UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from to
----------- -----------

Commission File Number 1-7418
------

ESSEX GROUP, INC.
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(Exact name of registrant as specified in its charter)

MICHIGAN 35-1313928
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1601 WALL STREET, FORT WAYNE, INDIANA 46802
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (219) 461-4000

None
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(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X ] Yes [ ] No

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:

Number of Shares Outstanding
Common Stock As of June 30, 1996
-------------- ----------------------------
$.01 Par Value 100

ESSEX GROUP, INC.

FORM 10-Q INDEX

FOR QUARTERLY PERIOD ENDED JUNE 30, 1996

Page No.

Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets . . . . . . . . . . . . . . . . 3

Consolidated Statements of Operations . . . . . . . . . . . 5

Consolidated Statements of Cash Flows . . . . . . . . . . . 6

Notes to Consolidated Financial Statements . . . . . . . . 8

Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition . . . . 13

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 20

Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED BALANCE SHEETS

June 30, December 31,
1996 1995
In Thousands of Dollars (Unaudited)
--------------------------------------------------------------------------------------

ASSETS

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . $ - $ 3,157
Accounts receivable (net of allowance of
$4,150 and $3,930) . . . . . . . . . . . . . . . . . 175,051 154,584
Inventories . . . . . . . . . . . . . . . . . . . . . 180,554 166,076
Other current assets . . . . . . . . . . . . . . . . . 18,832 8,988
-------- --------

Total current assets . . . . . . . . . . . . . 374,437 332,805

Property, plant and equipment, (net of accumulated
depreciation of $98,535 and $84,341) . . . . . . . . 266,526 270,546
Excess of cost over net assets acquired (net of
accumulated amortization of $15,281 and $13,221) . . 127,782 129,943
Other intangible assets and deferred costs (net of
accumulated amortization of $4,395 and $3,102) . . . 8,838 9,187
Other assets . . . . . . . . . . . . . . . . . . . . . 2,936 1,987
-------- --------

$780,519 $744,468
======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED BALANCE SHEETS - Continued

June 30, December 31,
1996 1995
In Thousands of Dollars, Except Per Share Data (Unaudited)
--------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
Notes payable to banks . . . . . . . . . . . . . . . . $ 20,123 $ 11,760
Current portion of long-term debt . . . . . . . . . . 11,576 24,734
Accounts payable . . . . . . . . . . . . . . . . . . . 58,153 66,797
Accrued liabilities . . . . . . . . . . . . . . . . . 48,029 45,864

Deferred income taxes . . . . . . . . . . . . . . . . 16,224 15,345
Due to Holdings . . . . . . . . . . . . . . . . . . . 2,122 384
-------- --------

Total current liabilities . . . . . . . . . . . 156,227 164,884

Long-term debt . . . . . . . . . . . . . . . . . . . . 419,228 388,016

Deferred income taxes . . . . . . . . . . . . . . . . 64,255 66,809
Other long-term liabilities . . . . . . . . . . . . . 12,058 10,081

Stockholder's equity:
Common stock, par value $.01 per share; 1,000 shares
authorized; 100 shares issued and outstanding; plus
additional paid in capital . . . . . . . . . . . . . 104,036 104,036
Retained earnings . . . . . . . . . . . . . . . . . . 24,715 10,642
-------- --------

Total stockholder's equity . . . . . . . . . . 128,751 114,678
-------- --------

$780,519 $744,468
======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Month Period Six Month Period
Ended June 30, Ended June 30,
------------------------ -----------------------
In Thousands of Dollars 1996 1995 1996 1995
----------------------------------------------------------------------------------------------
REVENUES:

Net sales . . . . . . . . . . . . . . . . . $337,533 $288,534 $645,943 $578,183

Interest income . . . . . . . . . . . . . 9 174 48 380
Other income . . . . . . . . . . . . . . . 326 470 565 1,329
-------- -------- -------- --------

337,868 289,178 646,556 579,892
-------- -------- -------- --------

COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . 284,642 250,936 543,293 498,159
Selling and administrative . . . . . . . . 29,331 21,559 57,450 43,283
Interest expense . . . . . . . . . . . . . 10,157 8,426 20,324 14,182

Other expense . . . . . . . . . . . . . . . 84 433 416 560
-------- -------- -------- --------
324,214 281,354 621,483 556,184
-------- -------- -------- --------

Income before income taxes and
extraordinary charge . . . . . . . . . . . . 13,654 7,824 25,073 23,708
Provision for income taxes . . . . . . . . . 6,000 3,780 11,000 10,480
-------- -------- -------- --------

Income before extraordinary charge . . . . . 7,654 4,044 14,073 13,228
Extraordinary charge - debt retirement,
net of income tax benefit . . . . . . . . . - 2,971 - 2,971
-------- -------- -------- --------

Net income . . . . . . . . . . . . . . . . . $ 7,654 $ 1,073 $ 14,073 $ 10,257
======== ======== ======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Month Period
Ended June 30,
------------------------
In Thousands of Dollars 1996 1995
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OPERATING ACTIVITIES

