal Funds Effective Rate. In November 1997, General Cable entered into interest rate swap agreements with three banks which effectively fix interest rates for specific amounts borrowed under the Credit Facility as follows (dollars in millions):
Fixed Notional Interest Period Amounts Rate ------------------------------ --------- -------- November 1997 to November 1998 $180.0 5.9% November 1998 to November 1999 125.0 6.2% November 1999 to November 2000 75.0 6.2% November 2000 to November 2001 25.0 6.2%
21 22 A facility fee accrues on the full amount of the Credit Facility, regardless of usage. The facility fee ranges between 8.0 and 20.0 basis points per annum and the spread over LIBOR ranges between 17.0 and 42.5 basis points per annum. Both the facility fee and the spread over LIBOR are subject to periodic adjustment depending upon General Cable's Leverage Ratio. The Credit Facility restricts certain corporate acts and contains required minimum financial ratios and other covenants. At December 31, 1997 the maximum dividend allowable under the most restrictive debt covenant was $0.20 per share per year. ENVIRONMENTAL AND ASBESTOS-RELATED LITIGATION MATTERS General Cable's expenditures for environmental compliance and remediation amounted to approximately $1.2 million, $1.0 million and $2.0 million in 1997, 1996 and 1995, respectively. In addition, subsidiaries of the Company have been named as PRPs in certain proceedings that involve environmental remediation. General Cable had accrued $6.1 million at December 31, 1997 for all environmental liabilities. In connection with Wassall PLC's acquisition of General Cable from American Premier Underwriters, American Premier has agreed to indemnify General Cable against certain environmental liabilities arising out of General Cable's or its predecessors' ownership or operation of properties and assets. While it is difficult to estimate future environmental liabilities, General Cable does not currently anticipate any material adverse effect on its results of operations, cash flows or financial position as a result of compliance with federal, state, local or foreign environmental laws or regulations or remediation costs. General Cable's expenditures for asbestos litigation amounted to approximately $0.1 million, $0.6 million and $0.5 million in 1997, 1996 and 1995, respectively (before reimbursement of a substantial portion thereof under the settlement agreement), all of which were for defense costs. General Cable had accrued approximately $2.2 million for this litigation at December 31, 1997. General Cable has entered into a settlement agreement with certain principal primary insurers concerning liability for the costs of defense, judgments and settlements, if any, in the asbestos litigation. Subject to the terms and conditions of the settlement agreement, the insurers are responsible for a substantial portion of the costs and expenses incurred in the defense or resolution of such litigation. The Company does not believe that the outcome of the litigation will have a material adverse effect on its results of operations, cash flows or financial position. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 22 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page ---- Independent Auditors' Report F-1 Consolidated Statements of Income For the Years Ended December 31, 1997, 1996 and 1995 F-2 Consolidated Balance Sheets at December 31, 1997 and 1996 F-3 Consolidated Statements of Cash Flows For the Years Ended December 31, 1997, 1996 and 1995 F-4 Notes to Consolidated Financial Statements F-5 "Selected Quarterly Financial Data" has been included in Note 19 to the Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 23 24 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the persons who served as executive officers of General Cable on March 2, 1998. All of the executive officers were elected to their current offices in March 1997.
PRINCIPAL BUSINESS AFFILIATIONS ------------------------------- NAME, AGE AND TITLE DURING PAST FIVE YEARS ------------------- ---------------------- Gregory B. Kenny, 45 Mr. Kenny has served as Executive Vice President and Executive Vice President and Chief Chief Operating Officer of General Cable since March Operating Officer 1997. From June 1994 to March 1997, he was Executive Vice President of the subsidiary of General Cable which was General Cable's immediate predecessor. From April 1992 until June 1994, he served as Senior Vice President of the predecessor company. Stephen Rabinowitz, 54 Mr. Rabinowitz has served as Chairman, President and Chairman, President and Chief Executive Officer Chief Executive Officer of General Cable since March 1997. From September 1994 until March 1997, he was President and Chief Executive Officer of the predecessor company. From March 1992 until August 1994, Mr. Rabinowitz served as President and Group Executive for AlliedSignal Friction Materials and President of AlliedSignal Braking Systems Business. Mr. Rabinowitz is also a director of JLG Industries, Inc. Robert J. Siverd, 49 Mr. Siverd has served as Executive Vice President, Executive Vice President, General Counsel and Secretary General Counsel and Secretary of General Cable since March 1997. From July 1994 until March 1997, he was Executive Vice President, General Counsel and Secretary of the predecessor company. From April 1992 until July 1994, he was Senior Vice President, General Counsel and Secretary of the predecessor company.
24 25 Christopher F. Virgulak, 42 Mr. Virgulak has served as Executive Vice President, Executive Vice President, Chief Financial Officer and Chief Financial Officer and Treasurer of General Cable Treasurer since March 1997. From October 1994 until March 1997, he was Executive Vice President, Chief Financial Officer and Treasurer of the predecessor company. From January 1993 until October 1994, he was Chief Financial Officer of Wassall USA, Inc. From November 1990 until September 1992, he was Chief Financial Officer of Carol Cable Company, Inc.
Except as set forth above, the information required in this Part (Item 10. Directors and Executive Officers of the Registrant), as well as the information called for by Item 11. Executive Compensation, Item 12. Security Ownership of Certain Beneficial Owners and Management; and Item 13. Certain Relationships and Related Transactions, is incorporated by reference to the definitive Proxy Statement which General Cable intends to file with the Securities and Exchange Commission within 120 days after December 31, 1997. 25 26 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of the Form 10-K: 1. Financial Statements are included in Part II, Item 8. 2. Financial Statement Schedules filed herewith for 1997, 1996 and 1995: II. Valuation and Qualifying Accounts S-1 All other schedules for which provisions are made in the applicable regulation of the Securities and Exchange Commission have been omitted as they are not applicable, not required, or the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits EXHIBIT NUMBER DESCRIPTION - ------ ------------ 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-22961) of the Company filed with the Securities and Exchange Commission on March 7, 1997, as amended (the "Initial S-1"). 3.2 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Initial S-1). 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Initial S-1). 10.1 Credit Agreement between the Company, Chase Manhattan Bank, as Administrative Agent, and the lenders signatory thereto ( incorporated by reference to Exhibit 10.2 to the Initial S-1). 10.2 General Cable Corporation 1998 Annual Incentive Plan. 10.3 General Cable Corporation 1997 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Initial S-1). 10.4 General Cable Corporation 1997 Stock Incentive Plan, as amended. 10.5 Employment Agreement dated May 13, 1997, between Stephen Rabinowitz and the Company (incorporated by reference to Exhibit 10.5 to the Initial S-1). 10.6 Amendment dated March 16, 1998 to Employment Agreement dated May 13, 1997, between Stephen Rabinowitz and the Company. 10.7 Employment Agreement dated May 13, 1997, between Gregory B. Kenny and the Company (incorporated by reference to Exhibit 10.6 to the Initial S-1). 10.8 Amendment dated March 16, 1998 to Employment Agreement dated May 13, 1997, between Gregory B. Kenny and the Company. 10.9 Employment Agreement dated May 13, 1997, between Christopher F. Virgulak and the Company (incorporated by reference to Exhibit 10.7 to the Initial S-1). 10.10 Employment Agreement dated May 13, 1997, between Robert J. Siverd and the Company (incorporated by reference to Exhibit 10.8 to the Initial S-1). 26 27 10.11 Change-in-Control Agreement dated May 13, 1997, between Stephen Rabinowitz and the Company (incorporated by reference to Exhibit 10.9 to the Initial S-1). 10.12 Change-in-Control Agreement dated May 13, 1997, between Gregory B. Kenny and the Company (incorporated by reference to Exhibit 10.10 to the Initial S-1). 10.13 Change-in-Control Agreement dated May 13, 1997, between Christopher F. Virgulak and the Company (incorporated by reference to Exhibit 10.11 to the Initial S-1). 10.14 Change-in-Control Agreement dated May 13, 1997, between Robert J. Siverd and the Company (incorporated by reference to Exhibit 10.12 to the Initial S-1). 10.15 Form of Intercompany Agreement among Wassall PLC, Netherlands Cable B.V. and the Company (incorporated by reference to Exhibit 10.14 to the Initial S-1). 10.16 Stock Purchase Agreement dated May 13, 1997, among Wassall PLC, General Cable Industries Inc. and the Company (incorporated by reference to Exhibit 10.15 to the Initial S-1). 21.1 List of Subsidiaries of General Cable. 23.1 Consent of Deloitte & Touche LLP. 27.1 Financial Data Schedule. (b) Reports on Form 8-K None. 27 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, General Cable Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. General Cable Corporation Signed: March 18, 1998 By: /s/ STEPHEN RABINOWITZ ---------------------------------------- Stephen Rabinowitz Chairman, President and Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ GREGORY B. KENNY Executive Vice President, March 18, 1998 ---------------- Chief Operating Officer and Gregory B. Kenny Director /s/ROBERT J. SIVERD Executive Vice President, General March 18, 1998 ---------------- Counsel and Secretary Robert J. Siverd /s/CHRISTOPHER F. VIRGULAK Executive Vice President, Chief March 18, 1998 ----------------------- Financial Officer and Treasurer Christopher F. Virgulak (Chief Accounting Officer) /s/GREGORY E. LAWTON Director March 18, 1998 --------------------- Gregory E. Lawton /s/JEFFREY NODDLE Director March 18, 1998 --------------------- Jeffrey Noddle /s/ROBERT L. SMIALEK Director March 18, 1998 --------------------- Robert L. Smialek /s/JOHN E. WELSH Director March 18, 1998 --------------------- John E. Welsh
28 29 INDEPENDENT AUDITORS' REPORT General Cable Corporation: We have audited the accompanying consolidated balance sheets of General Cable Corporation and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of General Cable Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Cincinnati, Ohio January 28, 1998 F-1 30 GENERAL CABLE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER SHARE DATA)
Year Ended December 31, ------------------------------------ 1997 1996 1995 ---- ---- ----- Net sales $ 1,134.5 $ 1,043.6 $ 1,061.3 Cost of sales 909.1 855.3 922.6 --------- --------- --------- Gross profit 225.4 188.3 138.7 Selling, general and administrative expenses 120.9 109.8 94.2 --------- --------- --------- Operating income 104.5 78.5 44.5 --------- --------- --------- Interest income (expense): Interest expense (18.1) (20.7) (21.4) Interest income 0.8 1.1 0.7 --------- --------- --------- (17.3) (19.6) (20.7) --------- --------- --------- Earnings before income taxes 87.2 58.9 23.8 Income tax benefit (provision) (34.0) (19.7) 1.5 --------- --------- --------- Net income $ 53.2 $ 39.2 $ 25.3 ========= ========= ========= Earnings per common share $ 2.18 $ 1.62 $ 1.04 ========= ========= ========= Weighted average common shares 24.4 24.3 24.3 ========= ========= ========= Earnings per common share-assuming dilution $ 2.16 $ 1.62 $ 1.04 ========= ========= ========= Weighted average common shares-assuming dilution 24.6 24.3 24.3 ========= ========= =========
See accompanying Notes to Consolidated Financial Statements. F-2 31 GENERAL CABLE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA)
ASSETS December 31, ------ ---------------- 1997 1996 ---- ---- Current Assets: Cash $ 4.2 $ 1.9 Receivables, net 162.4 135.5 Inventories 163.6 161.0 Deferred income taxes 20.9 23.7 Prepaid expenses and other 10.7 13.6 ------ ------ Total current assets 361.8 335.7 Property, plant and equipment, net 155.6 128.8 Deferred income taxes 29.2 31.8 Other non-current assets 17.1 17.3 ------ ------ Total assets $563.7 $513.6 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------- Current Liabilities: Accounts payable $ 80.5 $ 69.3 Accrued liabilities 55.4 58.8 Short-term debt -- 2.0 ------ ------ Total current liabilities 135.9 130.1 Long-term debt 238.5 9.3 Notes payable to related parties -- 195.8 Other liabilities 66.9 71.0 ------ ------ Total liabilities 441.3 406.2 ------ ------ Shareholders' Equity: Common stock, $0.01 par value: Issued and outstanding shares: 1997 - 24,515,426 1996 - 24,250,000 0.2 0.2 Additional paid-in capital 83.5 94.7 Retained earnings 38.7 12.5 ------ ------ Total shareholders' equity 122.4 107.4 ------ ------ Total liabilities and shareholders' equity $563.7 $513.6 ====== ======
See accompanying Notes to Consolidated Financial Statements. F-3 32 GENERAL CABLE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS)
