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, 1997
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.
------------------------------------------------------
(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, 1997
-------------- ----------------------------
$.01 Par Value 100

ESSEX GROUP, INC.

FORM 10-Q INDEX

FOR THE QUARTER ENDED JUNE 30, 1997

Page No.

Part I. Financial Information

Item 1. Financial Statements

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

Consolidated Statements of Income . . . . . . . . . . . . . 5

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

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

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 11

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 19

Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, June 30,
1996 1997
In Thousands of Dollars, Except Per Share Data (Unaudited)
--------------------------------------------------------------------------------------

ASSETS

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . $ 2,899 $ 8,459
Accounts receivable (net of allowance of
$5,239 and $5,872) . . . . . . . . . . . . . . . . . 189,717 229,457
Inventories . . . . . . . . . . . . . . . . . . . . . 217,643 234,135
Other current assets . . . . . . . . . . . . . . . . . 12,147 9,404
-------- --------

Total current assets . . . . . . . . . . . . . 422,406 481,455

Property, plant and equipment, (net of accumulated
depreciation of $112,108 and $123,232) . . . . . . . 280,489 276,895
Excess of cost over net assets acquired (net of
accumulated amortization of $17,388 and $19,491) . . 126,619 125,044
Other intangible assets and deferred costs (net of
accumulated amortization of $4,501 and $4,003) . . . 7,417 6,134
Other assets . . . . . . . . . . . . . . . . . . . . . 4,294 6,150
-------- --------

$841,225 $895,678
======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED BALANCE SHEETS - Continued

December 31, June 30,
1996 1997
In Thousands of Dollars, Except Per Share Data (Unaudited)
--------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
Notes payable to banks . . . . . . . . . . . . . . . . $ 30,913 $ 28,607
Current portion of long-term debt . . . . . . . . . . 11,576 2,500
Accounts payable . . . . . . . . . . . . . . . . . . . 71,243 63,645
Accrued liabilities . . . . . . . . . . . . . . . . . 64,313 62,606

Deferred income taxes . . . . . . . . . . . . . . . . 15,151 14,080
Due to Essex International . . . . . . . . . . . . . . 5,153 60,204
-------- --------

Total current liabilities . . . . . . . . . . . 198,349 231,642

Long-term debt . . . . . . . . . . . . . . . . . . . . 421,340 402,500

Deferred income taxes . . . . . . . . . . . . . . . . 58,043 52,900
Other long-term liabilities . . . . . . . . . . . . . 12,427 14,800

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 . . . . . . . . . . . . . . . . . . 47,030 89,800
-------- --------

Total stockholder's equity . . . . . . . . . . 151,066 193,836
-------- --------

$841,225 $895,678
======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
In Thousands of Dollars 1996 1997 1996 1997
----------------------------------------------------------------------------------------------

Net sales . . . . . . . . . . . . . . . . . . $337,533 $453,331 $645,943 $864,109
Cost of goods sold . . . . . . . . . . . . . 284,642 365,621 543,293 696,528

Selling and administrative expenses . . . . . 29,331 38,405 57,450 75,311
Other income, net . . . . . . . . . . . . . . (251) (14) (197) (74)
-------- -------- -------- --------

Income from operations . . . . . . . . . . . 23,811 49,319 45,397 92,344
Interest expense . . . . . . . . . . . . . . 10,157 10,147 20,324 21,274
-------- -------- -------- --------

Income before income taxes . . . . . . . . . 13,654 39,172 25,073 71,070
Provision for income taxes . . . . . . . . . 6,000 15,700 11,000 28,300
-------- -------- -------- --------

Net income . . . . . . . . . . . . . . . . . $ 7,654 $ 23,472 $ 14,073 $ 42,770
======== ======== ======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended
June 30,
------------------------
In Thousands of Dollars 1996 1997
-------------------------------------------------------------------------------
OPERATING ACTIVITIES

Net income . . . . . . . . . . . . . . . . . . . . . $ 14,073 $ 42,770
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization . . . . . . . . . . . 16,942 16,699
Non cash interest expense . . . . . . . . . . . . . 1,171 1,211
Non cash pension expense . . . . . . . . . . . . . 1,387 1,899
Provision for losses on accounts receivable . . . . 673 846
Benefit for deferred income taxes . . . . . . . . . (1,675) (6,214)
Loss on disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . 243 454
Changes in operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . (21,036) (40,586)
Increase in inventories . . . . . . . . . . . . . (9,768) (16,492)
Decrease in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . (6,450) (9,317)
Net (increase) decrease in other assets and
liabilities . . . . . . . . . . . . . . . . . . . (9,874) 1,319
Increase in due to Essex International . . . . . . 1,738 9,029
-------- --------