Net income . . . . . . . . . . . . . . . . . . . . . $ 14,073 $ 10,257
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization . . . . . . . . . . . 16,942 16,267
Non cash interest expense . . . . . . . . . . . . . 1,171 1,054
Non cash pension expense . . . . . . . . . . . . . 1,387 1,254
Loss on debt retirement . . . . . . . . . . . . . . - 4,951
Provision for losses on accounts receivable . . . . 673 243
Benefit for deferred income taxes . . . . . . . . . (1,675) (775)
Loss on disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . 243 418
Changes in operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . (21,036) (14,903)
Increase in inventories . . . . . . . . . . . . . (9,768) (1,522)
Decrease in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . (6,450) (1,493)
Net (increase) decrease in other assets and
liabilities . . . . . . . . . . . . . . . . . . . (9,874) 10,180
Increase (decrease) in due to Holdings . . . . . 1,738 (33,961)
-------- --------

NET CASH USED FOR OPERATING ACTIVITIES . . . . . . . (12,576) (8,030)
-------- --------

INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . . (9,342) (11,098)
Proceeds from disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . . 337 1,069
Acquisitions and other investments . . . . . . . . . (7,993) (492)
Issuance of equity interest in a subsidiary . . . . - 1,063
-------- --------

NET CASH USED FOR INVESTING ACTIVITIES . . . . . . . (16,998) (9,458)
-------- --------

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)

Six Month Period
Ended June 30,
------------------------
In Thousands of Dollars 1996 1995
-------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . 90,200 285,100
Repayment of long-term debt . . . . . . . . . . . . (72,146) (45,000)
Proceeds from notes payable to banks . . . . . . . . 265,688 28,200
Repayment of notes payable to banks . . . . . . . . (257,325) (18,200)
Dividend paid to Holdings . . . . . . . . . . . . . - (238,748)
Debt issuance costs . . . . . . . . . . . . . . . . - (5,092)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . 26,417 6,260
-------- --------

NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . (3,157) (11,228)

Cash and cash equivalents at beginning of period . . 3,157 16,894
-------- --------

Cash and cash equivalents at end of period . . . . . $ - $ 5,666
======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In Thousands of Dollars
-----------------------

NOTE 1 BASIS OF PRESENTATION

The unaudited interim consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of the management of Essex Group, Inc. (the "Company"), necessary
to present fairly the consolidated financial position of the Company as of
June 30, 1996, and the consolidated results of operations for the three
month and six month periods ended June 30, 1996 and 1995, respectively,
and cash flows of the Company for the six-month periods ended June 30,
1996 and 1995, respectively. Results of operations for the periods
presented are not necessarily indicative of the results for the full
fiscal year. These financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K, as amended, filed
with the Securities and Exchange Commission for the year ended December
31, 1995.

The Company is a wholly-owned subsidiary of BCP/Essex Holdings Inc.
("Holdings"). Holdings is a holding company with no operations and has
virtually no assets other than its ownership of all the outstanding stock
of the Company.

NOTE 2 INVENTORIES

The components of inventories are as follows:

June 30, December 31,
1996 1995
------------- -------------

Finished goods . . . . . . . . . . . . $144,931 $146,821
Raw materials and work in process . . 49,722 52,366
-------- --------
194,653 199,187
LIFO reserve . . . . . . . . . . . . . (14,099) (33,111)
-------- --------
$180,554 $166,076
======== ========

The Company values a major portion of its inventories at the lower of
cost or market based on a last-in, first-out ("LIFO") method. Principal
elements of cost included in the Company's inventories are copper,
purchased materials, direct labor and manufacturing overhead. Inventories
valued using the LIFO method amounted to $172,668 and $161,449 at June 30,
1996 and December 31, 1995, respectively.

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

In Thousands of Dollars
-----------------------

NOTE 3 DEBT ARRANGEMENTS

Long-term debt consists of the following:

June 30, December 31,
1996 1995
------------- -------------

10% Senior notes . . . . . . . . . . . $200,000 $200,000
Revolving loan . . . . . . . . . . . . 172,000 135,000
Term loan . . . . . . . . . . . . . . . 36,304 54,000
Lease obligation . . . . . . . . . . . 22,500 23,750
-------- --------
430,804 412,750
Less: current portion . . . . . . . . . 11,576 24,734
-------- --------
$419,228 $388,016
======== ========

Bank Financing

In April 1995, in connection with the redemption (the "Redemption") by
Holdings of all of its outstanding 16% Senior Discount Debentures due 2004
(the "Holdings Debentures"), the Company terminated its previous credit
agreement (the "Former Credit Agreement") and entered into three new
facilities: (i) a $260,000 revolving credit agreement, dated as of April
12, 1995, by and among the Company, Holdings, the Lenders named therein,
and Chemical Bank, as agent (the "Revolving Credit Agreement"); (ii) a
$60,000 senior unsecured note agreement, dated as of April 12, 1995, by
and among the Company, Holdings, as guarantor, the Lenders named therein,
and Chemical Bank, as administrative agent (the "Term Loan", together with
the Revolving Credit Agreement, the "Credit Facilities"); and (iii) a
$25,000 agreement and lease, dated as of April 12, 1995, by and between
the Company and Mellon Financial Services Corporation #3 (the "Sale and
Leaseback Agreement"). The Company recognized an extraordinary charge of
$2,971, net of applicable tax benefit ($1,980), in the second quarter 1995
for the write-off of unamortized deferred debt expense in connection with
the termination of its Former Credit Agreement.