Year Ended December 31, 1997 1996 1995 Cash flows of operating activities: Net income $ 53.2 $ 39.2 $ 25.3 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13.9 12.1 12.9 Deferred income taxes 5.4 9.3 (1.7) Changes in operating assets and liabilities: (Increase) decrease in receivables (26.9) 12.1 (4.9) (Increase) decrease in inventories (2.6) 17.6 9.1 (Increase) decrease in other assets (0.2) 2.1 (3.4) Increase (decrease) in accounts payable, accrued and other liabilities 11.3 (11.6) (16.1) ------ ------ ------ Net cash flows of operating activities 54.1 80.8 21.2 ------ ------ ------ Cash flows of investing activities: Capital expenditures (42.6) (30.0) (26.2) Proceeds from properties sold 5.2 -- -- Investment in joint venture -- (6.4) -- Other, net (2.0) 0.9 (0.5) ------ ------ ------ Net cash flows of investing activities (39.4) (35.5) (26.7) ------ ------ ------ Cash flows of financing activities: Dividends paid (43.8) (55.1) -- Net borrowings of revolving credit facility 230.0 -- -- Proceeds from related party notes payable -- 4.8 8.0 Proceeds from other debt -- 2.0 -- Repayment of related party notes payable (195.8) (8.0) -- Repayment of short-term debt (2.0) -- -- Repayment of other long-term debt (0.8) (0.8) (0.7) ------ ------ ------ Net cash flows of financing activities (12.4) (57.1) 7.3 ------ ------ ------ Increase (decrease) in cash 2.3 (11.8) 1.8 Cash - beginning of period 1.9 13.7 11.9 ------ ------ ------ Cash - end of period $ 4.2 $ 1.9 $ 13.7 ====== ====== ====== SUPPLEMENTAL INFORMATION Income taxes paid (refunded) $ 22.7 $ (1.1) $ 4.2 ====== ====== ====== Interest paid $ 16.7 $ 20.1 $ 21.3 ====== ====== ====== NONCASH ACTIVITIES Issuance of Restricted Stock $ 5.6 $ -- $ -- ====== ====== ======
See accompanying Notes to Consolidated Financial Statements. F-4 33 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL ------- General Cable Corporation and subsidiaries (General Cable) are engaged in the development, design, manufacture, marketing and distribution of copper wire and cable products for the communications and electrical markets. As of December 31, 1997, General Cable operated 17 manufacturing facilities within the United States in addition to the corporate headquarters in Highland Heights, Kentucky. In June 1994, a subsidiary of Wassall PLC acquired all of the outstanding common stock of General Cable (the Acquisition). On May 20, 1997, Wassall completed an initial public offering of approximately 19,435,000 shares of General Cable common stock at a price of $21 per share. This included 2,535,000 shares purchased under the U.S. Underwriters' over-allotment option. On August 22, 1997, a secondary offering of 4,815,000 shares of common stock at a price of $31 per share was completed. These shares represented all of Wassall's remaining holdings of General Cable common stock. General Cable did not receive any proceeds from the sale of the shares of common stock in these offerings. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of General Cable Corporation and its wholly owned subsidiaries. Investment in joint ventures is accounted for under the equity method of accounting. Other non-current assets included investment in joint venture of $5.5 million and $6.4 million at December 31, 1997 and 1996, respectively. All transactions and balances among the consolidated companies have been eliminated. Certain reclassifications have been made to the prior year to conform to the current year's presentation. REVENUE RECOGNITION Revenue is recognized when shipments are made to customers. EARNINGS PER SHARE In the fourth quarter of 1997, General Cable implemented Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share", which was issued in February 1997. There was no effect of implementing this new accounting standard on previously reported earnings per share. NEW STANDARDS In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". General Cable will be required to adopt these standards during 1998. Adoption of these standards will not impact the reported results of operations or financial position of General Cable; however, General Cable is planning to disclose additional information related to the Electrical and Communications Groups when SFAS No. 131 is implemented. INVENTORIES Inventories are stated at the lower of cost or market value. General Cable values the copper component of its inventories using the last-in/first-out (LIFO) method and values all remaining inventories using the first-in/first-out (FIFO) method. F-5 34 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS GOODWILL Goodwill recorded in the Acquisition was amortized using the straight-line method over 40 years. In accordance with SFAS No. 109, "Accounting for Income Taxes", the recognition in 1995 of the tax benefits of acquired deductible temporary differences and carryforwards served to reduce goodwill to zero. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Costs assigned to property, plant and equipment relating to the Acquisition were based on estimated fair values at that date. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. General Cable implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of," on January 1, 1996. SFAS No. 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable. Management believes that amounts recorded as assets are recoverable through normal operations. The implementation of SFAS No. 121 did not have a material effect on the consolidated financial statements. FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments are defined as cash or contracts relating to the receipt, delivery or exchange of financial instruments. Except as otherwise noted, fair value approximates the carrying value of such instruments. FORWARD PRICING AGREEMENTS FOR PURCHASES OF COPPER In the normal course of business, General Cable enters into forward pricing agreements for purchases of copper to match certain sales transactions. At December 31, 1997 and 1996, General Cable had $45.5 million and $16.9 million, respectively, of future copper purchases that were under forward pricing agreements. The fair market value of the forward pricing agreements was $39.3 million at December 31, 1997 and approximated the forward pricing agreement amount at December 31, 1996. General Cable expects to recover the cost of copper under these agreements as a result of firm sales price commitments with customers. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CONCENTRATION OF CREDIT RISK General Cable sells a broad range of products throughout the United States, Canada and Europe. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers, including members of buying groups, comprising General Cable's customer base. Ongoing credit evaluations of customers' financial condition are performed, and generally, no collateral is required. General Cable maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management's estimates. General Cable has one customer that accounted for 10.4% of its net sales in 1996. Sales to a single customer did not exceed 10% in 1997 or 1995. F-6 35 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are utilized to reduce interest rate risk. General Cable does not hold or issue derivative financial instruments for trading purposes. General Cable has entered into interest rate swap agreements designed to hedge underlying debt obligations. Amounts to be paid or received under interest rate swap agreements are accrued as interest and are recognized over the life of the swap agreements as an adjustment to interest expense on the underlying debt obligation. STOCK-BASED COMPENSATION Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. General Cable has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. 3. RECEIVABLES ----------- Receivables are net of allowances of $7.3 million and $8.4 million at December 31, 1997 and 1996, respectively. 4. INVENTORIES ----------- Inventories consisted of the following (in millions):
December 31, -------------------- 1997 1996 ---- ---- Raw materials $ 20.7 $ 20.8 Work-in-progress 28.4 28.6 Finished goods 114.5 111.6 ------- ------- Total $163.6 $161.0 ====== ======
At December 31, 1997 and 1996, $70.7 million and $67.8 million, respectively, of inventories were valued using the LIFO method. Approximate replacement cost of inventories valued using the LIFO method totaled $59.3 million at December 31, 1997 and $76.2 million at December 31, 1996. A reduction in inventory quantities during 1996 and 1995 resulted in a liquidation of LIFO inventory quantities carried at a lower cost as compared with the cost of current purchases. The effect of this liquidation was to decrease cost of goods sold by $1.6 million and $0.2 million, for the years ended December 31, 1996 and 1995, respectively. F-7 36 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. PROPERTY, PLANT AND EQUIPMENT ----------------------------- Property, plant and equipment consisted of the following (in millions):
December 31, -------------------- 1997 1996 Land $ 6.9 $ 6.9 Buildings and leasehold improvements 40.4 38.5 Machinery, equipment and office furnishings 122.6 94.1 Construction in progress 28.5 18.1 ------ ------ Total 198.4 157.6 Less-Accumulated depreciation and amortization (42.8) (28.8) ------ ------ Total $155.6 $128.8 ====== ======
Depreciation expense totaled $13.9 million, $12.1 million and $11.7 million for the years ended December 31, 1997, 1996 and 1995, respectively. 6. ACCRUED LIABILITIES ------------------- Accrued liabilities consisted of the following (in millions):
December 31, ------------------- 1997 1996 Customer rebates $ 9.7 $ 7.1 Payroll related accruals 9.6 9.4 Insurance claims and related expenses 9.2 10.1 Accrued restructuring costs 9.2 6.4 Payable to related party -- 4.8 Other accrued liabilities 17.7 21.0 ----- ----- Total $55.4 $58.8 ===== =====
F-8 37 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. RESTRUCTURING PLAN ------------------ In connection with the Acquisition, accruals of approximately $46.5 million were established for restructuring activities related to the reduction of excess manufacturing and warehouse capacity and the reduction of excess administrative overhead costs. These costs principally represented employee separation costs and costs related to facility closings, including lease payments for closed facilities and other premise costs. Facilities closed include two manufacturing plants during 1996 and three manufacturing plants and one warehouse in 1995. The restructuring plan is expected to be completed during 1998. The total cost of these actions is expected to approximate the original estimate. Changes in accrued restructuring costs were as follows (in millions):
Facility Separation Closing Costs Costs Total -------- -------- ------- Balance, December 31, 1994 $15.6 $28.1 $43.7 Utilization (7.9) (8.7) (16.6) ----- ----- ----- Balance, December 31, 1995 7.7 19.4 27.1 Utilization (4.7) (9.1) (13.8) ----- ----- ----- Balance, December 31, 1996 3.0 10.3 13.3 Utilization (0.7) (3.4) (4.1) ----- ----- ----- Balance, December 31, 1997 $ 2.3 $ 6.9 $ 9.2 ===== ===== =====
F-9 38 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. LONG-TERM DEBT -------------- Long-term debt consisted of the following (in millions):
December 31, ------------------ 1997 1996 ---- ---- Revolving Credit Facility $230.0 $ -- Other 8.5 9.3 ------ ------ Total $238.5 $ 9.3 ====== ======
In May 1997, General Cable entered into a credit facility with The Chase Manhattan Bank as administrative agent, and a syndicate of banks. The credit facility consists of a five-year senior unsecured revolving credit and competitive advance facility in an aggregate principal amount of $350 million which expires in May 2002. Initial borrowings of $268 million were used in part to repay the notes payable to Wassall and subsidiaries outstanding at the time of the initial public offering. At December 31, 1997, $230 million of revolving credit loans were outstanding, with a weighted average annual interest rate of 6.1% and such amount approximates fair market value. The Credit Facility loans bear interest, at General Cable's option, at (i) a spread over LIBOR or (ii) the Alternate Base Rate, which is defined as the higher of (a) the Agent's Prime Rate, (b) the secondary market rate for certificates of deposit (adjusted for reserve requirements) plus 1% or (c) the Federal Funds Effective Rate. A facility fee accrues on the full amount of the Credit Facility, regardless of usage. The facility fee ranges between 8.0 and 20.0 basis points per annum and the spread over LIBOR ranges between 17.0 and 42.5 basis points per annum. Both the facility fee and the spread over LIBOR are subject to periodic adjustment depending upon General Cable's Leverage Ratio as defined in the Credit Facility agreement. The Credit Facility restricts certain corporate acts and contains required minimum financial ratios and other covenants. At December 31, 1997 the maximum dividend allowable under the most restrictive debt covenant was $0.20 per share per year. Other long-term debt, primarily Industrial Revenue Bonds, had a weighted average annual interest rate of 5.1%. Maturities of such notes are as follows: 1998-$0.7 million, 1999-$2.7 million, 2000-$0.1 million, 2001-$0.1 million, 2002-$0.1 million and thereafter $4.8 million. F-10 39 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. NOTES PAYABLE TO RELATED PARTIES At December 31, 1996 notes payable to related parties consisted of a $169.8 million, 9.98% subordinated note and a $26.0 million note payable bearing interest at prime plus 3/4% payable to Wassall. At December 31, 1996, the fair value of General Cable's notes payable to related parties was $220.3 million compared to the carrying value of $195.8 million. The fair value was estimated by discounting the future cash flows using an interest rate available to General Cable at that time. 10. INTEREST RATE SWAPS General Cable utilizes interest rate swaps to manage its interest rate exposure by fixing its interest rate on a portion of the Credit Facility. Under the agreements, General Cable will pay or receive amounts equal to the difference between the average fixed rate and the three month LIBOR rate. In November 1997, General Cable entered into interest rate swaps which effectively fix interest rates at an average rate of 6.0% for specific amounts borrowed under the Credit Facility as follows (dollars in millions):
Fixed Notional Interest Period Amounts Rate ----------------------------- -------- -------- November 1997 to November 1998 $180.0 5.9% November 1998 to November 1999 125.0 6.2% November 1999 to November 2000 75.0 6.2% November 2000 to November 2001 25.0 6.2%
