-----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, BJ3V64zXobX840NttTsNgR3DMsG6C7r+IZLEMLwpqeR3UuhGAZuI4gXXoHj/uSsQ CF1EMnvzYeLtakUMX/GJUg== 0000950152-98-006494.txt : 19980812 0000950152-98-006494.hdr.sgml : 19980812 ACCESSION NUMBER: 0000950152-98-006494 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980810 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-Q SEC ACT: SEC FILE NUMBER: 001-12983 FILM NUMBER: 98680638 BUSINESS ADDRESS: STREET 1: 4 TESSENEER DRIVE CITY: HIGHLAND HEIGHTS STATE: KY ZIP: 41076 BUSINESS PHONE: 6065728000 10-Q 1 GENERAL CABLE CORPORATION FORM 10-Q 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1998 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) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 24, 1998 ----- ---------------------------- Common Stock, $.01 Par Value 36,792,349 - -------------------------------------------------------------------------------- PAGE 1 2 GENERAL CABLE CORPORATION INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I - FINANCIAL INFORMATION Page ---- Item 1. Consolidated Financial Statements Statements of Income - For the three and six months ended June 30, 1998 and 1997 3 Balance Sheets - June 30, 1998 and December 31, 1997 4 Statements of Cash Flows - For the six months ended June 30, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION Item 4. Results of Votes of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURE 17
2 3 GENERAL CABLE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- --------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales $306.7 $292.2 $585.3 $543.2 Cost of sales 239.8 237.2 461.4 439.4 ------- ------- ------- ------- Gross profit 66.9 55.0 123.9 103.8 Selling, general and administrative expenses 33.3 30.4 64.6 60.0 -------- -------- -------- -------- Operating income 33.6 24.6 59.3 43.8 -------- -------- -------- -------- Interest income (expense): Interest expense (4.2) (4.7) (8.0) (9.8) Interest income 0.2 0.1 0.5 0.3 --------- --------- ---------- --------- (4.0) (4.6) (7.5) (9.5) --------- --------- ---------- --------- Earnings before income taxes 29.6 20.0 51.8 34.3 Income tax provision (11.5) (8.0) (20.2) (13.7) --------- ---------- --------- --------- Net income $ 18.1 $ 12.0 $ 31.6 $ 20.6 ======= ======== ======= ======= Earnings per common share $ 0.49 $ 0.33 $ 0.86 $ 0.56 ======= ======= ======= ======= Weighted average common shares 36.8 36.6 36.8 36.5 ======== ======== ======== ======== Earnings per common share-assuming dilution $ 0.48 $ 0.33 $ 0.84 $ 0.56 ======= ======= ======= ======= Weighted average common shares-assuming dilution 37.7 36.6 37.6 36.5 ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements. 3 4 GENERAL CABLE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA)
ASSETS June 30, December 31, - ------ 1998 1997 ---- ---- Current Assets: (unaudited) Cash $ 10.6 $ 4.2 Receivables, net 175.2 162.4 Inventories 183.3 163.6 Deferred income taxes 20.4 20.9 Prepaid expenses and other 11.0 10.7 -------- ------- Total current assets 400.5 361.8 Property, plant and equipment, net 178.0 155.6 Deferred income taxes 28.1 29.2 Other non-current assets 17.4 17.1 -------- ------- Total assets $624.0 $563.7 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 91.2 $ 80.5 Accrued liabilities 58.3 55.4 ------- ------- Total current liabilities 149.5 135.9 Long-term debt 258.1 238.5 Other liabilities 64.1 66.9 -------- -------- Total liabilities 471.7 441.3 ------- ------- Shareholders' Equity: Common stock, $0.01 par value: Issued and outstanding shares: June 30, 1998 - 36,801,524 December 31, 1997 - 36,773,139 0.4 0.4 Additional paid-in capital 84.2 83.3 Retained earnings 67.7 38.7 -------- -------- Total shareholders' equity 152.3 122.4 ------- ------- Total liabilities and shareholders' equity $624.0 $563.7 ====== ======
See accompanying Notes to Consolidated Financial Statements. 4 5 GENERAL CABLE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
Six Months Ended June 30, --------------------------- 1998 1997 ---- ---- Cash flows of operating activities: Net income $31.6 $ 20.6 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8.6 6.7 Deferred income taxes 1.6 1.4 Changes in operating assets and liabilities: Increase in receivables (12.8) (39.8) Increase in inventories (19.7) (8.8) (Increase) decrease in other assets (1.1) 1.0 Increase in accounts payable, accrued and other liabilities 11.2 14.9 ------- ------ Net cash flows of operating activities 19.4 (4.0) ------- ------ Cash flows of investing activities: Capital expenditures (32.0) (12.3) Proceeds from the sale of property 1.6 4.6 Other, net 0.2 (1.9) ------- ------ Net cash flows of investing activities (30.2) (9.6) ------- ------ Cash flows of financing activities: Dividends paid (2.4) (42.6) Net borrowings of revolving credit facility 20.0 263.0 Repayment of related party notes payable - (195.8) Repayment of short-term debt - (2.0) Repayment of other long-term debt (0.4) (0.4) ------- ------ Net cash flows of financing activities 17.2 22.2 ------- ------ Increase in cash 6.4 8.6 Cash-beginning of period 4.2 1.9 ------- ------ Cash-end of period $10.6 $10.5 ======= ====== SUPPLEMENTAL INFORMATION Income taxes paid, net of refunds $13.0 $ 9.2 ======= ====== Interest paid $ 6.9 $ 8.3 ======= ====== NONCASH ACTIVITIES Issuance of Restricted Stock $ 0.8 $ 5.6 ======= ======