On May 12, 1995, the Company borrowed the full amount available under
the Term Loan and the Sale and Leaseback Agreement. These funds, together
with available cash and borrowings under the Revolving Credit Agreement,
were paid to Holdings in the form of a cash dividend ($238,748) and
repayment of a portion of an intercompany liability ($34,102) totaling
$272,850. Holdings applied such funds to redeem all of its outstanding
Holdings Debentures at 100% of their principal amount of $272,850 on May
15, 1995.

The Revolving Credit Agreement provides for up to $260,000 in revolving
loans, subject to specified percentages of eligible assets, reduced by
outstanding borrowings under the Company's Canadian credit agreement and
unsecured bank lines of credit ($5,123 and $15,000, respectively, at June
30, 1996), as described below. The Revolving Credit Agreement also
provides a $25,000 letter of credit subfacility. The Company's ability to
borrow under the Revolving Credit Agreement is restricted by the financial
covenants contained therein as well as those contained in the Term Loan
and to certain debt limitation covenants contained in the indenture under
which the 10% Senior Notes due 2003 (the "Senior Notes") were issued (the
"Senior Note Indenture"). The Revolving Credit Agreement terminates five
years from its

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

In Thousands of Dollars
-----------------------

effective date of April 12, 1995. Revolving Credit Agreement loans bear
floating rates of interest, at the Company's option, at bank prime plus
1.25% or a reserve adjusted Eurodollar rate (LIBOR) plus 2.25%. The
effective interest rate can be reduced by 0.25% to 1.25%, in 0.25%
increments, if certain specified financial conditions are achieved.
Commitment fees during the revolving loan period are .375% or .5% of the
average daily unused portion of the available credit based upon certain
specified financial conditions. Indebtedness under the Revolving Credit
Agreement is guaranteed by Holdings and all of the Company's subsidiaries,
and is secured by a pledge of the capital stock of the Company and its
subsidiaries and by a first lien on substantially all assets.

The Term Loan provides for an aggregate of $60,000 in term loans, the
last payment of which is due in May 2000. Borrowings under the Term Loan
bear floating rates of interest at bank prime plus 2.75% or LIBOR plus
3.75%. Principal payments on the term loans will be made in 20 equal
quarterly installments, subject to the loan's excess cash provision,
commencing August 15, 1995. The Term Loan requires 50% of excess cash, as
defined, to be applied against the outstanding term loan balance. The
excess cash calculation for the year ended December 31, 1995 required the
Company to repay $12,427 of the term loan. This payment was made in March
1996. After the 1996 excess cash repayment, principal payments will be
made in 17 equal quarterly installments of $2,269. Amounts repaid with
respect to the excess cash provision may not be reborrowed.

The Sale and Leaseback Agreement provides $25,000 for the sale and
leaseback of certain of the Company's fixed assets. The Sale and
Leaseback Agreement has a seven-year term expiring in May 2002. The
principal component of the rental is to be paid quarterly, with the amount
of each of the first 27 payments to be equal to 2.5% of lessor's cost of
the equipment, and the balance due at the final payment. The interest
component is to be paid on the unpaid principal balance and is to be
calculated by lessor at LIBOR plus 2.5%. The effective interest rate can
be reduced by 0.25% to 1.125% if certain specified financial conditions
are achieved.

On May 30, 1996, a subsidiary of the Company entered into a $12,000
(Canadian dollar) credit agreement by and between the subsidiary and a
Canadian chartered bank (the "Canadian Credit Agreement"). Borrowings are
restricted to meeting the working capital requirements of the subsidiary
and are secured by the subsidiary's accounts receivable. As of June 30,
1996, $5,123 was outstanding under the Canadian Credit Agreement and
denoted as notes payable to banks in the Consolidated Balance Sheets. The
Canadian Credit Agreement bears interest at rates similar to the Revolving
Credit Agreement and terminates one year from its effective date of May
30, 1996, although it may be extended for successive one year periods upon
the mutual consent of the subsidiary and lending bank.

In addition, the Company also has uncommitted bank lines of credit which
provide for unsecured borrowings for working capital of up to $25,000, of

which $15,000 and $11,760 were outstanding at June 30, 1996 and December
31, 1995, respectively. Amounts outstanding under these lines of credit
are also denoted as notes payable to banks in the Consolidated Balance
Sheets and bear interest at rates subject to agreement between the Company
and the lending banks. At June 30, 1996 and December 31, 1995, such rates
of interest averaged 6.2% and 6.7%, respectively.

The Company has purchased interest rate cap protection through May 15,
1997 with respect to $150,000 of debt with a strike rate of 10.0% (three
month LIBOR).