At December 31, 1997, the net unrealized loss on the interest rate swap transactions was $0.5 million, while the carrying value was zero. F-11 40 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES The provision (benefit) for income taxes consisted of the following (in millions):
Year Ended December 31, ------------------------------ 1997 1996 1995 ---- ---- ---- Current tax expense: Federal $24.1 $ 6.8 $-- State 3.8 2.9 -- Foreign 0.7 0.7 0.2 Deferred tax expense (benefit): Federal 4.3 8.4 (1.7) State 1.1 0.9 -- ----- ----- ----- $34.0 $19.7 $(1.5) ===== ===== =====
The reconciliation of reported income tax expense to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income is as follows (in millions):
Year Ended December 31, -------------------------------- 1997 1996 1995 ---- ---- ---- Statutory federal income tax $30.5 $20.6 $ 8.3 State income tax-net of federal benefit 3.2 1.7 - Valuation allowance change - - (10.1) Other, net 0.3 (2.6) 0.3 ------- ------- ------- $34.0 $19.7 $ (1.5) ===== ===== ======
The components of deferred tax assets and liabilities were as follows (in millions):
December 31, ------------------- 1997 1996 ---- ---- Deferred tax assets: Net operating loss carryforward $26.5 $27.4 Pension and retiree benefits accruals 7.6 7.9 Asset and rationalization reserves 6.1 7.8 Inventory reserves 4.5 5.1 Alternative minimum tax credit 4.7 4.7 Other liabilities and reserves 13.6 14.4 ----- ------ Total deferred tax assets $63.0 $67.3 ===== ===== Deferred tax liabilities: Depreciation and fixed assets $12.9 $11.8 ===== ===== Net deferred tax assets $50.1 $55.5 ===== =====
F-12 41 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. At December 31, 1994, a valuation allowance for the full amount of the net deferred tax asset was recorded because of pre-1994 losses and uncertainties as to the amount of taxable income that would be generated in future years. In 1995, management determined that it was more likely than not that future taxable income would be sufficient to enable General Cable to realize all of its deferred tax assets. Accordingly, the valuation allowance was eliminated in 1995. In accordance with SFAS No. 109, the recognition in 1995 of the tax benefits of acquired deductible temporary differences and carryforwards served to reduce goodwill to zero. In accordance with the provisions of Internal Revenue Code Section 382, utilization of the Company's net operating loss carryforward is estimated to be limited to approximately $5.4 million per year. The net operating loss carryforward expires in varying amounts from 2007 through 2012. Because of the Section 382 limitation, the portion of the Company's total net operating loss carryforward that may be utilized through expiration is estimated to be approximately $75.7 million. General Cable also has $4.7 million of alternative minimum tax (AMT) credit carryforwards that have no expiration date. The utilization of the AMT credit carryforwards is also subject to Section 382 limitations. 12. PENSION PLANS ------------- General Cable provides retirement benefits through contributory and noncontributory pension plans for the majority of its regular full-time employees. Pension expense under the defined contribution plans sponsored by General Cable equaled four percent of each eligible employee's covered compensation. In addition, General Cable sponsors employee savings plans under which General Cable may match a specified portion of contributions made by eligible employees. Benefits provided under defined benefit pension plans sponsored by General Cable are generally based on years of service multiplied by a specific fixed dollar amount. Contributions to these pension plans are based on generally accepted actuarial methods which may differ from the methods used to determine pension expense. The amounts funded for any plan year are neither less than the minimum required under federal law nor more than the maximum amount deductible for federal income tax purposes. F-13 42 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net pension expense for plans included the following components (in millions):
Year Ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Service cost $ 1.4 $ 1.4 $ 1.1 Interest cost 6.3 6.0 6.1 Return on plan assets (16.7) (10.5) (14.3) Net amortization and deferral 9.1 3.2 7.7 ----- ----- ----- Net defined benefit pension expense 0.1 0.1 0.6 Net defined contribution pension expense 2.2 2.1 2.3 ----- ----- ----- Total pension expense $ 2.3 $ 2.2 $ 2.9 ===== ===== =====
The table below sets forth the funded status of General Cable's defined benefit pension plans and the amounts recognized in General Cable's balance sheet at December 31, 1997 and 1996 related to those plans (in millions):
1997 1996 ------ ------- Actuarial present value of benefit obligation: Vested benefit obligation $(83.7) $(75.9) ====== ====== Accumulated benefit obligation $(91.0) $(82.7) ====== ====== Projected benefit obligation $(92.1) $(84.0) Plan assets at fair value 97.4 87.8 ------ ------ Excess assets 5.3 3.8 Unrecognized net gain (10.2) (9.1) Unrecognized prior service cost 3.7 2.8 ------ ------ Accrued pension liability $(1.2) $(2.5) ====== ======
The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7% for the year ended December 31, 1997 and 7.5% for the years ended December 31, 1996 and 1995. The rate of compensation increase was 4.5% and the assumed long-term rate of return on plan assets was 9.5% for each period presented. Pension plan assets consist of equity securities and various fixed income investments. F-14 43 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS -------------------------------------------- General Cable has post-retirement benefit plans that provide medical and life insurance for certain retirees and eligible dependents. General Cable funds the plans as claims or insurance premiums are incurred. Net post-retirement benefit expense included the following components (in millions):
Year Ended December 31, ----------------------- 1997 1996 1995 ---- ---- ---- Service cost $ 0.4 $0.4 $ 0.3 Interest cost 1.1 1.1 1.1 ---- ---- ---- Net post-retirement benefit expense $1.5 $1.5 $1.4 ==== ==== ====
The funded status of the plans and amounts recognized in General Cable's balance sheet were as follows (in millions):
December 31, ----------------- 1997 1996 ---- ---- Accumulated post-retirement benefit obligation: Retirees $ (4.4) $ (5.3) Fully eligible active plan participants (3.1) (3.0) Other active plan participants (7.9) (7.2) Unrecognized net loss 0.1 -- ----- ----- Accrued post-retirement benefit liability $(15.3) $(15.5) ===== =====
The discount rate used in determining the accumulated post-retirement benefit obligation was 7% for the year ended December 31, 1997 and 7.5% for the years ended December 31, 1996 and 1995. The assumed health care cost trend rate used in measuring the accumulated post-retirement benefit obligation was 9.5% decreasing gradually to 5.0% in year 2005 and thereafter. Increasing the assumed health care cost trend rate by 1% would result in an increase in the accumulated post-retirement benefit obligation of $1.3 million for 1997. The effect of this change would increase net post-retirement benefit expense by $0.2 million. F-15 44 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. STOCK OPTIONS ------------- General Cable has a Stock Incentive Plan under which a maximum of 2,450,000 shares of Common Stock may be issued. Stock options are granted to employees at prices which are not less than the closing market price at the date of grant. All options granted during 1997 expire in ten years and vest and become fully exercisable at the end of three years of continued employment. General Cable applies APB Opinion 25 and related Interpretations in accounting for the plan. Accordingly, no compensation cost has been recognized for grants under the stock option plan. If compensation costs for General Cable's stock option plan had been determined based on the fair value at the grant dates for awards under this plan consistent with the method of SFAS No. 123 the pro forma net income would have been $52.0 million or $2.13 per common share and $2.11 per common share assuming dilution for 1997. In determining the pro forma amounts above, the fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1997: dividend yield of 0.6%; expected volatility of 37%; risk-free interest rates of 6%; and expected option lives of 6.5 years. The weighted average per share fair value of options granted was $10.22 in 1997. These pro forma amounts may not be representative of future disclosures because the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. A summary of options information for the year ended December 31, 1997 follows:
Weighted-Average Shares Exercise Price ------ ----------------- Options granted 1,143,350 $ 21.03 Options cancelled (44,000) $ 21.00 ---------- Outstanding at end of year 1,099,350 $ 21.03 ==========
Following the initial public offering in May 1997, 1.1 million options were granted to General Cable's executive officers and key employees at an exercise price of $21.00 per share. As of December 31, 1997, options outstanding have exercise prices between $21.00 and $35.50 and a weighted average remaining contractual life of 9.4 years. None of the outstanding options were exercisable at December 31, 1997. F-16 45 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. SHAREHOLDERS' EQUITY General Cable is authorized to issue 75 million shares of common stock and 25 million shares of preferred stock. Changes in shareholders' equity were as follows (in millions):
Additional Common Paid In Retained Stock Capital Earnings Total ----- ------- -------- ----- December 31, 1994 $ 0.2 $ 94.7 $ 2.7 $ 97.6 Net income -- -- 25.3 25.3 ------ ------ ------ ------ December 31, 1995 0.2 94.7 28.0 122.9 Net income -- -- 39.2 39.2 Dividends -- -- (55.1) (55.1) Other -- -- 0.4 0.4 ------ ------ ------ ------ December 31, 1996 0.2 94.7 12.5 107.4 Net income -- 53.2 53.2 Dividends -- (16.7) (27.1) (43.8) Issuance of restricted stock -- 5.6 -- 5.6 Other -- (0.1) 0.1 -- ------ ------ ------ ------ December 31, 1997 $ 0.2 $ 83.5 $ 38.7 $122.4 ====== ====== ====== ======
Following consummation of the initial public offering, General Cable awarded 268,594 shares of restricted stock to executive officers and other key employees. The awards of restricted stock were made in settlement of obligations under existing long-term incentive arrangements. Restrictions on 149,547 shares expire on December 31, 1998, while restrictions on the remaining 119,047 shares expire in May 2000. 16. EARNINGS PER SHARE ------------------ A reconciliation of the numerator and denominator of earnings per common share to earnings per common share assuming dilution for the year ended December 31, 1997 is as follows (in millions):
Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- ------ Earnings per common share $53.2 24.4 $2.18 Dilutive effect of stock options -- 0.2 ----- ---- Earnings per common share-assuming dilution $53.2 24.6 $2.16 ===== ===== =====
Earnings per common share and earnings per common share assuming dilution for 1996 and 1995 were computed based on 24.3 million average shares outstanding. There were no dilutive securities outstanding in 1996 and 1995. F-17 46 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. COMMITMENTS AND CONTINGENCIES ----------------------------- Certain present and former operating sites, or portions thereof, currently or previously owned or leased by current or former operating units of General Cable are the subject of investigations, monitoring or remediation under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or superfund), the Federal Resource Conservation and Recovery Act or comparable state statutes or agreements with the third parties. These proceedings are in various stages ranging from initial investigations to active settlement negotiations to implementation of the clean-up or remediation of sites. Certain present and former operating units of General Cable have been named as potentially responsible parties (PRPs) at several off-site disposal sites under CERCLA or comparable state statutes in federal court proceedings. In each of these matters, the operating unit of General Cable is working with the governmental agencies involved and other PRPs to address environmental claims in a responsible and appropriate manner. At December 31, 1997, General Cable had an accrued liability of approximately $6.1 million for various environmental related liabilities of which General Cable is aware. In connection with the Acquisition, American Premier Underwriter's Inc. agreed to indemnify General Cable against all environmental liabilities arising out of General Cable's or its predecessors' ownership or operation of the Indiana Steel & Wire Company and Marathon Manufacturing Holdings, Inc. businesses (which were divested by General Cable prior to the Acquisition), without limitation as to time or amount. American Premier also agreed to indemnify General Cable against 66 2/3% of all other environmental liabilities arising out of General Cable's or its predecessors' ownership or operation of other properties and assets in excess of $10 million but not in excess of $33 million which are identified during the seven year period ending June 2001. While it is difficult to estimate future environmental liabilities accurately, General Cable does not currently anticipate any material adverse impact on its results of operations, financial position or cash flows as a result of compliance with federal, state, local or foreign environmental laws or regulations or cleanup costs of the sites discussed above. In addition, subsidiaries of the Company have been named as defendants in lawsuits alleging exposure to asbestos in products manufactured by the Company. At December 31, 1997, General Cable had accrued approximately $2.2 million for these lawsuits. The Company does not believe that the outcome of the litigation will have a material adverse effect on its results of operations, cash flows or financial position. General Cable has entered into various operating lease agreements related principally to certain administrative, manufacturing and distribution facilities and transportation equipment. Future minimum rental payments required under noncancelable lease agreements at December 31, 1997 were as follows: 1998-$7.2 million, 1999-$6.3 million, 2000-$5.8 million, 2001-$3.6 million and 2002-$0.9 million. Rental expense recorded under operating leases was $6.7 million, $4.2 million and $3.8 million for the years ended December 31, 1997, 1996 and 1995, respectively. F-18 47 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. RELATED PARTY TRANSACTIONS -------------------------- A subsidiary of Wassall charged General Cable a fee for management services of $0.9 million for the period January 1, 1997 to May 20, 1997, $1.6 million for 1996 and $1.4 million for 1995 which are included in selling, general and administrative expenses in the accompanying consolidated statements of income. 19. QUARTERLY OPERATING RESULTS (UNAUDITED) --------------------------------------- The interim financial information is unaudited. In the opinion of management, the interim financial information reflects all adjustments necessary for a fair presentation of quarterly financial information. Quarterly results have been influenced by seasonal factors inherent in General Cable's businesses. The sum of the quarters earnings per share amounts may not add to full year earnings per share because each quarter is calculated independently. Summarized historical quarterly financial data for 1997 and 1996 are set forth below (in millions, except per share data):