See accompanying Notes to Consolidated Financial Statements. 5 6 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of General Cable Corporation and its wholly owned subsidiaries. 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. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of General Cable Corporation and Subsidiaries have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the three and six months ended June 30, 1998 are not necessarily indicative of results that may be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto in General Cable's 1997 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 1998. 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". SFAS No. 130 was adopted during the first quarter of 1998. However, management believes the disclosure provisions of SFAS No. 130 are not material to its consolidated financial statements. General Cable will be required to adopt SFAS No. 131 during 1998. Adoption of SFAS No. 131 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. During 1998 two additional standards have been issued, SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" and SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". General Cable will be required to adopt SFAS No. 132 during 1998 and believes that it will not impact the reported results of operations or financial position of the Company; however, additional disclosures may be required. General Cable will be required to adopt SFAS No. 133 no later than January 1, 2000. Management has not yet analyzed the impact of SFAS No. 133 on its consolidated financial statements. 6 7 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. INVENTORIES Inventories consisted of the following (in millions): June 30, December 31, 1998 1997 ---- ---- Raw materials $ 20.1 $ 20.7 Work-in-progress 26.4 28.4 Finished goods 136.8 114.5 ------- ------- Total $183.3 $163.6 ====== ====== General Cable values only the copper component of its inventories using the last-in/first-out (LIFO) method. At June 30, 1998 and December 31, 1997, $77.9 million and $70.7 million, respectively, of inventories were valued using the LIFO method. Approximate replacement cost of inventories valued using the LIFO method totaled $63.5 million at June 30, 1998 and $59.3 million at December 31, 1997. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are necessarily based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many variables beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. 3. SHAREHOLDERS' EQUITY Changes in shareholders' equity were as follows (in millions):
Additional Common Paid-In Retained Stock Capital Earnings Total ----- ------- -------- ----- Balance, December 31, 1997 $ 0.4 $ 83.3 $ 38.7 $ 122.4 Net income -- -- 31.6 31.6 Dividends -- -- (2.4) (2.4) Issuance of Restricted Stock -- 0.8 -- 0.8 Other -- 0.1 (0.2) (0.1) ------ ------- ------- -------- Balance, June 30, 1998 $ 0.4 $ 84.2 $ 67.7 $ 152.3 ====== ======= ======= ========
On April 17, 1998, the Board of Directors approved a three-for-two stock split on the Company's Common Stock, effected in the form of a stock dividend paid on May 14, 1998 to shareholders of record on April 28, 1998. An amount equal to the par value of the common shares issued was transferred from additional paid-in capital to the common stock account. The effect of the stock split has been retroactively reflected as of December 31, 1997 in the Consolidated Balance Sheet and related footnotes. All references to number of shares and to per share information have been adjusted to reflect the stock split on a retroactive basis. 7 8 GENERAL CABLE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. EARNINGS PER SHARE A reconciliation of the numerator and denominator of earnings per common share to earnings per common share assuming dilution is as follows (in millions):