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

In Thousands of Dollars, Except Per Share Data
----------------------------------------------

Senior Notes

In May 1993, the Company issued $200,000 aggregate principal amount of
its Senior Notes which bear interest at 10% per annum, payable
semiannually and are due in May 2003. The Senior Notes rank pari passu in
right of payment with all other senior indebtedness of the Company. To
the extent that any other senior indebtedness of the Company is secured by
liens on the assets of the Company, the holders of such secured senior
indebtedness will have a claim prior to any claim of the holders of the
Senior Notes as to those assets.

NOTE 4 HOLDINGS PREFERRED STOCK AND WARRANTS

At June 30, 1996, Holdings had outstanding 2,189,176 shares of 15%
Series B Cumulative Redeemable Exchangeable Preferred Stock, Liquidation
Preference $25 Per Share, (the "Series B Preferred Stock") and 5,666,738
warrants to purchase an equivalent number of shares of common stock of
Holdings at a per share exercise price of approximately $2.86. The
accreted balance of the Series B Preferred Stock was $53,063 at June 30,
1996. Dividends on the Series B Preferred Stock were payable quarterly at
a rate of 15.0% per annum. Dividends accruing have been paid in
additional shares of Series B Preferred Stock. On July 3, 1996, Holdings
called for redemption all of its outstanding Series B Preferred Stock.
See Note 6 for further information.

NOTE 5 CONTINGENT LIABILITIES

There are various environmental claims and legal proceedings pending
against the Company which have arisen out of the ordinary course of its
business. Pursuant to the February 29, 1988 acquisition of the Company by
Holdings from United Technologies Corporation ("UTC"), UTC agreed to
indemnify the Company against all losses (as defined) resulting from or in
connection with damage or pollution to the environment and arising from
events, operations, or activities of the Company prior to February 29,
1988 or from conditions or circumstances existing at February 29, 1988.
Except for certain matters relating to permit compliance, the Company is
fully indemnified with respect to conditions, events or circumstances
known to UTC prior to February 29, 1988. The sites covered by this
indemnity are handled directly by UTC and all payments required to be made
are paid directly by UTC. The amounts related to this environmental
contingency are not material to the Company's consolidated financial
statements. UTC also provided a second environmental indemnity which
deals with losses related to environmental events, conditions or
circumstances existing at or prior to February 29, 1988, which only became
known in the five year period commencing February 29, 1988. As to any
such losses, the Company is responsible for the first $4,000 incurred.
Management and its legal counsel periodically review the probable outcome
of pending proceedings and the costs reasonably expected to be incurred.
The Company accrues for these costs when it is probable that a liability
has been incurred and the amount of the loss can be reasonably estimated.

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

In Thousands of Dollars, Except Per Share Data
----------------------------------------------

After consultation with counsel during the current quarter, in the opinion
of management, the ultimate cost to the Company, exceeding amounts
provided, will not materially affect the consolidated financial position
or results of operations.

NOTE 6 SUBSEQUENT EVENT

On July 3, 1996, Holdings called for redemption all of its outstanding
Series B Preferred Stock. The stock was redeemed at the close of business
on July 15, 1996, at a redemption price of $26.875 per share, plus accrued
and unpaid dividends through the redemption date of $0.166 per share, for
a total redemption price of $27.041 per share.

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

In Thousands of Dollars
-----------------------

The aggregate amount due upon redemption of the outstanding Series B
Preferred Stock, $59,198, was financed by Holdings through a private
offering of its common stock to certain of its current common stockholders
and their affiliates. This offering has not been registered under the
Securities Act of 1933, and such common stock may not be offered or sold
in the United States absent such registration or an applicable exemption
from registration.

Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition

Introduction

Essex Group, Inc. (the "Company"), founded in Detroit, Michigan in 1930,
is engaged in one principal line of business, the development, production
and marketing of electrical wire and cable and electrical insulation
products. Among the Company's products are building wire for residential
and commercial applications; magnet wire for electromechanical devices
such as motors, transformers and electrical controls; voice and data
communication wire; automotive wire and specialty wiring assemblies for
automobiles and trucks; industrial wire for applications in appliances,
construction and recreational vehicles and insulation products including
mica paper and mica-based composites.

In October 1992, MS/Essex Holdings Inc. ("Holdings") was acquired (the
"Acquisition") by merger (the "Merger") of B E Acquisition Corporation
("BE") with and into Holdings with Holdings surviving under the name
BCP/Essex Holdings Inc. ("Holdings"). BE was a newly organized Delaware
corporation formed for the purpose of effecting the Acquisition.
Shareholders of BE included Bessemer Holdings, L.P. (an affiliate and
successor in interest to Bessemer Capital Partners, L.P. ["BCP"])
("BHLP"), affiliates of Goldman, Sachs & Co. ("Goldman Sachs"), affiliates
of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Chemical
Equity Associates, A California Limited Partnership ("CEA") and members of
management. As a result of the Merger, the stockholders of BE became
stockholders of Holdings. Holdings acquired the Company from United
Technologies Corporation ("UTC") in February 1988.