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- 1997 - ---- Net sales $ 251.0 $ 292.2 $ 306.1 $ 285.2 Gross profit 48.8 55.0 61.7 59.9 Net income 8.6 12.0 17.3 15.3 Earnings per share 0.35 0.49 0.71 0.62 Earnings per share- Assuming dilution 0.35 0.49 0.69 0.61 1996 - ----- Net sales $ 258.0 $ 270.7 $ 272.2 $ 242.7 Gross profit 36.0 47.6 55.7 49.0 Net income 2.5 10.0 15.2 11.5 Earnings per share 0.10 0.41 0.63 0.48 Earnings per share- assuming dilution 0.10 0.41 0.63 0.48
F-19 48 SCHEDULE II GENERAL CABLE CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS ACCOUNTS RECEIVABLE ALLOWANCES (IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------- 1997 1996 1995 ---- ---- ---- Accounts Receivable Allowances: Beginning balance $ 8.4 $ 8.1 $10.7 Provision 1.3 1.3 .7 Write-offs (2.4) (1.0) (3.3) ----- ----- ------ Ending balance $ 7.3 $ 8.4 $ 8.1 ===== ===== =====
S-1 49 GENERAL CABLE CORPORATION AND SUBSIDIARIES EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-22961) of the Company filed with the Securities and Exchange Commission on March 7, 1997, as amended (the Initial S-1). 3.2 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Initial S-1). 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Initial S-1). 10.1 Credit Agreement between the Company, Chase Manhattan Bank, as Administrative Agent, and the lenders signatory thereto ( incorporated by reference to Exhibit 10.2 to the Initial S-1). 10.2 General Cable Corporation 1998 Annual Incentive Plan. 10.3 General Cable Corporation 1997 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Initial S-1). 10.4 General Cable Corporation 1997 Stock Incentive Plan, as amended. 10.5 Employment Agreement dated May 13, 1997, between Stephen Rabinowitz and the Company (incorporated by reference to Exhibit 10.5 to the Initial S-1). 10.6 Amendment dated March 16, 1998 to Employment Agreement dated May 13, 1997, between Stephen Rabinowitz and the Company. 10.7 Employment Agreement dated May 13, 1997, between Gregory B. Kenny and the Company (incorporated by reference to Exhibit 10.6 to the Initial S-1). 10.8 Amendment dated March 16, 1998 to Employment Agreement dated May 13, 1997, between Gregory B. Kenny and the Company. 10.9 Employment Agreement dated May 13, 1997, between Christopher F. Virgulak and the Company (incorporated by reference to Exhibit 10.7 to the Initial S-1). 10.10 Employment Agreement dated May 13, 1997, between Robert J. Siverd and the Company (incorporated by reference to Exhibit 10.8 to the Initial S-1). 10.11 Change-in-Control Agreement dated May 13, 1997, between Stephen Rabinowitz and the Company (incorporated by reference to Exhibit 10.9 to the Initial S-1). 10.12 Change-in-Control Agreement dated May 13, 1997, between Gregory B. Kenny and the Company (incorporated by reference to Exhibit 10.10 to the Initial S-1). 10.13 Change-in-Control Agreement dated May 13, 1997, between Christopher F. Virgulak and the Company (incorporated by reference to Exhibit 10.11 to the Initial S-1). 10.14 Change-in-Control Agreement dated May 13, 1997, between Robert J. Siverd and the Company (incorporated by reference to Exhibit 10.12 to the Initial S-1). 10.15 Form of Intercompany Agreement among Wassall PLC, Netherlands Cable B.V. and the Company (incorporated by reference to Exhibit 10.14 to the Initial S-1). 10.16 Stock Purchase Agreement dated May 13, 1997, among Wassall PLC, General Cable Industries Inc. and the Company (incorporated by reference to Exhibit 10.15 to the Initial S-1). 21.1 List of Subsidiaries of General Cable. 23.1 Consent of Deloitte & Touche LLP. 27.1 Financial Data Schedule. E-1 EX-10.2 2 EXHIBIT 10.2 1 EXHIBIT 10.2 GENERAL CABLE CORPORATION 1998 ANNUAL INCENTIVE PLAN 1. PURPOSE The purpose of the General Cable Corporation 1998 Annual Incentive Plan (the "Plan") is to provide annual incentive awards ("Awards") in order to motivate certain executive officers and key employees of General Cable Corporation, a Delaware corporation, and its subsidiaries (the "Company") to put forth maximum efforts toward the growth, profitability and success of the Company and its subsidiaries and to encourage such individuals to remain in the employ of the Company or the applicable subsidiary. 2. ADMINISTRATION a. The Plan shall be administered by a committee (the "Committee"), which shall be a committee or subcommittee of the Board of Directors of the Company (the "Board") appointed by the Board from among its members. Initially, the Committee shall be the Board's Compensation Committee. Unless the Board otherwise determines, the Committee shall be comprised solely of not less than two members who each shall qualify, at the time of appointment, as an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations thereunder. b. The Committee shall have all the powers vested in it by the terms of the Plan, such powers to include authority (within the limitations described herein) to select the persons to be granted Awards under the Plan, to determine the time when Awards will be granted, to determine whether performance objectives and other conditions for earning Awards have been met, to determine whether Awards will be paid at the end of the performance period or deferred to a later date, and to determine whether an Award or payment of an Award should be reduced or eliminated. The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make such determinations and interpretations and to take such action in connection with the Plan and any Awards granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all persons participating in the Plan and their legal representatives. No member of the Committee and no employee of the Company shall be liable for any act or failure to act hereunder, except in circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated. The Company shall indemnify members of the Committee and any agent of the Committee who is an employee of the 2 Company against any and all liabilities or expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan. c. The Committee may delegate to one or more of its members, or to one or more executive officers of the Company ("Executive Officers"), including to the Chief Executive Officer of the Company, authority to select key employees other than Executive Officers to be granted Awards under the Plan and to make all other determinations in respect of such Awards. In addition, the Committee may delegate to such persons such administrative duties as it deems advisable. References herein to "Committee" shall include any such delegatee, except where the context otherwise requires. The Committee, or any person to whom it has delegated duties as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan including such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred in the engagement of such counsel, consultant or agent shall be paid by the Company. 3. ELIGIBILITY Awards may be granted under the Plan to such Executive Officers and key employees of the Company as shall be selected for participation pursuant to Section 2 above. 4. AWARDS AND AWARD POOL; LIMITATIONS ON AWARDS a. Each Award granted under the Plan shall represent an amount payable in cash by the Company to the Executive Officer or key employee (a "Participant") upon accomplishment of one or more or a combination of performance objectives ("Performance Objectives") in a specified fiscal year (a "Performance Year"), subject to all other terms and conditions of the Plan and such other terms and conditions as may be specified by the Committee. The Performance Objectives for an Award to an Executive Officer shall consist of specific Performance Objectives approved by the Committee. Performance Objectives for an Award to a key employee other than an Executive Officer may consist of any measure of performance the Committee may determine in its discretion. The grant of Awards under the Plan shall be evidenced by Award letters in a form approved by the Committee from time to time which shall contain the terms and conditions, as determined by the Committee, of a Participant's Award; provided, however, that in the event of any conflict between the provisions of the Plan and any Award letters, the provisions of the Plan shall prevail. An Award shall be determined by multiplying the Participant's target percentage of base salary with respect to a Performance Year by applicable factors and percentages based on the achievement of Performance Objectives. -2- 3 b. Awards payable in respect of a given Performance Year may be settled only if and to the extent the total amount of Awards (the "Award Pool") has been accrued on the books of the Company as of the end of such Performance Year. The Award Pool is designated only for purposes of accounting within the Plan and does not authorize any segregation of assets or the creation of a trust. The maximum amount of an Award granted to any one Participant in respect of a Performance Year shall not exceed $3.0 million. This maximum amount limitation shall be measured at the time of settlement of an Award under Section 6. c. Annual Performance Objectives shall be based on the performance of the Company, one or more of its subsidiaries or affiliates, one or more of its units or divisions and/or the individual for the Performance Year. Performance Objectives shall include the following performance measures individually or in any combination: net sales; pretax income before allocation of corporate overhead and bonus; budget; earnings per share; net income; division, group or corporate financial goals; return on stockholders' equity; return on assets; attainment of strategic and operational initiatives; appreciation in or maintenance of the price of the Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; or reductions in costs. 5. GRANT OF AWARDS a. The Committee shall select those Executive Officers who it determines are to be Participants for a given Performance Year and grant Awards to such Participants not later than 90 days after the commencement of the Performance Year, and shall select other key employees for participation and grant Awards to such Participants at such times as the Committee may determine. In granting an Award, the Committee shall establish the amount of the Award in accordance with Section 4 and other terms of such Award. Other provisions of the Plan notwithstanding, in the case of any Participant who initially becomes employed by the Company as an Executive Officer after the commencement of a Performance Year, the Participant may be granted an Award for that Performance Year prior to the date at which 25% of the period remaining in the year from the date of hiring of such Executive Officer has elapsed. b. After the end of each Performance Year, the Committee shall determine the extent to which the Award Pool shall be funded based on achievement of Performance Objectives for such Performance Year. The Committee shall also determine the maximum amount payable to any Participant in respect of an Award for the Performance Year and the amount payable to each Participant in settlement of the Participant's Award for the Performance Year. The Committee, in its discretion, may determine that the amount payable to any Participant in settlement of an Award shall be reduced, including a determination to make no final Award whatsoever, and, in the case -3- 4 of a Participant who is not an Executive Officer, may determine that such amount shall be increased. The Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m) of the Code, prior to settlement of each Award granted to an Executive Officer, that the Performance Objectives and other material terms of the Award upon which settlement of the Award was conditioned have been satisfied. c. The Committee may adjust or modify Awards or terms of Awards (1) in recognition of unusual or nonrecurring events affecting the Company or any business unit, or the financial statements or results thereof, or in response to changes in applicable laws (including tax, disclosure, and other laws), regulations, accounting principles, or other circumstances deemed relevant by the Committee, (2) with respect to any Participant whose position or duties with the Company change during a Performance Year, or (3) with respect to any person who first becomes a Participant after the first day of the Performance Year; provided, however, that no adjustment to an Award granted to an Executive Officer shall be authorized or made if and to the extent that such authorization or the making of such adjustment would contravene the requirements applicable to "performance-based compensation" under Section 162(m) of the Code and regulations thereunder. 