NET CASH USED FOR OPERATING ACTIVITIES . . . . . . . (12,576) 1,618
-------- --------

INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . . (9,342) (14,156)
Proceeds from disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . . 337 3,198
Acquisitions . . . . . . . . . . . . . . . . . . . . (7,631) -
Other investments . . . . . . . . . . . . . . . . . (362) (900)
-------- --------

NET CASH USED FOR INVESTING ACTIVITIES . . . . . . . (16,998) (11,858)
-------- --------

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)

Six Months Ended
June 30,
------------------------
In Thousands of Dollars 1996 1997
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FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . 90,200 291,400
Repayment of long-term debt . . . . . . . . . . . . (72,146) (319,316)
Proceeds from notes payable to banks . . . . . . . . 265,688 309,634
Repayment of notes payable to banks . . . . . . . . (257,325) (311,940)
Proceeds from Essex International . . . . . . . . . - 46,022
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . 26,417 15,800
-------- --------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,157) 5,560

Cash and cash equivalents at beginning of period . . 3,157 2,899
-------- --------

Cash and cash equivalents at end of period . . . . . $ - $ 8,459
======== ========

See Notes to Consolidated Financial Statements

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

NOTE 1 ORGANIZATION

Essex Group, Inc. (the "Company") is a wholly owned subsidiary of Essex
International Inc. ("Essex International") (formerly known as BCP/Essex
Holdings Inc.). The principal asset of Essex International is all of the
outstanding common stock of the Company.

On May 1, 1997, Essex International completed its initial public
offering (the "Offering") of 6,546,700 shares of common stock, including
3,546,700 shares sold by certain existing shareholders. The net proceeds
to Essex International, after underwriting commissions and other
associated expenses, were approximately $46,022 of which $29,497 was used
to repay the senior unsecured note agreement and the remaining proceeds
were applied to the revolving credit facility. In connection with the
Offering, BCP/Essex Holdings Inc.'s name was changed to Essex
International Inc.

NOTE 2 BASIS OF PRESENTATION

The unaudited interim consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of Company management, necessary to present fairly the
consolidated financial position of the Company as of June 30, 1997, and
the consolidated results of operations for the three and six months ended
June 30, 1996 and 1997, respectively, and cash flows of the Company for
the six months ended June 30, 1996 and 1997, 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 filed
with the Securities and Exchange Commission for the year ended December
31, 1996.

NOTE 3 INVENTORIES

The components of inventories are as follows:

December 31, June 30,
1996 1997
------------- -------------

Finished goods . . . . . . . . . . . . $171,213 $200,784
Raw materials and work in process . . 56,840 56,760
-------- --------
228,053 257,544

LIFO reserve . . . . . . . . . . . . . (10,410) (23,409)
-------- --------
$217,643 $234,135
======== ========

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 $210,454 and $223,820 at December
31, 1996 and June 30, 1997, respectively.

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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

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 must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory
valuation.

NOTE 4 LONG-TERM DEBT

Long-term debt consists of the following:

December 31, June 30,
1996 1997
------------- -------------

10% Senior notes . . . . . . . . . . . $200,000 $200,000
Revolving loan . . . . . . . . . . . . 179,900 185,000
Lease obligation . . . . . . . . . . . 21,250 20,000
Term loan . . . . . . . . . . . . . . . 31,766 -
-------- --------
432,916 405,000
Less: current portion . . . . . . 11,576 2,500
-------- --------
$421,340 $402,500
======== ========

In connection with the Offering, the Company's revolving credit facility
was amended and restated. It continues to provide up to $370,000 in
revolving loans and maintains existing terms and conditions except that
revolving loans bear floating rates of interest, at the Company's option,
at bank prime plus 0.50% or a reserve adjusted Eurodollar rate ("LIBOR")
plus 1.50%. The spreads over the prime and LIBOR rates can be reduced to
0% and .375%, respectively, if a certain specified leverage ratio is
achieved. The average commitment fees during the revolving loan period
are between 0.125% to 0.375% of the average daily unused portion of the
available credit based upon certain financial ratios.