Three Months Ended June 30, --------------------------------------------------------------------------------- 1998 1997 ------------------------------------- ---------------------------------------- Per Share Per Share Income(1) Shares(2) Amount Income(1) Shares(2) Amount --------- --------- ------ --------- --------- ------ Earnings per common share $18.1 36.8 $0.49 $12.0 36.6 $0.33 ===== ===== Dilutive effect of stock options - 0.9 - - ----- ---- ----- ---- Earnings per common share- Assuming dilution $18.1 37.7 $0.48 $12.0 36.6 $0.33 ===== ==== ===== ===== ==== =====
Six Months Ended June 30, --------------------------------------------------------------------------------- 1998 1997 ------------------------------------- ---------------------------------------- Per Share Per Share Income(1) Shares(2) Amount Income(1) Shares(2) Amount --------- --------- ------ --------- --------- ------ Earnings per common share $31.6 36.8 $0.86 $20.6 36.5 $0.56 ===== ===== Dilutive effect of stock options - 0.8 - - ----- ---- ----- ---- Earnings per common share- Assuming dilution $31.6 37.6 $0.84 $20.6 36.5 $0.56 ===== ==== ===== ===== ==== =====
(1) Numerator (2) Denominator 5. SUBSEQUENT EVENT On July 21, 1998 General Cable announced plans to close its Montoursville, PA cordset assembly plant. Operations at the plant will be phased out over the next nine to eighteen months, and will be replaced with production from a new manufacturing facility. The company believes the costs incurred related to the closure of the facility will not be material to its consolidated financial statements. 8 9 GENERAL CABLE CORPORATION AND SUBSIDIARIES ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL General Cable 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 and logistics; customer relationships, sales and service; and improved operating efficiency. All statements, other than statements of historical fact, included in this report, including the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations", are, or may be considered, forward-looking statements under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Important factors that could cause results to differ materially from those discussed in the forward-looking statements (Forward 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 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 for the Company are qualified in their entirety by the Forward Statements. General Cable's reported net sales are directly influenced by the price of copper. Copper prices have been volatile, with the copper cathode daily selling price on the COMEX averaging $0.78 per pound during the second quarter and first six months of 1998, $1.14 per pound during the second quarter of 1997 and $1.13 per pound during the first six months of 1997. However, as a result of a number of practices intended to match copper purchases with sales, the Company's overall profitability has not been significantly affected by changing 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. Also, the Company does not engage in activities to hedge the underlying value of its copper inventory. 9 10 GENERAL CABLE CORPORATION AND SUBSIDIARIES General Cable generally experiences certain seasonal trends in sales and cash flow. Larger 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, when construction activity increases. In general, receivables related to higher sales activity during the spring and summer are collected in the third and fourth quarters of the year. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997 General Cable continued to achieve improved results in earnings per share in the second quarter of 1998. Fully diluted earnings per share increased 45% to $0.48, up from $0.33 per share in the second quarter of 1997. Earnings increased significantly as a result of substantially higher sales volume and the results of the Company's continuing productivity improvement initiatives. Net sales increased 5% to $306.7 million for the second quarter of 1998, up from $292.2 million for the same period in 1997 despite a $0.36 decrease in the average monthly COMEX price per pound of copper in the three months ended June 30, 1998 compared to the same period in 1997. After adjusting the 1997 net sales to reflect the $0.36 lower average price per pound of copper in the second quarter of 1998, net sales were actually $47.8 million, or 18%, higher than the first quarter of 1997. The increase in copper-adjusted net sales reflected a 13% increase in the copper-adjusted net sales of Electrical products and a 28% increase in the copper-adjusted net sales of Communications products. The growth in Communications products resulted from substantially higher sales of plastic insulated cable (PIC) to a broad base of Local Telephone Exchange Carrier customers. PIC sales through key distributor customers were also up about 35 percent. In addition, copper-adjusted net sales of data