Results of Operations

Three Month Period Ended June 30, 1996

Net sales for the second quarter 1996 were $337.5 million or 17% higher
than the comparable period in 1995, resulting primarily from improved
sales volumes and increased sales attributable to the distribution
operations acquired in September 1995, partially offset by lower copper
prices, the Company's principal raw material. During the second quarter
1996, the average price of copper on the New York Commodity Exchange, Inc.
("COMEX") was 13.2% lower than the comparable period in 1995. Copper
costs are generally passed on to customers through product pricing.
Second quarter 1996 sales volumes were at record levels with respect to
historical second quarter operating performance and exceeded the second
quarter 1995 by 19.3%. Sales volumes improved due primarily to increased
demand for the Company's building wire and magnet wire products. Building
wire sales for the second quarter 1996 increased as compared to the second
quarter 1995 due primarily to higher sales volumes, attributable to
increased demand and improved market share, partially offset by the
decrease in copper prices. Although the building wire market has
experienced very competitive conditions due primarily to excess industry
capacity, product pricing improved in the second quarter 1996 compared to
the same period last year. The Company believes this improvement to be
the result of higher end user demand coupled with low distributor
inventories. Sales of magnet wire during the second quarter 1996 improved
from the comparable 1995 period due to improved sales volumes partially
offset by declining copper prices. Improved sales volumes were
attributable to increased demand for magnet wire in the electric motor

market as well as increased sales to distributors. Voice and data
communication wire sales for the second quarter 1996 declined from the
comparable period in 1995 due to decreased sales to regional Bell
operating companies, reduced export sales and lower copper prices,
partially offset by continued growth in premise wire sales. Automotive
wire sales in the second quarter 1996 were above the comparable 1995
period due to increased sales volumes partially offset by the decrease in
copper prices.

Cost of goods sold for the second quarter 1996 was 13.4% higher than the
same period in 1995 due primarily to higher sales volumes and increased
sales attributable to the distribution operations acquired in September
1995, partially offset by lower copper prices. The Company's cost of
goods sold as a percentage of net sales was 84.3% and 87.0% in the second
quarter 1996 and 1995, respectively. The cost of goods sold percentage
decrease resulted primarily from a change in product mix associated with
the distribution operations acquired in September 1995, the impact of
lower copper and other material costs, lower manufacturing costs
attributable to continued capital investments and higher manufacturing
volumes.

Selling and administrative expenses for the second quarter 1996 were
36.1% above the comparable 1995 period, due primarily to increased
overhead expenses related to the distribution operations acquired in
September 1995.
Interest expense in the second quarter 1996 was $1.7 million higher than
the same period in 1995 due primarily to additional borrowings under the
Company's new credit facilities to effect the redemption (the
"Redemption") of all of Holdings' outstanding Senior Discount Debentures
due 2004 (the "Debentures"). See "Liquidity, Capital Resources and
Financial Condition" under this caption. The Redemption resulted in a
reduction of Holdings' second quarter 1996 interest expense of 23.2%
compared to the second quarter 1995.

Income tax expense was 43.9% pretax income in the second quarter 1996
compared with 48.3% for the same period in 1995. The effective income tax
rate of the Company is higher than the approximate statutory rate of 40%
due to the effect of the amortization of excess of cost over net assets
acquired which is not deductible for income tax purposes.

The Company recorded net income of $7.7 million for the second quarter
1996 compared to net income of $1.1 million for the comparable period last
year. The 1995 results include an extraordinary charge of $3.0 million
($5.0 million before applicable tax benefit) for the write-off of
unamortized deferred debt expense associated with the Company s former
revolving credit agreement.

Six Month Period Ended June 30, 1996

Net sales for the first six months of 1996 were $645.9 million or 11.7%
higher than the comparable period in 1995, resulting primarily from
improved sales volumes and increased sales attributable to the
distribution operations acquired in September 1995, partially offset by
lower copper prices, the Company's principal raw material. During the
first half of 1996, the average price of copper on the New York Commodity
Exchange, Inc. ("COMEX") was 13.8% lower than the comparable period in
1995. Copper costs are generally passed on to customers through product
pricing. First half 1996 sales volumes were at record levels with respect

to historical first half operating performance and exceeded the first half
1995 by 11.9%. Improved sales volumes resulted primarily from increased
demand for the Company's building wire and magnet wire products. Building
wire sales for the first six months of 1996 increased as compared to the
first six months of 1995 due primarily to an increase in sales volumes,
attributable to increased demand and improved market share, partially
offset by declining copper prices. Although building wire market prices
have experienced very competitive conditions resulting primarily from
excess industry capacity, market demand continued to improve in the first
six months of 1996 on the strength of new non-residential construction
coupled with low distributor inventories. Sales of magnet wire during the
first half of 1996 improved from the comparable 1995 period due to
improved sales volumes partially offset by declining copper prices.
Improved sales volumes were attributable to increased demand for magnet
wire in the electric motor market as well as increased sales to
distributors. Voice and data communication wire sales for the first six
months of 1996 increased over the comparable period in 1995 due to
increased domestic sales volume and improved product pricing. Automotive
wire sales in the first half of 1996 were above the comparable 1995 period
due to improved sales volumes partially offset by the decrease in copper
prices.