Through June 30, 1997, the Company fully complied with all of the
financial ratios and covenants under the agreements governing its
outstanding indebtedness.

NOTE 5 CONTINGENT LIABILITIES

There are various claims and pending legal proceedings against the
Company, including environmental matters and other matters arising out of
the ordinary course of its business. Pursuant to the 1988 acquisition of

the Company by Essex International 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 administrated 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

ESSEX GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In Thousands of Dollars

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. After consultation with
counsel, in the
opinion of management, the ultimate cost to the Company, exceeding amounts
provided, will not materially affect its consolidated financial position,
cash flows or results of operations. There can be no assurance, however,
that future developments will not alter this conclusion.

Since approximately 1990, the Company has been named as a defendant in a
number of product liability lawsuits brought by electricians and other
skilled tradesmen claiming injury from exposure to asbestos found in
electrical wire products produced a number of years ago. At June 30,
1997, the number of cases filed against the Company was 97 involving
approximately 410 claims. The Company's strategy is to defend these cases
vigorously. The Company believes that its liability, if any, in these
matters and the related defense costs will not have a material adverse
effect either individually or in the aggregate upon its business or
financial condition, cash flows or results of operations. There can be no
assurance, however, that future developments will not alter this
conclusion.

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

Introduction

In October 1992, Essex International was acquired (the "Acquisition") by
Bessemer Holdings, L.P. ("BHLP") (an affiliate and successor in interest
to Bessemer Capital Partners, L.P.), affiliates of Goldman, Sachs, & Co.
(collectively "Goldman Sachs"), affiliates of Donaldson, Lufkin & Jenrette
Securities Corporation (collectively "DLJ"), Chase Equity Associates
("CEA"), and certain present and former employees of the Company.

On May 1, 1997, Essex International completed its initial public
offering (the "Offering") of 6,546,700 shares of common stock, including
3,546,700 shares sold by certain existing shareholders. The net proceeds
to Essex International, after underwriting commissions and other
associated expenses, were approximately $46.0 million of which $29.5
million was used to repay the senior unsecured note agreement and the
remaining proceeds were applied to the revolving credit facility. In
connection with the Offering, BCP/Essex Holdings Inc.'s name was changed
to Essex International Inc.

The Company, founded in 1930, is a leading developer, manufacturer and
marketer of diversified electrical wire and cable products. Among the
Company's products are magnet wire for electromechanical devices such as
motors, transformers and electrical controls; building wire for
residential and commercial applications; copper voice and data
communication wire; automotive wire and specialty wiring assemblies for
automobiles and trucks and industrial wire for applications in appliances,
construction and recreational vehicles.

Results of Operations

Product Lines

The following table sets forth for the three and six months ended June
30, 1996 and 1997, respectively, the dollar amounts of sales for each of
the Company's major product lines:

Sales
-----------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1996 1997 1996 1997
------ ------ ------ ------
(In millions)

Building wire . . . . . . . . . . $122.3 $203.3 $214.6 $385.8
Magnet wire . . . . . . . . . . . 98.6 107.9 197.7 215.1

Communication wire . . . . . . . 41.4 50.7 85.6 89.3
Automotive wire . . . . . . . . . 25.4 24.2 49.1 46.0
Industrial wire . . . . . . . . . 16.4 35.1 31.5 65.0
Other (a) . . . . . . . . . . . . 33.4 32.1 67.4 62.9
------ ------ ------ ------

Total . . . . . . . . . . . . . . $337.5 $453.3 $645.9 $864.1
====== ====== ====== ======

------------

(a) Includes sales of third-party manufactured products, including
electrical insulating products, electric motors, motor repair parts and
pump seals sold through the Company's distribution business unit.

Three Months Ended June 30, 1997

Net sales for the second quarter 1997 were $453.3 million or 34.3%
higher than the comparable period in 1996, due to improved sales volume,
primarily attributable to the October 1996 acquisition of Triangle Wire
and Cable, Inc. ("Triangle"), and improved product pricing partially
offset by lower copper prices, the Company's principal raw material.
During the second quarter 1997, the average price of copper on the New
York Commodity Exchange, Inc. ("COMEX") was $1.14 versus $1.16 for the
comparable period in 1996, a 1.7% decline. Copper costs are generally
passed on to customers through product pricing. Second quarter 1997 sales
volume was at a record level and exceeded the second quarter 1996 by
26.2%. The Company's operating margin improved significantly during the
second quarter 1997 to 10.9% from the second quarter 1996 of 7.0%. This
improvement was due primarily to a significant improvement in building
wire product pricing, certain lower manufacturing costs resulting from
continued capital improvement programs and further cost reductions and
economies of scale derived from the acquired Triangle operations as well
as internal growth.