communications products rose almost 27%, with the largest increases coming in General Cable's high performing enhanced category cables. The sales growth in Communication products continues to be driven by the ongoing proliferation of personal computers, and growth in Internet use, local and wide area networks, high-speed modems and access lines, and advanced voice, data and video applications. The growth in Electrical products sales in the second quarter of 1998 compared to the same period in 1997 was primarily due to increased volume of building wire, driven by new customer wins primarily in the retail channel, and increased volume of industrial power and control products, consumer cordsets and automotive products. In support of the 18% copper-adjusted top-line growth, selling, general and administrative expenses increased 10% to $33.3 million in the second quarter of 1998 from $30.4 million in the second quarter of 1997 primarily reflecting higher volume - related expenses such as transportation, and higher salary and related costs, primarily in engineering and supply chain management, to support the Company's sales growth. During the second quarter of 1998, the Company continued to leverage its sales growth as evidenced by the fact that selling, general and administrative expenses as a percentage of copper-adjusted net sales declined from 11.7% in the second quarter of 1997, to 10.9% in the second quarter of 1998. 10 11 GENERAL CABLE CORPORATION AND SUBSIDIARIES Operating profit increased 37% to $33.6 million in the second quarter of 1998 from $24.6 million in the second quarter of 1997. The substantial improvement in operating profit reflects the 18% increase in copper-adjusted sales and productivity improvement led by manufacturing cost reductions. The manufacturing cost reductions are the result of process improvements to reduce material costs and usage, and improved throughput. These improvements in operating profit were partially offset by lower building wire pricing in the second quarter; the price premium over copper cost was down 8% versus last year. The price premiums improved substantially in June, up 7% from April and down only 3% versus prior year. Net interest expense was $4.0 million in the second quarter of 1998 compared to $4.6 million in the second quarter of 1997. The reduction reflects the impact of refinancing related party debt in May 1997 with borrowing under a new credit facility at a lower effective interest rate. The effective income tax rate for the second quarter of 1998 was 39% compared to approximately 40% for the second quarter of 1997. SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997 General Cable's continued improvement in results during the first six months of 1998 included substantial growth in earnings per share, return on net assets and copper-adjusted net sales. Fully diluted earnings per share increased 50% to $0.84, up from $0.56 per share in the first six months of 1997. The significant improvement was fueled by substantially higher sales volume and continuing productivity improvement initiatives. In addition, return on net assets for the first six months of 1998 of 16.7% was up 4.4 points over the same period in the prior year. Net sales for the six months ended June 30, 1998 increased $42.1 million, or 8% to $585.3 million from net sales of $543.2 million for the same period in 1997 despite a $0.35 decrease in the average monthly COMEX price per pound of copper in the six months ended June 30, 1998 compared to the same period in 1997. After adjusting the net sales for the first six months of 1997 to reflect the $0.35 lower average monthly COMEX price per pound of copper in the first six months of 1998, net sales were $102.5 million, or 21% higher than the first six months of 1997. The increase in copper adjusted net sales reflects an 11% increase in the copper-adjusted net sales of Electrical products and 39% increase in the copper-adjusted net sales of Communications products. The 39% increase in Communications product sales was the result of significantly higher sales of PIC and datacom products. The PIC sales increases include sales to a broad base of Local Telephone Exchange Carrier customers. Sales growth of data communication products was primarily in high-performance, enhanced category cables. The growth in Electrical product sales resulted from increased volume of building wire products and to a lesser extent, increased volume in industrial power and control products, consumer cordset products, and products for the automotive aftermarket. 