6. SETTLEMENT OF AWARDS Except as provided in this Section 6, each Participant shall receive payment of a cash lump sum in settlement of his or her Award, in the amount determined in accordance with Section 5 as promptly as practicable following the time such determination in respect thereof has been reached by the Committee. a. The Committee may specify that up to fifty (50) percent of any Award shall be settled by issuance of shares of the Company's Common Stock or other awards pursuant to the Company's 1997 Stock Incentive Plan (the "1997 Plan") having a fair market value, as determined by the Committee in accordance with the 1997 Plan, equal to the cash value of an Award at the date of grant or equal to the cash amount of the Award that would otherwise have been payable in settlement of the Award at the end of the Performance Year or the date of settlement. Such shares shall be subject to such conditions, including deferral of delivery for up to five years, restrictions on transferability, mandatory reinvestment of dividends in additional shares or awards, and other terms and conditions as shall be specified by the Committee. b. Each Participant shall have the right to defer his or her receipt of part or all of any payment due in settlement of an Award under and in accordance with the terms and conditions of any deferred compensation plan or arrangement of the Company unless otherwise specified by the Committee. -4- 5 7. TERMINATION OF EMPLOYMENT Except as otherwise provided in any written agreement between the Company and a Participant, if a Participant ceases to be employed by the Company prior to settlement of an Award for any reason other than death, disability (as determined by the Committee), normal retirement, or early retirement with the approval of the Committee, such Award shall be forfeited. If such cessation of employment results from such Participant's death, disability (as determined by the Committee), normal retirement, or early retirement with the approval of the Committee, the Committee shall determine, in its sole discretion and in such manner as it may deem reasonable (subject to Section 8), the extent to which the Performance Objectives for the Performance Year or portion thereof completed at the date of cessation of employment have been achieved, and the amount payable in settlement of the Award based on such determinations. The Committee may base such determination on the performance achieved for the full year, in which case its determination may be deferred until following the Performance Year. Such determinations shall be set forth in a written certification, as specified in Section 5. Such Participant or his or her beneficiary shall be entitled to receive settlement of such Award at the earliest time such payment may be made without causing the payment to fail to be deductible by the Company under Section 162(m) of the Code. 8. STATUS OF AWARDS UNDER SECTION 162(M) It is the intent of the Company that Awards granted to Executive Officers shall constitute "performance-based compensation" within the meaning of Section 162(m) of the Code and regulations thereunder, if at the time of settlement the Participant remains an Executive Officer. Accordingly, the Plan shall be interpreted in a manner consistent with Section 162(m) of the Code and regulations thereunder. If any provision of the Plan relating to Executive Officers or any Award letter evidencing an Award to an Executive Officer does not comply or is inconsistent with the provisions of Section 162(m)(4)(C) of the Code or regulations thereunder (including Treasury Regulation 1.162-27(e)) required to be met in order that compensation (other than post-termination compensation) shall constitute "performance-based compensation," such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no post-termination settlement shall be authorized or made under Section 7 if and to the extent that such authorization or settlement would contravene such requirements. 9. TRANSFERABILITY Awards and any other benefit payable under, or interest in, this Plan are not transferable by a Participant except upon a Participant's death by will or the laws of descent and distribution, and shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any such attempted action shall be void. -5- 6 10. WITHHOLDING All payments relating to an Award, whether at settlement or resulting from any further deferral or issuance of an Award under another plan of the Company in settlement of the Award, shall be net of any amounts required to be withheld pursuant to applicable federal, state and local tax withholding requirements. In any case in which payments will be in a form other than cash, the Company shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Company to the Participant as the Committee shall prescribe. 11. TENURE A Participant's right, if any, to continue to serve the Company as an Executive Officer, officer, employee, or otherwise, shall not be enlarged or otherwise affected by his or her designation as a Participant or any other event under the Plan. 12. NO RIGHTS TO SETTLEMENT OR TO PARTICIPATE Until the Committee has determined to settle an Award under Section 6, a Participant's selection to participate, the grant of an Award, and other events under the Plan shall not be construed as a commitment that any Award will be settled under the Plan. Nothing in the Plan shall be deemed to give any eligible employee any right to participate in the Plan except upon determination of the Committee under Section 4. The foregoing notwithstanding, the Committee may authorize legal commitments with respect to Awards under the terms of an employment agreement or other agreement with a Participant, to the extent of the Committee's authority under the Plan, including commitments that limit the Committee's future discretion under the Plan, but in all cases subject to Section 8. 13. UNFUNDED PLAN Participants shall have no right, title, or interest whatsoever in or to any specific assets of the Company or investments which the Company may make to aid in meeting its obligations under the plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended. -6- 7 14. OTHER COMPENSATORY PLANS AND ARRANGEMENTS Nothing in the Plan shall preclude any Participant from participation in any other compensation or benefit plan of the Company or its subsidiaries. The adoption of the Plan and the grant of Awards hereunder shall not preclude the Company or any subsidiary from paying any other compensation apart from the Plan, including compensation for services or in respect of performance in a Performance Year for which an Award has been made. 15. DURATION, AMENDMENT AND TERMINATION OF PLAN No Award may be granted in respect of any Performance Year after 2007. The Board may amend the Plan from time to time or suspend or terminate the Plan at any time, provided that any such action shall be subject to stockholder approval if and to the extent required by law or regulation, or to ensure that compensation under the Plan will qualify as "performance-based compensation" under Section 162(m) and the regulations thereunder. 16. GOVERNING LAW The Plan, Awards granted hereunder, and actions taken in connection herewith shall be governed and construed in accordance with the laws of the Commonwealth of Kentucky (regardless of the law that might otherwise govern under applicable Kentucky principles of conflict of laws). 17. EFFECTIVE DATE The Plan shall be effective as of January 1, 1998; provided, however, that the Plan shall be subject to approval of the stockholders of the Company at an annual meeting or any special meeting of stockholders of the Company before settlement of Awards for the 1998 Performance Year so that compensation will qualify as "performance-based compensation" under Section 162(m) of the Code and regulations thereunder. In addition, the Board may determine to submit the Plan to stockholders for reapproval at such times, if any, required in order that compensation under the Plan shall qualify as performance-based compensation. -7- EX-10.4 3 EXHIBIT 10.4 1 EXHIBIT 10.4 GENERAL CABLE CORPORATION 1997 STOCK INCENTIVE PLAN (as amended and restated effective as of March 16, 1998) 1. PURPOSE The General Cable Corporation 1997 Stock Incentive Plan (the "Plan") is intended to provide incentives which will attract, retain and motivate highly competent persons as non-employee directors and key employees of General Cable Corporation (the "Company") and any of its subsidiary corporations, limited liability companies or other forms of business entities now existing or hereafter formed or acquired ("Subsidiaries"), by providing them opportunities to acquire shares of the common stock, par value $.01 per share, of the Company ("Common Stock") or to receive monetary payments based on the value of such shares pursuant to the Awards (as defined in Section 4 below) described herein. Furthermore, the Plan is intended to assist in aligning the interests of the Company's non-employee directors and key employees with those of its stockholders. 2. ADMINISTRATION a. The Plan generally shall be administered by a committee (the "Committee"), which shall be the Board of Directors of the Company (the "Board"), or, once established, a committee or subcommittee of the Board of Directors appointed by the Board from among its members. The Committee may be the Board's Compensation Committee. Unless the Board determines otherwise, the Committee shall be comprised solely of not less than two members who each shall qualify as a (i) "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor rule) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii) an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations thereunder. The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make such determinations and interpretations and to take such action in connection with the Plan and any Awards granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all participants and their legal representatives. No member of the Board, no member of the Committee and no employee of the Company shall be liable for any act or failure to act hereunder, except in circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated. The Company shall indemnify 2 members of the Committee and any agent of the Committee who is an employee of the Company, against any and all liabilities or expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan, except in circumstances involving such person's bad faith, gross negligence or willful misconduct. b. The Committee shall have authority to grant Awards to non-employee directors and to the executive officers of the Company ("Executive Officers"). The Chief Executive Officer shall have the authority to determine and grant Awards to key employees of the Company and its Subsidiaries who are not Executive Officers and to take all necessary administrative actions required to implement his actions under the Plan. With respect to Awards proposed for groups of key employees, the Chief Executive Officer shall make recommendations to the Committee on the aggregate amount of Awards and the eligible participants and the Committee shall have the authority to change or modify the aggregate amount of such Awards. c. The Committee may delegate to one or more of its members, or to one or more agents, such administrative duties as it may deem advisable, and the Committee, or any person to whom it has delegated duties as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the Subsidiaries or affiliate whose employees have benefited from the Plan, as determined by the Committee. The Chief Executive Officer in administering the Plan may obtain and rely upon opinions or computations from counsel, consultants or agents and the Company will pay all expenses incurred in connection with such consultations, advice or computations. 3. PARTICIPANTS Participants shall consist of (i) such non-employee directors and such key employees who are Executive Officers of the Company as the Committee in its sole discretion determines to be significantly responsible for the success and future growth and profitability of the Company and whom the Committee may designate from time to time to receive awards under the Plan, and (ii) such key employees of the Company and any of its Subsidiaries who are not Executive Officers as the Chief Executive Officer in his discretion determines to be significantly responsible for the success and future growth and profitability of the Company and designates to receive Awards under the Plan. Designation of a participant in any year shall not require the Committee or the Chief Executive Officer as applicable to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the participant in any other year. The Committee or the Chief Executive -2- 3 Officer as applicable shall consider such factors as they deem pertinent in selecting participants and in determining the type and amount of their respective Awards. 4. TYPE OF AWARDS Awards under the Plan may be granted in any one or a combination of (1) Stock Options, (2) Stock Appreciation Rights, (3) Stock Awards, (4) Performance Awards and (5) Stock Units (each as described below, and collectively, the "Awards"). Stock Awards, Performance Awards and Stock Units may, as determined by the Committee or the Chief Executive Officer, in their discretion, constitute Performance-Based Awards, as described in Section 11 below. Awards shall be evidenced by agreements (which need not be identical) in such forms as the Committee or the Chief Executive Officer may from time to time approve; provided, however, that in the event of any conflict between the provisions of the Plan and any such agreements, the provisions of the Plan shall prevail. 