Building wire sales for the second quarter 1997 increased 66.2% as
compared to the second quarter 1996 due primarily to improved sales volume
and product pricing (without regard to copper costs). A substantial
portion of the increased sales volume was attributable to Triangle while
the remaining improvement was the result of increased demand within the
served markets. Building wire demand exhibited continued strength during
the second quarter 1997 resulting from new non-residential construction
and, the Company believes, a sustained expansion of the replacement and
upgrade segment of the market. Building wire operating margins during the
second quarter 1997 improved significantly over the comparable period in
1996 due to the above-mentioned strength of product demand, as well as
reduced costs and improved productivity as a result of Triangle. The
operations of Triangle have been integrated rapidly and effectively,
contributing to such productivity improvement.

Sales of magnet wire during the second quarter 1997 improved from the
comparable 1996 period due primarily to higher sales volume partially
offset by lower copper prices. Sales volume improvements were
attributable to increased demand for magnet wire in most served markets
due, in part, to growth in the domestic economy and greater use of magnet
wire for increased energy efficiency in electric motors. The additional
sales volume coupled with lower production costs provided improved magnet

wire operating margins during the second quarter 1997 as compared to the
second quarter 1996.

Communication wire sales for the second quarter 1997 were above the
comparable period in 1996 due to higher outside plant ("OSP") and data
communication wire sales partially offset by reduced product pricing
(without regard to copper costs). OSP sales volume was 33.3% higher than
the second quarter 1996 which the Company believes is attributable to
improved business conditions within this segment of the copper
communication cable business. Second quarter 1997 data communication wire
sales volume increased 21.3% as compared to the same period in 1996,
reflecting increased product demand for expanding markets such as local
area networks ("LANs"), Internet connectivity and other premise
applications. Second quarter 1997 communication wire operating margins
decreased from the second quarter 1996 due to competitive pricing pressure
in high end data communication wire partially offset by higher sales
volume.

Automotive wire sales in the second quarter 1997 were below those in the
comparable period in 1996 due primarily to reduced copper prices.
Automotive operating margins improved due to the reduction of overhead
expenses.

Industrial wire sales in the second quarter 1997 were more than double
the second quarter 1996 due primarily to increased sales volume
attributable to Triangle. Industrial wire operating margins for the
second quarter 1997 improved from the comparable period in 1996 due to
higher sales volume and lower production costs partially offset by
incremental selling and administrative costs associated with Triangle.

Other sales in the second quarter 1997 decreased from the comparable
period in 1996. Distribution business unit sales of third-party
manufactured products, primarily within the motor repair segment,
decreased primarily due to unusually mild seasonal weather conditions
which have necessitated fewer repairs for motors, transformers and pumps.

Cost of goods sold for the second quarter 1997 was 28.4% higher than the
same period in 1996 due primarily to higher sales volume partially offset
by lower copper prices. The Company's cost of goods sold as a percentage
of net sales was 84.3% and 80.7% in the second quarter 1996 and 1997,
respectively. The cost of goods sold percentage decrease resulted
primarily from the impact of improved building wire product pricing, as
well as certain lower manufacturing costs attributable to continued
capital investments. Also, the operations of Triangle have been
integrated rapidly and effectively, and have driven substantial
improvements in productivity.

Selling and administrative expenses for the second quarter 1997 were
30.9% above the comparable 1996 period, due primarily to incremental
commission, selling and warehouse expenses associated with Triangle.
However, selling and administrative expenses, as a percentage of sales,
were 8.5% in the second quarter of 1997, compared to 8.7% in the same
period in 1996, reflecting the elimination of certain other Triangle
general and administrative expenses and economies of scale derived from
the acquired Triangle operations as well as internal growth.

Interest expense in the second quarter 1997 was essentially unchanged
from 1996, as incremental borrowing costs to finance the Triangle

acquisition were offset through reduced debt levels attributable to the
proceeds received from the Offering and lower rates of interest on the
Company's outstanding debt.

Income tax expense was 40.1% of pretax income in the second quarter 1997
compared with 43.9% for the same period in 1996 due to the increase in
pretax income reducing the impact of the amortization of excess cost over
net assets acquired, which is not deductible for income tax purposes.