11 12 GENERAL CABLE CORPORATION AND SUBSIDIARIES Capitalizing on "The Power of One" strategy, General Cable continued to show excellent sales growth with key customers. Copper-adjusted net sales to the Company's top 20 customers increased 39%, nearly twice the overall copper-adjusted growth rate, reflecting General Cable's continuing ability to partner with customers for mutually beneficial growth in revenues and earnings. Despite substantial top-line growth, general and administrative expenses increased only $4.6 million, or 8% to $64.6 million in the first six months of 1998 from $60.0 million in the first six months of 1997. The increase reflected higher transportation costs and increased salaries for additional staffing to support sales growth. Selling, general and administrative expenses as a percentage of copper-adjusted net sales declined from 12.5% in the first six months of 1997, to 11.0% in the first six months of 1998 as the Company continued to leverage its sales growth. Operating profit increased 35% to $59.3 million in the first six months of 1998 from $43.8 million in the first six months of 1997. The significant improvement in operating profit reflects the 21% increase in copper-adjusted net sales, manufacturing cost reductions, and selling, general and administrative expense productivity. These were partially offset by lower building wire pricing and higher costs associated with temporarily purchasing PIC products from third parties at a cost in excess of General Cable's manufacturing cost to satisfy PIC demand in excess of capacity. General Cable brought PIC capacity on stream during the first quarter of 1998 and an additional PIC capacity expansion is underway at the Bonham, Texas plant for start-up during the second half of 1998. These capacity additions have reduced and will continue to reduce the adverse effect on operating margins of outsourcing PIC products. Net interest expense was $7.5 million in the first six months of 1998 compared to $9.5 million in the first six months of 1997. The reduction reflects the impact of refinancing the remaining related party debt in May, 1997 with borrowing under a new credit facility at a lower effective interest rate. The effective income tax rate for the six months ended June 30, 1998 was 39% compared to 40% for the six months ended June 30, 1997. 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. Cash flow provided by operating activities in the first six months of 1998 was $19.4 million. Net income before depreciation and deferred taxes of $41.8 million and an $11.2 million increase in accounts payable, accrued liabilities and other long-term liabilities were partially offset by a $1.1 million increase in other assets, a $12.8 million increase in accounts receivable and an $19.7 million increase in inventories. The increase in accounts receivable was due to the strong growth in sales in the last two months of the second quarter of 1998 compared to the last two months of the fourth quarter of 1997 partially offset by lower copper cost in 1998. The increase in inventory was due to a build of inventories in anticipation of increased seasonal demand in the third quarter of 1998. 12 13 GENERAL CABLE CORPORATION AND SUBSIDIARIES Cash flow used in investing activities was $30.2 million in the first six months of 1998, principally reflecting $32.0 million of capital expenditures, primarily focused on increased capacity and improved manufacturing productivity. Cash flow provided by financing activities in the first six months of 1998 was $17.2 million, primarily reflecting proceeds of borrowings of $20.0 million under General Cable's revolving credit line, partially offset by $2.4 million of dividends paid during the first six months. 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 $268.0 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. Borrowings under the Credit Facility were $250.0 million at June 30, 1998. 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 the 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% 13 14 GENERAL CABLE CORPORATION AND SUBSIDIARIES 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 a result of the Company's strong financial performance in 1997, both the facility fee and the spread over LIBOR were adjusted down effective March 31, 1998 to the minimum amount provided under the Credit Facility. The Credit Facility restricts certain corporate acts and contains required minimum financial ratios and other covenants. An amendment to the Credit Facility agreement dated April 17, 1998 eliminated the prior limitation of annual dividends to an aggregate maximum of $0.20 per share outstanding as of the immediately preceding fiscal year. However, aggregate annual dividends will still generally be restricted to 50% of the net income in the preceding fiscal year as stated in the original agreement. 