5. COMMON STOCK AVAILABLE UNDER THE PLAN a. Shares Available. The aggregate number of shares of Common Stock that may be subject to Awards, including Stock Options, granted under this Plan shall be 3,150,000 shares of Common Stock, which may be authorized and unissued or treasury shares, subject to any adjustments made in accordance with Section 12 below. b. Maximum Individual Limit. The maximum number of shares of Common Stock with respect to which Awards may be granted or measured to any individual participant under the Plan during the term of the Plan shall not exceed 1,000,000 shares, provided, however, that the maximum number of shares of Common Stock with respect to which Stock Options and Stock Appreciation Rights may be granted to an individual participant under the Plan during the term of the Plan shall not exceed 750,000 shares (in each case, subject to adjustments made in accordance with Section 12 below). c. Shares Underlying Awards That Again Become Available. Any shares of Common Stock subject to a Stock Option, Stock Appreciation Right, Stock Award, Performance Award, or Stock Unit which for any reason are cancelled, terminated without having been exercised, forfeited, settled in cash or delivered to the Company as part or full payment for the exercise of a Stock Option, shall again be available for Awards under the Plan. The preceding sentence shall apply only for purposes of determining the aggregate number of shares of Common Stock subject to Awards but shall not apply for purposes of determining the maximum number of shares of Common Stock subject to Awards (including the maximum number of shares of Common Stock subject to Stock Options and Stock Appreciation Rights) that any individual participant may receive. -3- 4 6. STOCK OPTIONS a. In General. The Committee is authorized to grant Stock Options to non-employee directors and key employees of the Company who are Executive Officers and shall, in its sole discretion, determine such non-employee directors and Executive Officers who will receive Stock Options and the number of shares of Common Stock underlying each Stock Option. The Chief Executive Officer is authorized to grant Stock Options to key employees of the Company and any of its Subsidiaries who are not Executive Officers and shall in his discretion determine such persons and the number of shares of Common Stock underlying each Stock Option. Stock Options may be (i) "incentive stock options" ("Incentive Stock Options"), within the meaning of Section 422 of the Code, or (ii) Stock Options which do not qualify as Incentive Stock Options ("Nonqualified Stock Options"). The Committee or the Chief Executive Officer may grant to any participant one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Stock Options. Each Stock Option shall be subject to such terms and conditions consistent with the Plan as the Committee or the Chief Executive Officer may impose from time to time. In addition, each Stock Option shall be subject to the following limitations set forth in this Section 6. b. Exercise Price. Each Stock Option granted hereunder shall have such per-share exercise price as the Committee may determine on the date of grant; provided, however, subject to Section 6(e) below, that the per-share exercise price shall not be less than 100 percent of the Fair Market Value (as defined in Section 17 below) of the Common Stock on the date the option is granted. c. Payment of Exercise Price. The Stock Option exercise price may be paid in cash or, in the discretion of the Committee or the Chief Executive Officer, by the delivery of shares of Common Stock then owned by the participant for at least six months, by the withholding of shares of Common Stock for which a Stock Option is exercisable, or by a combination of these methods. In the discretion of the Committee or the Chief Executive Officer, a payment may also be made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee or the Chief Executive Officer may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of the Plan, including, without limitation, in lieu of the exercise of a Stock Option by delivery of shares of Common Stock then owned by a participant for at least six months, providing the Company with a notarized statement attesting to the number of shares owned, where upon verification by the Company, the Company would issue to the participant only the number of incremental shares to which the participant is entitled upon exercise of the Stock Option. In determining which methods a participant may -4- 5 utilize to pay the exercise price, the Committee or the Chief Executive Officer may consider such factors as they determine are appropriate; provided, however, that with respect to Incentive Stock Options, all such discretionary determinations shall be made at the time of grant and specified in the Stock Option agreement. d. Exercise Period. Stock Options granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee or the Chief Executive Officer; provided, however, that no Stock Option shall be exercisable later than ten years after the date it is granted. All Stock Options shall terminate at such earlier times and upon such conditions or circumstances as the Committee or the Chief Executive Officer shall, in their discretion, set forth in such option agreement on the date of grant. e. Limitations on Incentive Stock Options. Incentive Stock Options may be granted only to participants who are key employees of the Company or any of its Subsidiaries on the date of grant. The aggregate market value (determined as of the time the Stock Option is granted) of the Common Stock with respect to which Incentive Stock Options (under all option plans of the Company) are exercisable for the first time by a participant during any calendar year shall not exceed $100,000. For purposes of the preceding sentence, (i) Stock Incentive Options shall be taken into account in the order in which they are granted and (ii) Incentive Stock Options granted before 1987 shall not be taken into account. Incentive Stock Options may not be granted to any participant who, at the time of grant, owns stock possessing (after the application of the attribution rules of Section 424(d) of the Code) more than 10 percent of the total combined voting power of all outstanding classes of stock of the Company or any of its Subsidiaries, unless the option price is fixed at not less than 110 percent of the Fair Market Value of the Common Stock on the date of grant and the exercise of such option is prohibited by its terms after the expiration of 5 years from the date of grant of such option. In addition, no Incentive Stock Option shall be issued to a participant in tandem with a Nonqualified Stock Option. 7. STOCK APPRECIATION RIGHTS The Committee is authorized to grant Stock Appreciation Rights to key employees of the Company who are Executive Officers and shall, in its sole discretion, determine such Executive Officers who will receive Stock Appreciation Rights and the number of shares of Common Stock with respect to each Stock Appreciation Right. The Chief Executive Officer is authorized to grant Stock Appreciation Rights to key employees of the Company and any of its Subsidiaries who are not Executive Officers and shall in his discretion determine the key employees who will receive Stock Appreciation Rights and the number of shares of Common Stock with respect to each Stock Appreciation Right. A "Stock Appreciation Right" shall mean a right to receive a payment, in cash, Common Stock or a combination thereof, in an amount equal to the excess of (x) the Fair Market Value, or other specified valuation, of a specified number -5- 6 of shares of Common Stock on the date the right is exercised over (y) the Fair Market Value, or other specified valuation (which shall be no less than the Fair Market Value), of such shares of Common Stock on the date the right is granted, all as determined by the Committee or the Chief Executive Officer; provided, however, that if a Stock Appreciation Right is granted retroactively in tandem with or in substitution for a Stock Option, the designated Fair Market Value in the Stock Appreciation Right agreement may be the Fair Market Value on the date such Stock Option was granted. Each Stock Appreciation Right shall be subject to such terms and conditions as the Committee or the Chief Executive Officer shall impose from time to time. 8. STOCK AWARDS The Committee is authorized to grant Stock Awards to non-employee directors and key employees of the Company who are Executive Officers and shall, in its sole discretion, determine such non-employee directors and Executive Officers who will receive Stock Awards and the number of shares of Common Stock underlying each Stock Award. The Chief Executive Officer is authorized to grant Stock Awards to key employees of the Company and its Subsidiaries who are not Executive Officers and in his discretion to determine the key employees who will receive Stock Awards and the number of shares of Common Stock underlying each Stock Award. Stock Awards may be subject to such terms and conditions as the Committee or the Chief Executive Officer determines appropriate, including, without limitation, restrictions on the sale or other disposition of such shares, and the right of the Company to reacquire such shares for no consideration upon termination of the participant's employment within specified periods. The Committee or the Chief Executive Officer may require the participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Stock Award and/or that the stock certificates evidencing such shares be held in custody or bear restrictive legends until the restrictions thereon shall have lapsed. The Stock Award agreement shall specify whether the participant shall have, with respect to the shares of Common Stock subject to a Stock Award, all of the rights of a holder of shares of Common Stock, including the right to receive dividends and to vote the shares. 9. PERFORMANCE AWARDS a. In General. The Committee is authorized to grant Performance Awards to key employees of the Company who are Executive Officers and shall, in its sole discretion, determine the Executive Officers who will receive Performance Awards and the number of shares of Common Stock or Stock Units (as described in Section 10 below) that may be subject to each Performance Award. The Chief Executive Officer is authorized to grant Performance Awards to key employees of the Company and any of its Subsidiaries who are not Executive Officers and shall in his discretion determine the key employees who will receive Performance Awards and the number of shares of Common Stock or Stock Units (as described in Section 10 below) that may be subject -6- 7 to each Performance Award. Each Performance Award shall be subject to such terms and conditions consistent with the Plan as the Committee or the Chief Executive Officer may impose from time to time. The Committee or the Chief Executive Officer shall set performance targets at their discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Awards that will be paid out to the participants, and may attach to such Performance Awards one or more restrictions. Performance targets may be based upon, without limitation, Company-wide, divisional and/or individual performance. b. Adjustment of Performance Targets. With respect to those Performance Awards that are not intended to qualify as Performance-Based Awards (as described in Section 11 below), the Committee or the Chief Executive Officer shall have the authority at any time to make adjustments to performance targets for any outstanding Performance Awards which the Committee or the Chief Executive Officer deems necessary or desirable unless at the time of establishment of goals the Committee or the Chief Executive Officer shall have precluded its authority to make such adjustments. c. Payout. Payment of earned Performance Awards may be made in shares of Common Stock or in cash and shall be made in accordance with the terms and conditions prescribed or authorized by the Committee or the Chief Executive Officer. The participant may elect to defer, or the Committee or the Chief Executive Officer may require or permit the deferral of, the receipt of Performance Awards upon such terms as the Committee or the Chief Executive Officer deems appropriate. 10. STOCK UNITS a. In General. The Committee is authorized to grant Stock Units to key employees of the Company who are Executive Officers and shall, in its sole discretion, determine the Executive Officers who will receive Stock Units and the number of shares of Common Stock with respect to each Stock Unit. The Chief Executive Officer is authorized to grant Stock Units to key employees of the Company and its Subsidiaries who are not Executive Officers and shall in his discretion determine the key employees who will receive Stock Units and the number of shares of Common Stock with respect to each Stock Unit. The Committee or the Chief Executive Officer shall determine the criteria for the vesting of Stock Units. A Stock Unit granted by the Committee or the Chief Executive Officer shall provide payment in shares of Common Stock at such time as the award agreement shall specify. Shares of Common Stock issued pursuant to this Section 10 may be issued with or without other payments therefor as may be required by applicable law or such other consideration as may be determined by the Committee or the Chief Executive Officer. The Committee or the Chief Executive Officer shall determine whether a participant granted a Stock Unit shall be entitled to a Dividend Equivalent Right (as defined below). -7- 8 b. Payout. Upon vesting of a Stock Unit, unless the Committee or the Chief Executive Officer has determined to defer payment with respect to such unit or a Participant has elected to defer payment under Section 10(c) below, shares of Common Stock representing the Stock Units shall be distributed to the participant unless the Committee or the Chief Executive Officer, with the consent of the participant, provides for the payment of the Stock Units in cash or partly in cash and partly in shares of Common Stock equal to the value of the shares of Common Stock which would otherwise be distributed to the participant. c. Deferral. Prior to the year with respect to which a Stock Unit may vest, the participant may elect not to receive Common Stock upon the vesting of such Stock Unit and for the Company to continue to maintain the Stock Unit on its books of account. In such event, the value of a Stock Unit shall be payable in shares of Common Stock pursuant to the agreement of deferral. d. Definitions. A "Stock Unit" shall mean a notional account representing one share of Common Stock. A "Dividend Equivalent Right" shall mean the right to receive the amount of any dividend paid on the share of Common Stock underlying a Stock Unit, which shall be payable in cash or in the form of additional Stock Units. 