Six Months Ended June 30, 1997

Net sales for the first six months of 1997 were $864.1 million or 33.8%
higher than the comparable period in 1996, due to improved sales volume,
primarily attributable to Triangle, and improved product pricing partially
offset by lower copper prices, the Company's principal raw material.
During the first half of 1997, the average price of COMEX copper was $1.13
versus $1.17 for the comparable period in 1996, a 3.4% decline. Copper
costs are generally passed on to customers through product pricing. First
half 1997 sales volume was at record levels and exceeded the first half of
1996 by 30.5%. The Company's operating margin improved significantly
during the first six months of 1997 to 10.7% from the first six months of
1996 of 7.0%. This improvement was due primarily to a significant
improvement in building wire product pricing, certain lower manufacturing
costs resulting from continued capital improvement programs and further
cost reductions and economies of scale derived from the acquired Triangle
operations as well as internal growth.

Building wire sales for the first six months of 1997 increased 79.8% as
compared to the same period in 1996 due primarily to improved sales volume
and product pricing (without regard to copper costs) partially offset by a
decline in copper prices. A substantial portion of the increased sales
volume was attributable to Triangle while the remaining improvement was
the result of increased demand within the served markets. Building wire
demand has exhibited continued strength during the first half of 1997
resulting from new non-residential construction and, the Company believes,
a sustained expansion of the replacement and upgrade segment of the
market. Building wire operating margins during the first half of 1997
improved significantly over the comparable period in 1996 due to the
above-mentioned strength of product demand, as well as reduced costs and
improved productivity as a result of Triangle.

Sales of magnet wire during the first six months of 1997 improved from
the comparable 1996 period due primarily to higher sales volume partially
offset by lower copper prices. Sales volume improvements were primarily
attributable to greater magnet wire consumption for devices containing
electric motors in the home and motor vehicles, along with increased
consumer and governmental pressure for higher energy efficiency from these
devices. Higher energy efficiency requires materially more magnet wire.
The additional sales volume coupled with lower production costs provided
improved magnet wire operating margins during the first half of 1997 as
compared to the first half of 1996.

Communication wire sales for the first six months of 1997 were above the
comparable period in 1996 due to higher OSP and data communication wire
sales partially offset by reduced copper prices. OSP sales volume for the
first six months of 1997 approximated the comparable period in 1996
although the Company has experienced a recent surge in demand which the
Company believes is attributable to improved business conditions within

this segment of the copper communication cable market. First half 1997
data communication wire sales increased 11.6% with volume 18.8% higher as
compared to the same period in 1996, reflecting increased product demand
for expanding markets such as LANs, Internet connectivity and other
premise applications. First half 1997 communication wire operating
margins declined from the comparable period in 1996 due to the completion
in 1996 of certain supply contracts which were not repeated in 1997
coupled with competitive pricing pressure in high end data communication
wire.

Automotive wire sales in the first six months of 1997 were below those
in the comparable period in 1996 due primarily to reduced copper prices.
Operating margins improved due to reduced overhead expenses. Although the
Company believes North American automotive and light truck production for
1997 will approximate 1996 levels, it expects growth in sales of its
automotive wire for the remainder of 1997 resulting from several contracts
with both new and existing customers.

Industrial wire sales in the first half of 1997 were more than double
those in the comparable period in 1996 due to an increase in sales volume
partially offset by the decline in copper prices. The increase in sales
volume was primarily due to incremental sales attributable to Triangle.
Industrial wire operating margins for the first half of 1997 improved from
the comparable period in 1996 due to higher sales volume partially offset
by incremental selling and administrative costs associated with Triangle.

Other sales in the first six months of 1997 decreased from the
comparable period in 1996. Distribution business unit sales of third-
party manufactured products, primarily within the motor repair segment,
decreased primarily due to unusually mild seasonal weather conditions
which have necessitated fewer repairs for motors, transformers and pumps.

Cost of goods sold for the first six months of 1997 was 28.2% higher
than the same period in 1996 due primarily to higher sales volume
partially offset by lower copper prices. The Company's cost of goods sold
as a percentage of net sales was 84.1% and 80.6% in the first six months
of 1996 and 1997, respectively. The cost of goods sold percentage
decrease resulted primarily from the impact of improved building wire
product pricing as well as certain lower manufacturing costs attributable
to continued capital investments. Also, the operations of Triangle have
been integrated rapidly and effectively, and have driven substantial
improvements in productivity.