Cost of goods sold for the first six months of 1996 was 9.1% higher than
the same period in 1995 due primarily to higher sales volumes and
increased sales attributable to the distribution operations acquired in
September 1995, partially offset by lower copper prices. The Company's
cost of goods sold as a percentage of net sales was 84.1% and 86.2% in the
first six months of 1996 and 1995, respectively. The cost of goods sold
percentage decrease resulted primarily from a change in product mix
associated with the distribution operations acquired in September 1995,
the impact of lower copper and other material costs, lower manufacturing
costs attributable to continued capital investments and higher
manufacturing volumes.

Selling and administrative expenses for the first six months of 1996
were 32.7% above the comparable 1995 period, due primarily to increased
overhead expenses attributable to the distribution operations acquired in
September 1995.

Interest expense in the first half of 1996 was $6.1 million higher than
the same period in 1995 due primarily to additional borrowings under the
Company's new credit facilities to effect the Redemption of all of
Holdings' outstanding Debentures. See "Liquidity, Capital Resources and
Financial Condition" under this caption. The Redemption resulted in a
reduction of Holdings' first half 1996 interest expense of 28.8% compared
to the first half of 1995.

Income tax expense was 43.9% of pretax income in the first six months of
1996 compared with 44.2% for the same period in 1995. The effective
income tax rate of the Company is higher than the approximate statutory
rate of 40% due to the effect of the amortization of excess of cost over
net assets acquired which is not deductible for income tax purposes.

The Company recorded net income of $14.1 million for the first six
months of 1996 compared to net income of $10.3 million for the comparable
period last year. The 1995 results include an extraordinary charge of
$3.0 million ($5.0 million before applicable tax benefit) for the write-

off of unamortized deferred debt expense associated with the Company s
former revolving credit agreement.

Liquidity, Capital Resources and Financial Condition

The Company's financial position at June 30, 1996 was highly leveraged.
The Company's aggregate notes payable to banks plus long-term debt was
$450.9 million and its stockholder's equity was $128.8 million. The
Company's ratio of debt to stockholder's equity was approximately 3.5 to 1
at June 30, 1996 and 3.7 to 1 at December 31, 1995.

In general, the Company requires liquidity for working capital, capital
expenditures, debt repayments, interest and taxes. Of particular
significance to the Company is its working capital requirements which
increase whenever it experiences strong incremental demand in its business
and/or a significant rise in copper prices. Historically, the Company has
satisfied its liquidity requirements through a combination of funds
generated from operating activities together with funds available under
its credit facilities. Based upon historical experience and the
availability of funds under its credit facilities, the Company expects
that its usual sources of liquidity will be sufficient to enable it to
meet its cash requirements for working capital, capital expenditures, debt
repayments, interest and taxes for 1996. As of June 30, 1996, the Company
was in compliance with all covenants under the agreements governing its
outstanding indebtedness.

In April 1995, in connection with the Redemption of all of Holdings'
outstanding Debentures at their principal amount of $272.9 million, the
Company terminated its previous credit agreement (the "Former Credit
Agreement") and entered into three new facilities: (i) a $260.0 million
revolving credit agreement, dated as of April 12, 1995 by and among the
Company, Holdings, the lenders named therein and Chemical Bank, as agent
(the "Revolving Credit Agreement"); (ii) a $60.0 million senior unsecured
note agreement, dated as of April 12, 1995 by and among the Company,
Holdings, as guarantor, the lenders named therein and Chemical Bank, as
administrative agent (the "Term Loan", together with the Revolving Credit
Agreement, the "Credit Facilities"); and (iii) a $25.0 million agreement
and lease dated as of April 12, 1995 by and between the Company and Mellon
Financial Services Corporation #3 (the "Sale and Leaseback Agreement" and
together with the Credit Facilities the "New Company Facilities"). The
Company recognized an extraordinary charge of approximately $3.0 million,
net of applicable tax benefit, in the second quarter 1995 for the write-
off of unamortized deferred debt expense in connection with the
termination of the Former Credit Agreement. Holdings is a party to each
of the Credit Facilities and has guaranteed the Company's obligations
under the Revolving Credit Agreement. Holdings has secured its
obligations pursuant to the guarantee of the Revolving Credit Agreement by
a pledge of all of the outstanding stock of the Company to the lending
banks.

On May 12, 1995 the Company borrowed the full amounts available under
the Term Loan and Sale and Leaseback Agreement. These funds, together
with available cash and borrowings under the Revolving Credit Agreement,
were paid to Holdings in the form of a cash dividend ($238.8 million) and
repayment of a portion of an intercompany liability ($34.1 million)
totaling $272.9 million. Holdings applied such funds to effect the
redemption of its Debentures, at 100% of their principal amount of $272.9
million, on May 15, 1995.