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. The Company estimates that these costs will not exceed $2.0 million. The majority of the work necessary to upgrade to Year 2000 compliance will be completed by October 1998. In addition, the Company is communicating with third parties with whom it conducts business to determine the extent to which General Cable may be vulnerable if their systems are not Year 2000 compliant in a timely manner. Where practicable, the Company will assess and attempt to mitigate its risks with respect to the failure of these third parties to convert their systems. The effect, if any, on the Company's results of operations from the failure of third parties to be Year 2000 ready, is not reasonably estimable. 14 15 GENERAL CABLE CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS General Cable's Annual Meeting of Shareholders was held on May 19, 1998. Proxies were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934 and each of the following matters was voted upon and approved by the shareholders as indicated below. Of the 36,802,800 shares outstanding, 4,780,850 were not voted. (a) Election of Directors: For Against --- ------- Jeffrey Noddle 31,904,355 117,595 John E. Welsh, III 31,904,910 117,040 The following Directors are continuing in office after the date of the Annual Meeting: Gregory B. Kenny, Robert L. Smialek, Gregory E. Lawton and Stephen Rabinowitz. (b) Ratification of appointment of Deloitte & Touche LLP to audit the 1998 consolidated financial statements of General Cable. Votes for - 31,994,418; votes against- 6,982; and abstentions - 20,550. (c) Approval of the General Cable Corporation 1997 Stock Incentive Plan as amended. Votes for - 19,307,958; votes against - 12,663,915; and abstentions - 50,077. (d) Approval of the General Cable Corporation 1998 Annual Incentive Plan. Votes for-28,203,859; votes against - 652,603; and abstentions - 55,986. ITEM 5. OTHER INFORMATION The Securities and Exchange Commission has made recent changes to the proxy rules in Regulation 14A under the Securities Exchange Act, including Rule 14a-5. General Cable is providing below certain information to shareholders concerning the procedures that will apply to the exercise of discretionary authority by management under proxies solicited by and granted to General Cable for the 1999 Annual Meeting of Shareholders. Under General Cable's Amended and Restated Bylaws, a proxy granted to General Cable's management relating to the 1999 Annual Meeting will give management discretionary authority to vote on any proposal properly placed before the shareholders unless a shareholder follows the advance notice procedure in the Bylaws. This procedure requires that written notice of the proposal must be given to the 15 16 GENERAL CABLE CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION (CON'T) Secretary of the Company at its headquarters address sixty (60) days before the Annual Meeting. The notice must include the following: (i) the names and business addresses of the proponent and all persons acting together in concert with the proponent; (ii) the names and addresses of the shareholder proponent and other persons identified in item (i) as shown on the books of General Cable; (iii) the class and number of shares of General Cable beneficially owned by the proponent and the persons identified in item (i); (iv) a description of the stockholder proposal containing all material information about the proposal; and (v) such other information as the Board of Directors reasonably determines is necessary or appropriate to enable the Board of Directors and stockholders of General Cable to consider the proposal. The Bylaw provision also provides that if the officer presiding at the Annual Meeting determines that the proposal was not made in accord with the Bylaw's procedures, the officer may disregard the proposal at the Annual Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 - Financial Data Schedule (b) Reports on Form 8-K - None 16 17 SIGNATURE Pursuant to the requirements 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: August 6, 1998 By: s/CHRISTOPHER F. VIRGULAK -------------------------- Christopher F. Virgulak Executive Vice President, Chief Financial Officer and Treasurer 17 EX-27 2 EXHIBIT 27
5 0000886035 GENERAL CABLE CORP. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 10,600 0 182,700 7,500 183,300 400,500 228,500 50,500 624,000 149,500 0 0 0 400 151,900 624,000 585,300 585,300 461,400 461,400 0 0 8,000 51,800 20,200 31,600 0 0 0 31,600 .86 .84 A three for two stock split occurred on May 14, 1998, prior Financial Data Schedules have not been restated.
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