Selling and administrative expenses for the first half of 1997 were
31.1% above the comparable 1996 period due primarily to incremental
commission, selling and warehouse expenses associated with Triangle.
However, selling and administrative expenses, as a percentage of sales,
were 8.7% in the first half of 1997, compared to 8.9% for the same period
in 1996, reflecting the elimination of certain other Triangle general and
administrative expenses and economies of scale derived from the acquired
Triangle operations as well as internal growth.

Interest expense in the first six months of 1997 was 4.7% higher than
the same period in 1996, as incremental borrowing costs to finance the
Triangle acquisition were partially offset through reduced debt levels
attributable to the proceeds received from the Offering and lower rates of
interest on the Company's outstanding debt.

Income tax expense was 39.8% of pretax income in the first half 1997
compared with 43.9% for the same period in 1996 due to the increase in
pretax income reducing the impact of the amortization of excess cost over
net assets acquired, which is not deductible for income tax purposes.

Liquidity, Capital Resources and Financial Condition

General

The Company's aggregate notes payable to banks and long-term debt at
June 30, 1997 was $433.6 million, and its stockholder's equity was $193.8
million. The resulting ratio of debt to stockholder's equity improved to
2.2 to 1 from 3.1 to 1 at December 31, 1996. As of June 30, 1997, the
Company was in compliance with all covenants under the agreements
governing its outstanding indebtedness.

Credit Facilities and Lines of Credit

The Company maintains the following credit facilities: (i) a $370.0
million revolving credit agreement dated as of October 31, 1996, by and
among the Company, Essex International, the Lenders named therein, and The
Chase Manhattan Bank, as administrative agent (the "Revolving Credit
Agreement") which was amended and restated effective April 23, 1997 (the
"Restated Credit Agreement"); (ii) 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");
(iii) a $12.0 million (Canadian dollar) credit agreement by and between a
subsidiary of the Company and the Bank of Montreal (the "Canadian Credit
Agreement"); and (iv) bank lines of credit with various lending banks
which provide for unsecured borrowings for working capital of up to $40.0
million.

The Restated Credit Agreement, which terminates October 31, 2001,
provides for up to $370.0 million in revolving loans, subject to specified
percentages of eligible assets and reduced by borrowings under the
Canadian Credit Agreement and unsecured bank lines of credit ($7.6 million
and $21.0 million outstanding, at June 30, 1997, respectively). The
Restated Credit Agreement also provides a $25.0 million letter of credit
subfacility. Outstanding borrowings bear floating rates of interest, at
the Company's option, at bank prime plus 0.50% or a reserve adjusted
Eurodollar rate ("LIBOR") plus 1.50%. The spreads over the prime and
LIBOR rates can be reduced to 0% and .375%, respectively, if a certain
specified leverage ratio is achieved. Based upon the specified leverage
ratio at June 30, 1997, the Company's floating rate of interest for
borrowings under the Restated Credit Agreement is LIBOR plus 0.5%. The
average commitment fees during the revolving loan period are between
0.125% to 0.375% of the average daily unused portion of the available
credit based upon certain financial ratios. Indebtedness under the
Restated Credit Agreement is guaranteed by Essex International 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 of the Company and its subsidiaries. The

Company's ability to borrow under the Restated Credit Agreement is
restricted by the financial covenants contained therein as well as by
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"). As of June 30, 1997, the Company had $109.4
million of undrawn capacity based upon a borrowing base of $323.0 million,
reduced by outstanding borrowings under: (i) the Restated Credit
Agreement ($185.0 million), (ii) unsecured bank lines of credit ($21.0
million) and (iii) the Canadian Credit Agreement ($7.6 million).

The Sale and Leaseback Agreement provided $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.

As of June 30, 1997, $7.6 million (U.S. dollars) was outstanding under
the Canadian Credit Agreement and denoted as notes payable to banks in the
Company's Consolidated Balance Sheets. Borrowings are secured by the
subsidiary's accounts receivable. Interest rates for borrowings under the
Canadian Credit Agreement are based upon Canadian market rates for
banker's acceptances with spreads similar to the Restated Credit
Agreement. The Canadian Credit Agreement terminates on May 30, 1998,
although it may be extended for successive one-year periods upon the
mutual consent of the subsidiary and the Bank of Montreal.