11. PERFORMANCE-BASED AWARDS a. In General. All Stock Options and Stock Appreciation Rights granted under the Plan, and certain Stock Awards, Performance Awards, and Stock Units granted under the Plan, and the compensation attributable to such Awards, are intended to (i) qualify as Performance-Based Awards (as described in the next sentence) or (ii) be otherwise exempt from the deduction limitation imposed by Section 162(m) of the Code. Certain Awards granted under the Plan may be granted in a manner such that the Awards qualify as "performance-based compensation" (as such term is used in Section 162(m) of the Code and the regulations thereunder) and thus be exempt from the deduction limitation imposed by Section 162(m) of the Code ("Performance-Based Awards"). Awards shall only qualify as Performance-Based Awards if at the time of grant the Committee is comprised solely of two or more "outside directors" (as such term is used in Section 162(m) of the Code and the regulations thereunder). b. Stock Options and Stock Appreciation Rights. Stock Options and Stock Appreciation Rights granted under the Plan with an exercise price at or above the Fair Market Value of the Common Stock on the date of grant should qualify as Performance-Based Awards. c. Other Awards. Stock Awards, Performance Awards, and Stock Units granted under the Plan should qualify as Performance-Based Awards if, as determined by the Committee or the Chief Executive Officer in their sole discretion, either the -8- 9 granting or vesting of such Award is subject to the achievement of a performance target or targets based on one or more of the performance measures specified in Section 11(d) below. With respect to such Awards intended to qualify as Performance-Based Awards: (1) the Committee or the Chief Executive Officer shall establish in writing (x) the objective performance-based goals applicable to a given period and (y) the individual employees or class of employees to which such performance-based goals apply no later than 90 days after the commencement of such period (but in no event after 25 percent of such period has elapsed); (2) no Performance-Based Awards shall be payable to or vest with respect to, as the case may be, any participant for a given period until the Committee or the Chief Executive Officer certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied; and (3) after the establishment of a performance goal, the Committee or the Chief Executive Officer shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal. d. Performance Measures. The Committee or the Chief Executive Officer may use the following performance measures (either individually or in any combination) to set performance targets with respect to Awards intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of corporate overhead and bonus; budget; earnings per share; net income; division, group or corporate financial goals; return on stockholders' equity; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; economic value-added models; comparisons with various stock market indices; and/or reductions in costs. 12. ADJUSTMENT PROVISIONS If there shall be any change in the Common Stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, split up, spinoff, combination of shares, exchange of shares, dividend in kind or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, an adjustment shall be made to each outstanding Stock Option and Stock Appreciation Right such that each such Stock Option and Stock Appreciation Right shall thereafter be exercisable for such -9- 10 securities, cash and/or other property as would have been received in respect of the Common Stock subject to such Stock Option or Stock Appreciation Right had such Stock Option or Stock Appreciation Right been exercised in full immediately prior to such change or distribution, and such an adjustment shall be made successively each time any such change shall occur. In addition, in the event of any such change or distribution, in order to prevent dilution or enlargement of participants' rights under the Plan, the Committee or the Chief Executive Officer shall have the authority to adjust, in an equitable manner, the number and kind of shares that may be issued under the Plan, the number and kind of shares subject to outstanding Awards, the exercise price applicable to outstanding Awards, and the Fair Market Value of the Common Stock and other value determinations applicable to outstanding Awards. Appropriate adjustments may also be made by the Committee or the Chief Executive Officer in the terms of any Awards under the Plan to reflect such changes or distributions and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance targets and changes in the length of performance periods. In addition, other than with respect to Stock Options, Stock Appreciation Rights and other awards intended to constitute Performance-Based Awards, the Committee or the Chief Executive Officer is authorized to make adjustments to the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations, or accounting principles. Notwithstanding the foregoing, (i) any adjustment with respect to an Incentive Stock Option shall comply with the rules of Section 424(a) of the Code, and (ii) in no event shall any adjustment be made which would render any Incentive Stock Option granted hereunder other than an incentive stock option for purposes of Section 422 of the Code. 13. CHANGE IN CONTROL a. Accelerated Vesting. Notwithstanding any other provision of this Plan, if there is a Change in Control of the Company (as defined in Section 13(b) below), the Committee or the Chief Executive Officer, in their discretion, may take such actions as they deem appropriate with respect to outstanding Awards, including, without limitation, accelerating the exercisability, vesting and/or payout of such Awards. b. Definition. For purposes of this Section 13, (i) if there is an employment agreement or a change-in-control agreement between the participant and the Company or any of its Subsidiaries in effect, "Change in Control" shall have the same definition as the definition of "change in control" contained in such employment agreement or change-in-control agreement, or (ii) if "Change in Control" is not defined in such employment agreement or change-in-control agreement, or if there is no employment agreement or change-in-control agreement between the participant and the Company or any of its Subsidiaries in effect, a "Change in Control" of the Company shall be deemed to have occurred upon any of the following events: -10- 11 (1) any person or other entity (other than any of the Company's Subsidiaries or any employee benefit plan sponsored by the Company or any of its Subsidiaries) including any person as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes the beneficial owner, as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of more than 35 percent of the total combined voting power of all classes of capital stock of the Company normally entitled to vote for the election of directors of the Company (the "Voting Stock"); (2) the stockholders of the Company approve the sale of all or substantially all of the property or assets of the Company and such sale occurs; (3) the Company's Common Stock shall cease to be publicly traded (other than a suspension of trading that lasts for a short period of time); (4) the stockholders of the Company approve a consolidation or merger of the Company with another corporation (other than with any of the Company's Subsidiaries), the consummation of which would result in the shareholders of the Company immediately before the occurrence of the consolidation or merger owning, in the aggregate, less than 60 percent of the Voting Stock of the surviving entity, and such consolidation or merger occurs; or (5) a change in the Company's Board occurs with the result that the members of the Board on the Effective Dated (as defined in Section 24(a) below) of the Plan (the "Incumbent Directors") no longer constitute a majority of such Board, provided that any person becoming a director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest or the settlement thereof, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose election or nomination for election was supported by two-thirds (2/3) of the then Incumbent Directors shall be considered an Incumbent Director for purposes hereof. Notwithstanding anything contained in the Plan to the contrary, a Change in Control of the Company shall not include an initial public offering of the Company. c. Cashout. The Committee or the Chief Executive Officer, in their discretion, may determine that, upon the occurrence of a Change in Control of the Company, each Stock Option and Stock Appreciation Right outstanding hereunder shall -11- 12 terminate within a specified number of days after notice to the holder, and such holder shall receive, with respect to each share of Common Stock subject to such Stock Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such shares of Common Stock immediately prior to the occurrence of such Change in Control over the exercise price per share of such Stock Option or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Committee or the Chief Executive Officer, in their discretion, shall determine. 14. TERMINATION OF EMPLOYMENT a. Subject to any written agreement between the participant and the Company or any of its Subsidiaries, if a participant's employment is terminated due to death or disability: (1) all unvested Stock Awards and all unvested Stock Units held by the participant on the date of the participant's death or the date of the termination of his or her employment as the case may be, shall immediately become vested as of such date; (2) all unexercisable Stock Options and all unexercisable Stock Appreciation Rights held by the participant on the date of the participant's death or the date of the termination of his or her employment, as the case may be, shall immediately become exercisable as of such date and shall remain exercisable until the earlier of (i) the end of the one-year period following the date of the participant's death or the date of the termination of his or her employment, as the case may be, or (ii) the date the Stock Option or Stock Appreciation Right would otherwise expire; (3) all exercisable Stock Options and all exercisable Stock Appreciation Rights held by the participant on the date of the participant's death or the date of the termination of his or her employment, as the case may be, shall remain exercisable until the earlier of (i) the end of the one-year period following the date of the participant's death or the date of the termination of his or her employment, as the case may be, or (ii) the date the Stock Option or Stock Appreciation Right would otherwise expire; and (4) all unearned and/or unvested Performance Awards held by the participant on the date of the participant's death or the date of the termination of his or her employment, as the case may be, shall immediately be forfeited by such participant as of such date. -12- 13 b. Subject to any written agreement between the participant and the Company or any of its Subsidiaries, if a participant's employment is terminated by the Company for Cause (as defined in Section 14(f) below), all exercisable and all unexercisable Stock Options, all exercisable and all unexercisable Stock Appreciation Rights, all unvested Stock Awards, all unearned and/or unvested Performance Units, and all unvested Stock Units held by the participant on the date of the termination of his or her employment for Cause shall immediately be forfeited by such participant as of such date. c. Subject to any written agreement between the participant and the Company or any of its Subsidiaries, if a participant's employment is terminated for any reason other than for Cause or other than due to death or disability: (1) all unexercisable Stock Options, all unexercisable Stock Appreciation Rights, all unvested Stock Awards, all unearned and/or unvested Performance Units, and all unvested Stock Units held by the participant on the date of the termination of his or her employment shall immediately be forfeited by such participant as of such date; and (2) all exercisable Stock Options and all exercisable Stock Appreciation Rights held by the participant on the date of the termination of his or her employment shall remain exercisable until the earlier of (i) the end of the 90-day period following the date of the termination of the participant's employment or (ii) the date the Stock Option or Stock Appreciation Right would otherwise expire. d. Notwithstanding anything contained in the Plan to the contrary, the Committee or the Chief Executive Officer may, in their sole discretion, provide that: (1) any or all unvested Stock Awards and/or any or all unvested Stock Units held by the participant on the date of the participant's death and/or the date of the termination of the participant's employment shall immediately become vested as of such date; (2) any or all unexercisable Stock Options and/or any or all unexercisable Stock Appreciation Rights held by the participant on the date of the participant's death and/or the date of the termination of his or her employment shall immediately become exercisable as of such date and shall remain exercisable until a date that occurs on or prior to the date the Stock Option or Stock Appreciation Right is scheduled to expire, provided, however, that Incentive Stock Options shall remain exercisable not longer than the end of the 90-day period following the date of the