The Revolving Credit Agreement provides for up to $260.0 million in
revolving loans, subject to specified percentages of eligible assets,
reduced by outstanding borrowings under the Company's Canadian credit
agreement and unsecured bank lines of credit ($5.1 million and $15.0
million, respectively, at June 30, 1996), as described below. The
Revolving Credit Agreement also provides a $25.0 million letter of credit
subfacility. The Company's ability to borrow under the Revolving Credit
Agreement is restricted by the financial covenants contained therein as
well as those contained in the Term Loan and certain debt limitation
covenants contained in the indenture under which the 10% Senior Notes due
2003 (the "Senior Notes") were issued (the "Senior Note Indenture"). The
Revolving Credit Agreement terminates five years from its effective date
of April 12, 1995. The Revolving Credit Agreement loans bear floating
rates of interest, at the Company's option, at bank prime plus 1.25% or a
reserve adjusted Eurodollar rate (LIBOR) plus 2.25%. The effective
interest rate can be reduced by 0.25% to 1.25%, in 0.25% increments, if
certain specified financial conditions are achieved. Commitment fees
during the revolving loan period are .375% or 0.5% of the average daily
unused portion of the available credit based upon certain specified
financial conditions.

The Term Loan provides for an aggregate $60.0 million in term loans, and
is to be repaid in 20 equal quarterly installments, subject to the loan's
excess cash provision, beginning August 15, 1995 and ending May 15, 2000.
The Term Loan bears floating rates of interest at bank prime plus 2.75% or
LIBOR plus 3.75%. The Term Loan requires 50% of excess cash, as defined,
to be applied against the outstanding term loan balance. The excess cash
calculation for the year ended December 31, 1995 required the Company to
repay $12.4 million of the term loan. The payment was made in March 1996.
After the 1996 excess cash repayment, the remaining principal payments
will be made in 17 equal quarterly installments of $2.3 million. Amounts
repaid with respect to the excess cash provision may not be reborrowed.

The Sale and Leaseback Agreement provides $25.0 million for the sale and
leaseback of certain of the Company's fixed assets. The lease obligation
has a seven-year term expiring in May 2002. The principal component of
the rental is paid quarterly, with the amount of each of the first 27
payments equal to 2.5% of Lessor's cost of the equipment, and the balance
due at the final payment. The interest component is paid on the unpaid
principal balance and is calculated by Lessor at LIBOR plus 2.5%. The
effective interest rate can be reduced by 0.25% to 1.125% if certain
specified financial conditions are achieved.

The Revolving Credit Agreement restricts incurrence of indebtedness,
liens, guarantees, mergers, sales of assets, lease obligations, payment of
dividends, capital expenditures and investments and, with certain
exceptions, limits prepayment of indebtedness, including the Senior Notes.
Transactions with affiliates are also restricted subject to certain
exceptions. The Term Loan and the Senior Note Indenture prohibit, with
certain exceptions, the incurrence by the Company of any secured
indebtedness unless such indebtedness is equally and ratably secured. The
failure by Holdings or the Company to comply with any of the foregoing
covenants, if such failure is not timely cured or waived, could lead to
acceleration of the indebtedness covered by the applicable agreement and
to cross-defaults and cross-acceleration of other indebtedness of the
Company.

On May 30, 1996, a subsidiary of the Company entered into a $12.0
million (Canadian dollar) credit agreement by and between the subsidiary
and a Canadian chartered bank (the "Canadian Credit Agreement").
Borrowings are restricted to meeting the working capital requirements of
the subsidiary and are secured by the subsidiary's accounts receivable.
As of June 30, 1996, $5.1 million was outstanding under the Canadian
Credit Agreement and denoted as notes payable to banks in the Consolidated
Balance Sheets. The Canadian Credit Agreement bears interest at rates
similar to the Revolving Credit Agreement and terminates one year from its
effective date of May 30, 1996, although it may be extended for successive
one year periods upon the mutual consent of the subsidiary and lending
bank.

In addition, the Company also has uncommitted bank lines of credit which
provide for unsecured borrowings for working capital of up to $25.0
million of which $15.0 million was outstanding at June 30, 1996 and also
denoted as notes payable to banks in the Consolidated Balance Sheets.
These lines of credit bear interest at rates subject to agreement between
the Company and the lending banks. At June 30, 1996, such rates of
interest averaged 6.2%.

The Company has purchased interest rate cap protection through May 15,
1997 with respect to $150.0 million of debt with a strike rate of 10.0%
(three month LIBOR).

Net cash used for operating activities of the Company through the first
six months of 1996 was $12.6 million, compared to $8.0 million during the
same period in 1995. The increase in cash requirements was needed
primarily to fund higher inventory and accounts receivable balances
resulting from the nearly 12% increase in sales for the comparable
periods. Further, in 1995 other assets declined due to the collection of
a miscellaneous receivable. Partially offsetting these uses of funds was
the 1995 repayment of an intercompany liability with Holdings in the
amount of $34.1 million.

Capital expenditures of $9.3 million in the first six months of 1996
were $1.8 million less than in the comparable period in 1995. Major
projects in 1996 entail improving product quality, increasing
manufacturing productivity and expanding capacity. Capital expenditures
in 1996 are expected to be approximately 20% to 25% below 1995 and will be
used to complete modernization projects, expand capacity, enhance
efficiency and ensure continued compliance with regulatory requirements.
At June 30, 1996, approximately $6.1 million was committed to outside
vendors for capital expenditures. The Company's Credit Facilities impose
limitations on capital expenditures, business acquisitions and
investments. On March 25, 1996, the Company acquired the Canadian
building wire operations of BICC Phillips, Inc. The acquisition consisted
primarily of inventory and equipment and was financed from proceeds
received under the Company's Revolving Credit Agreement. Future cash
requirements of this operation are expected to be satisfied through the
Company's traditional sources of liquidity as previously discussed.