The Company had $21.0 million outstanding of unsecured bank lines of
credit as of June 30, 1997. Such amount is denoted as notes payable to
banks in the Company's Consolidated Balance Sheets. These lines of credit
bear interest at rates subject to agreement between the Company and the
lending banks.

Cash Flow and Working Capital

In general, the Company requires liquidity for working capital, capital
expenditures, debt repayments, interest and taxes. Of particular
significance to the Company are its working capital requirements which
increase whenever it experiences strong incremental demand in its business
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 the reminder of 1997.

Operating Activities. Net cash provided by operating activities in the
first half of 1997 was $47.6 million, compared to $12.6 million used for
operating activities during the same period in 1996. The decrease in cash
requirements was primarily the result of higher net income and an increase
in a intercompany liability with Essex International, partially offset by
higher accounts receivable and inventories associated with the Company's
sales growth.

Investing Activities. Capital expenditures of $14.2 million in the
first six months of 1997 were $4.8 million more than the comparable period
in 1996. Capital expenditures in 1997 are expected to be approximately
40% above 1996 levels and will be used for modernization projects to
enhance efficiency, to support the newly acquired Triangle facilities and
equipment and to expand capacity. At June 30, 1997, approximately $10.5
million was committed to outside vendors for capital expenditures. The
Restated Credit Agreement imposes limitations on capital expenditures,
business acquisitions and investments.

Financing Activities. The net proceeds of the Offering, after
underwriting commissions and other associated expenses, were approximately
$46.0 million, of which $29.5 million was used to repay the senior
unsecured note agreement dated as of April 17, 1995, by and among the
Company, Essex International, as guarantor, the lenders named therein and
The Chase Manhattan Bank, as administrative agent (the "Term Loan") and
the remaining proceeds were applied to the Company's revolving credit
facility. The net proceeds were received from Essex International in the
form of an intercompany transfer.

Considerations Relating To Holdings' Cash Obligations

Essex International is a holding company with no operations and
virtually no assets other than its ownership of all the outstanding common
stock of the Company. All such stock is pledged, however, to the lenders
under the Restated Credit Agreement. Accordingly, Essex International's
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 Essex
International in amounts sufficient to service Essex International's cash
obligations.

Essex International expects that it may receive certain cash payments
from the Company from time to time to the extent cash is available and to
the extent it is permitted under the terms of the Restated Credit
Agreement and the Senior Note Indenture. Such payments may include (i) an
amount necessary under the tax sharing agreement between Essex
International and the Company to enable Essex International 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; and
(iii) certain other amounts to meet ongoing expenses of Essex
International (such amounts are considered to be immaterial both
individually and in the aggregate, however, because Essex International
has no operations, other than those conducted through the Company, or
employees thereof). To the extent Essex International makes any such
payments, it will do so out of operating cash flow, borrowings under the
Restated Credit Agreement or other sources of funds it may obtain in the
future subject to the terms of the Restated Credit Agreement and the
Senior Note Indenture.

Long-Term Liquidity Considerations

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 the
Sale and Leaseback Agreement.

The Company's operations involve the use, disposal and cleanup of
certain substances regulated under environmental protection laws. The
Company has accrued $0.9 million for environmental remediation and
restoration costs. The accrual is based upon management's 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,
if any, will not have a material adverse effect on its financial position,
results of operations or cash flows.

General Economic Conditions and Inflation

Although net sales are heavily influenced by the price of copper, the
Company's major raw material, the Company's profitability is generally not

significantly affected by changes in copper prices because the Company
generally has been able to pass on its cost of copper to its customers and
the Company attempts to match its copper purchases with its production
requirements, thereby minimizing copper cathode and rod inventories. In
the short term, however, pronounced changes in the price of copper may
tend to affect gross profits within the building wire product line because
such changes affect cost of goods sold more quickly than those changes can
be reflected in the pricing of building wire products.

The Company believes that it is only affected by inflation to the extent
that the economy in general is affected. Should inflationary pressures
drive costs higher, the Company believes that general industry price
increases would sustain operating results, although there can be no
assurance that this will be the case. 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,
broad product line and its strategy of attempting to match its copper
purchases with its needs.

Information Regarding Forward Looking Statements

This report contains various forward-looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to have been correct. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those expected. Among
the key factors that may have a direct bearing on the Company's operating
results are fluctuations in the economy, demand for the Company's
products, the impact of price competition and fluctuations in the price of
copper.

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, 1997.

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, 1997 /s/ David A. Owen
---------------------------------
David A. Owen
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)