termination of the participant's employment; -13- 14 (3) any or all exercisable Stock Options and/or any or all exercisable Stock Appreciation Rights held by the participant on the date of the participant's death and/or the date of the termination of his or her employment shall remain exercisable until a date that occurs on or prior to the date the Stock Option or Stock Appreciation Right is scheduled to expire, provided, however, that Incentive Stock Options shall remain exercisable not longer than the end of the 90-day period following the date of the termination of the participant's employment; and/or (4) a participant shall immediately become vested in all or a portion of any earned Performance Unit held by such participant on the date of the termination of the participant's employment, and such vested Performance Unit (or portion thereof) and/or any unearned Performance Unit (or portion thereof) held by such participant on the date of the termination of his or her employment shall immediately become payable to such participant as if all performance goals had been met as of the date of the termination of his or her employment. e. Notwithstanding anything contained in the Plan to the contrary, (i) the provisions contained in this Section 14 shall be applied to an Incentive Stock Option only if the application of such provision maintains the treatment of such Incentive Stock Option as an Incentive Stock Option and (ii) the exercise period of an Incentive Stock Option in the event of a termination due to disability provided in Section 14(a)(3) above shall only apply if the participant's disability satisfies the requirement of "permanent and total disability" as defined in Section 22(e)(3) of the Code. f. For purposes of this Section 14, (i) if there is an employment agreement between the participant and the Company or any of its Subsidiaries in effect, "Cause" shall have the same definition as the definition of "cause" contained in such employment agreement; or (ii) if "Cause" is not defined in such employment agreement or if there is no employment agreement between the participant and the Company or any of its Subsidiaries in effect, "Cause" shall include, but is not limited to: (1) any willful and continuous neglect of or refusal to perform the employee's duties or responsibilities with respect to the Company or any of its Subsidiaries, insubordination, dishonesty, gross neglect or willful malfeasance by the participant in the performance of such duties and responsibilities, or the willful taking of actions which materially impair the participant's ability to perform such duties and responsibilities, or any serious violation of the rules or regulations of the Company; -14- 15 (2) the violation of any local, state or federal criminal statute, including, without limitation, an act of dishonesty such as embezzlement, theft or larceny; (3) intentional provision of services in competition with the Company or any of its Subsidiaries, or intentional disclosure to a competitor of the Company or any of its Subsidiaries of any confidential or proprietary information of the Company or any of its Subsidiaries; or (4) any similar conduct by the participant with respect to which the Company determines in its discretion that the participant has terminated employment under circumstances such that the payment of any compensation attributable to any Award granted under the Plan would not be in the best interest of the Company or any of its Subsidiaries. 15. TRANSFERABILITY Each Award granted under the Plan to a participant which is subject to restrictions on transferability and/or exercisability shall not be transferable otherwise than by will or the laws of descent and distribution, and/or shall be exercisable, during the participant's lifetime, only by the participant. In the event of the death of a participant, each Stock Option or Stock Appreciation Right theretofore granted to him or her shall be exercisable during such period after his or her death as the Committee or the Chief Executive Officer shall, in their discretion, set forth in such option or right on the date of grant and then only by the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant's rights under the Stock Option or Stock Appreciation Right shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, at the discretion of the Committee or the Chief Executive Officer, an Award (other than an Incentive Stock Option) may permit the transferability of such Award by a participant solely to members of the participant's immediate family or trusts or family partnerships for the benefit of such persons, subject to any restriction included in the Award agreement. 16. OTHER PROVISIONS Awards granted under the Plan may also be subject to such other provisions (whether or not applicable to the Award granted to any other participant) as the Committee or the Chief Executive Officer determines on the date of grant to be appropriate, including, without limitation, for the installment purchase of Common Stock under Stock Options, for the installment exercise of Stock Appreciation Rights, to assist the participant in financing the acquisition of Common Stock, for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any form of -15- 16 Award, for the acceleration of exercisability or vesting of Awards in the event of a change in control of the Company, for the payment of the value of Awards to participants in the event of a change in control of the Company, or to comply with federal and state securities laws, or understandings or conditions as to the participant's employment in addition to those specifically provided for under the Plan. 17. FAIR MARKET VALUE For purposes of this Plan and any Awards granted hereunder, Fair Market Value shall be (i) the closing price of the Common Stock on the date of calculation (or on the last preceding trading date if Common Stock was not traded on such date) if the Common Stock is readily tradeable on a national securities exchange or other market system or (ii) if the Common Stock is not readily tradeable, the amount determined in good faith by the Committee or the Chief Executive Officer as the fair market value of the Common Stock. 18. WITHHOLDING All payments or distributions of Awards made pursuant to the Plan shall be net of any amounts required to be withheld pursuant to applicable federal, state and local tax withholding requirements. If the Company proposes or is required to distribute Common Stock pursuant to the Plan, it may require the recipient to remit to it or to the corporation that employs such recipient an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Stock. In lieu thereof, the Company or the employing corporation shall have the right to withhold the amount of such taxes from any other sums due or to become due from such corporation to the recipient as the Committee or the Chief Executive Officer shall prescribe. The Committee or the Chief Executive Officer may, in their discretion, and subject to such rules as it may adopt (including any as may be required to satisfy applicable tax and/or non-tax regulatory requirements), permit an optionee or award or right holder to pay all or a portion of the federal, state and local withholding taxes arising in connection with any Award consisting of shares of Common Stock by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld, such tax calculated at rates required by statute or regulation. 19. TENURE A participant's right, if any, to continue to serve the Company as a director, officer, employee, or otherwise, shall not be enlarged or otherwise affected by his or her designation as a participant under the Plan. -16- 17 20. UNFUNDED PLAN Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended. 21. NO FRACTIONAL SHARES No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee or the Chief Executive Officer shall determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 22. DURATION, AMENDMENT AND TERMINATION No Award shall be granted more than ten years after the Effective Date; provided, however, that the terms and conditions applicable to any Award granted prior to such date may thereafter be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. Also, by mutual agreement between the Company and a participant hereunder, under this Plan or under any other present or future plan of the Company, Awards may be granted to such participant in substitution and exchange for, and in cancellation of, any Awards previously granted such participant under this Plan, or any other present or future plan of the Company. The Board may amend the Plan from time to time or suspend or terminate the Plan at any time. However, no action authorized by this Section 22 shall reduce the amount of any existing Award or change the terms and conditions thereof without the participant's consent. No amendment of the Plan shall, without approval of the stockholders of the Company, (i) increase the total number of shares which may be issued under the Plan or the maximum number of shares with respect to Stock Options, Stock Appreciation Rights and other Awards that may be granted to any individual under the Plan or (ii) modify the requirements as to eligibility for Awards under the Plan; provided, however, that no amendment may be made without approval of the stockholders of the Company if the amendment will disqualify any Incentive Stock Options granted hereunder. -17- 18 23. GOVERNING LAW This Plan, Awards granted hereunder and actions taken in connection herewith shall be governed and construed in accordance with the laws of the Commonwealth of Kentucky (regardless of the law that might otherwise govern under applicable Kentucky principles of conflict of laws). 24. EFFECTIVE DATE a. The Plan shall be effective as of the date on which the Plan is adopted by the Board (the "Effective Date"); provided, however, that the Plan shall be approved by the stockholders of the Company at an annual meeting or any special meeting of stockholders of the Company within 12 months before or after the Effective Date, and such approval of stockholders shall be a condition to the right of each participant to receive Awards hereunder. Any Award granted under the Plan prior to such approval of stockholders shall be effective as of the date of grant (unless, with respect to any Award, the Committee or the Chief Executive Officer as applicable specifies otherwise at the time of grant), but no such Award may be exercised or settled and no restrictions relating to any Award may lapse prior to such stockholder approval, and if stockholders fail to approve the Plan as specified hereunder, any such Award shall be cancelled. b. This Plan shall terminate on the 10th anniversary of the Effective Date (unless sooner terminated by the Board). -18- EX-10.6 4 EXHIBIT 10.6 1 EXHIBIT 10.6 AMENDMENT TO EMPLOYMENT AGREEMENT This is an amendment to the Employment Agreement (the "Agreement") entered into on May 13, 1997, by and between General Cable Corporation, a Delaware corporation (the "Company"), GCC Corporation, and Stephen Rabinowitz (the "Executive"). The Company, in its own right and as successor by merger to GCC Corporation, and the Executive, in consideration of their mutual agreements, agree as follows: Paragraph 3(b) of the Agreement is amended by deleting the phrase "which is not less favorable than the opportunity provided pursuant to the 1997 Incentive Bonus" from lines 20 and 21 of that paragraph. The parties have caused this amendment to be duly executed by them this 16th day of March 1998. GENERAL CABLE CORPORATION /s/ Robert J. Siverd - ------------------------ Robert J. Siverd Executive Vice President, General Counsel and Secretary /s/ Stephen Rabinowitz ---------------------------- Stephen Rabinowitz EX-10.8 5 EXHIBIT 10.8 1 EXHIBIT 10.8 AMENDMENT TO EMPLOYMENT AGREEMENT This is an amendment to the Employment Agreement (the "Agreement") entered into on May 13, 1997, by and between General Cable Corporation, a Delaware corporation (the "Company"), GCC Corporation, and Gregory B. Kenny (the "Executive"). The Company, in its own right and as successor by merger to GCC Corporation, and the Executive, in consideration of their mutual agreements, agree as follows: Paragraph 3(b) of the Agreement is amended by deleting the phrase "which is not less favorable than the opportunity provided pursuant to the 1997 Incentive Bonus" from lines 15 and 16 of that paragraph. The parties have caused this amendment to be duly executed by them this 16th day of March 1998. GENERAL CABLE CORPORATION /s/ Stephen Rabinowitz - ------------------------------ Stephen Rabinowitz Chairman, Chief Executive Officer and President /s/ Gregory B. Kenny ------------------------------ Gregory B. Kenny EX-21.1 6 EXHIBIT 21.1 1 EXHIBIT 21.1 GENERAL CABLE CORPORATION AND SUBSIDIARIES LIST OF SUBSIDIARIES JURISDICTION NAME OF INCORPORATION GK Technologies, Inc. New Jersey General Cable Industries, Inc. Delaware General Cable de Mexico del Norte Mexico Genca Corporation Delaware Marathon Manufacturing Holdings, Inc. Delaware General Cable Company Canada, Ltd. Ontario, Canada General Cable IP Corp Delaware General Cable Export Sales Corp. Barbados Carol Cable, Ltd. England Carol Cable Europe, Ltd. England General Photonics L.L.C. (50% owned) Delaware Diversified Contractors, Inc. Delaware MLTC Company Delaware Marathon Steel Co. Arizona E-2 EX-23.1 7 EXHIBIT 23.1 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT GENERAL CABLE CORPORATION We consent to the incorporation by reference in Registration Statements No. 333-28965, 333-31865, 333-31867, 333-31869, and 333-31871 of General Cable Corporation on Forms S-8 of our report dated January 28, 1998 appearing in this Annual Report on Form 10-K of General Cable Corporation for the year ended December 31, 1997. DELOITTE & TOUCHE LLP Cincinnati, Ohio March 27, 1998 E-3 EX-27.1 8 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 4,200 0 169,700 7,300 163,600 361,800 198,400 42,800 563,700 135,900 0 0 0 200 122,200 563,700 1,134,500 1,134,500 909,100 909,100 0 0 18,100 87,200 34,000 53,200 0 0 0 53,200 2.18 2.16
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