Regarding long-term liquidity issues, future capital expenditures are
anticipated to be at or below historical levels while the Senior Notes
mature in 2003 and are expected to be replaced by similar financing at
that time. The terms of the Sale and Leaseback Agreement include a
balloon payment of $8.1 million in 2002. The Company expects that its
traditional sources of liquidity will enable it to meet its long-term cash

requirements for working capital, capital expenditures, interest and
taxes, as well as its debt repayment obligations under both the Term Loan
and the Sale and Leaseback Agreement.

The Company's operations involve the use, disposal and clean-up of
certain substances regulated under environmental protection laws. The
Company has accrued $0.7 million for environmental remediation and
restoration costs. The accruals were based upon management's best
estimate of the Company's exposure in light of relevant available
information including the allocations and remedies set forth in applicable
consent decrees, third party estimates of remediation costs, the estimated
ability of other potentially responsible parties to pay their
proportionate share of remediation costs, the nature of each site and the
number of participating parties. Subject to the difficulty in estimating
future environmental costs, the Company expects that any sum it may have
to pay in connection with environmental matters in excess of the amounts
recorded or disclosed will not have a material adverse effect on its
financial position, results of operations or cash flows.

Considerations Relating To Holdings' Cash Obligations

Holdings is a holding company with no operations and has virtually no
assets other than its ownership of the outstanding common stock of the
Company. All of such stock is pledged, however, to the lenders under the
Revolving Credit Agreement. Accordingly, Holdings' ability to meet its
cash obligations is dependent on the Company's ability to pay dividends,
to loan, or otherwise advance or transfer funds to Holdings in amounts
sufficient to service Holdings' obligations.

The Company expects that it may make certain cash payments to Holdings
from time to time to the extent cash is available and to the extent it is
permitted under the terms of the Credit Facilities and the Senior Note
Indenture. Such payments may include (i) an amount necessary under the
tax sharing agreement between the Company and Holdings to enable Holdings
to pay the Company's taxes as if computed on an unconsolidated basis; (ii)
an annual management fee to an affiliate of BHLP of up to $1.0 million;
(iii) amounts necessary to repurchase management stockholders' shares of
Holdings' common stock under certain specified conditions; and (iv) other
amounts to meet ongoing expenses of Holdings (such amounts are considered
to be immaterial both individually and in the aggregate, however, because
Holdings has no operations, other than those conducted through the
Company, or employees). To the extent the Company makes any such
payments, it will do so out of operating cash flow, borrowings under the
Revolving Credit Agreement or other sources of funds it may obtain in the
future and only to the extent such payments are permitted under the terms
of the Credit Facilities and the Senior Note Indenture.

At June 30, 1996, Holdings had outstanding 2,189,176 shares of 15%
Series B Cumulative Redeemable Exchangeable Preferred Stock, Liquidation
Preference $25 Per Share, (the "Series B Preferred Stock"). The aggregate
liquidation preference of the Series B Preferred Stock was $54.7 million
at June 30, 1996. On July 3, 1996, Holdings called for redemption all of
its outstanding Series B Preferred Stock. The stock was redeemed at the
close of business on July 15, 1996, at a redemption price of $26.875 per
share, plus accrued and unpaid dividends through the redemption date of
$0.166 per share, for a total redemption price of $27.041 per share.

The aggregate amount paid upon redemption of the outstanding Series B
Preferred Stock, $59.2 million, was financed by Holdings through a private
offering of its common stock to certain of its current common stockholders
and their affiliates. This offering has not been registered under the
Securities Act of 1933, and such common stock may not be offered or sold
in the United States absent such registration or an applicable exemption
from registration.

General Economic Conditions and Inflation

The Company faces various economic risks ranging from an economic
downturn adversely impacting the Company's primary markets to marked
fluctuations in copper prices. In the short-term, pronounced changes in
the price of copper tend to affect gross profits within the building wire
product line because such changes affect raw material costs more quickly
than those changes can be reflected in the pricing of building wire
products. In the long-term, however, copper price changes have not had a
material adverse effect on gross profits because cost changes generally
have been passed through to customers over time. In addition, the Company
believes that its sensitivity to downturns in its primary markets is less
significant than it might otherwise be due to its diverse customer base
and its strategy of attempting to match its copper purchases with its
needs. The Company cannot predict either the continuation of current
economic conditions or future results of its operations in light thereof.

The Company believes that it is not particularly affected by inflation
except to the extent that the economy in general is thereby affected.
Should inflationary pressures drive costs higher, the Company believes
that general industry competitive price increases would sustain operating
results, although there can be no assurance that this will be the case.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Item Exhibit Index
---- -------------

27.1 Financial Data Schedule

(b) Reports on Form 8-K:

No Reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1996.

SIGNATURE

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

ESSEX GROUP, INC.
(Registrant)

August 12, 1996 /s/ David A. Owen
---------------------------------
David A. Owen
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)