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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission File No. 1-12983
GENERAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-1398235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 Tesseneer Drive
Highland Heights, KY 41076
(Address of principal executive offices)
(606) 572-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 26, 1998
----- -------------------------------
Common Stock, $.01 Par Value 36,816,173
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GENERAL CABLE CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
PART I - FINANCIAL INFORMATION Page
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Item 1. Consolidated Financial Statements
Statements of Income -
For the three and nine months ended September 30, 1998
and 1997 3
Balance Sheets -
September 30, 1998 and December 31, 1997 4
Statements of Cash Flows -
For the nine months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
------- ------- ------- -------
Net sales $ 304.5 $ 306.1 $ 889.8 $ 849.3
Cost of sales 235.2 244.4 696.6 683.8
------- ------- ------- -------
Gross profit 69.3 61.7 193.2 165.5
Selling, general and administrative expenses 29.6 29.6 94.2 89.6
------- ------- ------- -------
Operating income 39.7 32.1 99.0 75.9
------- ------- ------- -------
Interest income (expense):
Interest expense (4.2) (4.4) (12.2) (14.2)
Interest income 0.2 0.3 0.7 0.6
------- ------- ------- -------
(4.0) (4.1) (11.5) (13.6)
------- ------- ------- -------
Earnings before income taxes 35.7 28.0 87.5 62.3
Income tax provision (13.6) (10.7) (33.8) (24.4)
------- ------- ------- -------
Net income $ 22.1 $ 17.3 $ 53.7 $ 37.9
======= ======= ======= =======
Earnings per common share $ 0.60 $ 0.47 $ 1.46 $ 1.04
======= ======= ======= =======
Weighted average common shares 36.8 36.8 36.8 36.6
======= ======= ======= =======
Earnings per common share-assuming dilution $ 0.59 $ 0.46 $ 1.43 $ 1.03
======= ======= ======= =======
Weighted average common shares-assuming
dilution 37.5 37.4 37.6 36.8
======= ======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
ASSETS September 30, December 31,
- ------ 1998 1997
------------- ------------
(unaudited)
Assets:
Cash $ 5.6 $ 4.2
Receivables, net 181.8 162.4
Inventories 178.8 163.6
Deferred income taxes 20.1 20.9
Prepaid expenses and other 11.4 10.7
------ ------
Total current assets 397.7 361.8
Property, plant and equipment, net 192.9 155.6
Deferred income taxes 27.4 29.2
Other non-current assets 17.1 17.1
------ ------
Total assets $635.1 $563.7
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 87.5 $ 80.5
Accrued liabilities 59.8 55.4
------- -------
Total current liabilities 147.3 135.9
Long-term debt 253.5 238.5
Other liabilities 61.6 66.9
------ ------
Total liabilities 462.4 441.3
------ ------
Shareholders' Equity:
Common stock, $0.01 par value:
Issued and outstanding shares:
September 30, 1998 - 36,814,254
December 31, 1997 - 36,773,139 0.4 0.4
Additional paid-in capital 84.3 83.3
Retained earnings 88.0 38.7
------ ------
Total shareholders' equity 172.7 122.4
------ ------
Total liabilities and shareholders' equity $635.1 $563.7
====== ======
See accompanying Notes to Consolidated Financial Statements.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
Nine Months Ended
September 30,
-----------------------
1998 1997
------- -------
Cash flows of operating activities:
Net income $ 53.7 $ 37.9
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 13.3 10.1
Deferred income taxes 2.6 1.5
Changes in operating assets and liabilities:
Increase in receivables (19.4) (51.2)
(Increase) decrease in inventories (15.2) 0.8
(Increase) decrease in other assets (3.0) 0.4
Increase in accounts payable,
accrued and other liabilities 6.5 15.4
------- -------
Net cash flows of operating activities 38.5 14.9
------- -------
Cash flows of investing activities:
Capital expenditures (52.0) (19.1)
Proceeds from the sale of property 3.5 4.9
Other, net 0.6 (2.1)
------- -------
Net cash flows of investing activities (47.9) (16.3)
------- -------
Cash flows of financing activities:
Dividends paid (4.2) (42.6)
Net borrowings of revolving credit facility 15.6 248.0
Repayment of related party notes payable - (195.8)
Repayment of short-term debt - (2.0)
Repayment of other long-term debt (0.6) (0.6)
------- -------
Net cash flows of financing activities 10.8 7.0
------- -------
Increase in cash 1.4 5.6
Cash-beginning of period 4.2 1.9
------- -------
Cash-end of period $ 5.6 $ 7.5
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SUPPLEMENTAL INFORMATION
Income taxes paid, net of refunds $ 22.6 $ 14.1
======= =======
Interest paid $ 9.3 $ 12.4
======= =======
NONCASH ACTIVITIES
Issuance of Restricted Stock $ 1.0 $ 5.6
======= =======
See accompanying Notes to Consolidated Financial Statements.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the accounts of General Cable Corporation and its wholly owned
subsidiaries. All transactions and balances among the consolidated companies
have been eliminated. Certain reclassifications have been made to the prior year
to conform to the current year's presentation.
BASIS OF PRESENTATION The accompanying unaudited consolidated
financial statements of General Cable Corporation and Subsidiaries have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Results of operations for the three and nine
months ended September 30, 1998 are not necessarily indicative of results that
may be expected for the full year. These financial statements should be read in
conjunction with the audited financial statements and notes thereto in General
Cable's 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 30, 1998.
NEW STANDARDS In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS No.
130 was adopted during the first quarter of 1998. However, management believes
the disclosure provisions of SFAS No. 130 are not material to its consolidated
financial statements. General Cable will be required to adopt SFAS No. 131
during 1998. Adoption of SFAS No. 131 will not impact the reported results of
operations or financial position of General Cable. However, General Cable is
planning to disclose additional information related to the Electrical and
Communications Groups when SFAS No. 131 is implemented. During 1998 two
additional standards have been issued, SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" and SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". General Cable will be
required to adopt SFAS No. 132 during 1998 and believes that it will not impact
the reported results of operations or financial position of the Company;
however, additional disclosures may be required. General Cable will be required
to adopt SFAS No. 133 no later than January 1, 2000. Management has not yet
analyzed the impact of SFAS No. 133 on its consolidated financial statements.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVENTORIES
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Inventories consisted of the following (in millions):
September 30, December 31,
1998 1997
------ ------
Raw materials $ 22.2 $ 20.7
Work-in-progress 25.6 28.4
Finished goods 131.0 114.5
------ ------
Total $178.8 $163.6
====== ======
General Cable values only the copper component of its inventories
using the last-in/first-out (LIFO) method. At September 30, 1998 and December
31, 1997, $73.6 million and $70.7 million, respectively, of inventories were
valued using the LIFO method. Approximate replacement cost of inventories valued
using the LIFO method totaled $58.9 million at September 30, 1998 and $59.3
million at December 31, 1997. An actual valuation of inventory under the LIFO
method can be made only at the end of each year based on the inventory levels
and costs at that time. Accordingly, interim LIFO calculations are necessarily
based on management's estimates of expected year-end inventory levels and costs.
Because these are subject to many variables beyond management's control, interim
results are subject to the final year-end LIFO inventory valuation.
3. SHAREHOLDERS' EQUITY
--------------------
Changes in shareholders' equity were as follows (in millions):
Additional
Common Paid-In Retained
Stock Capital Earnings Total
----- ------- -------- -----
Balance, December 31, 1997 $ 0.4 $83.3 $ 38.7 $122.4
Net income - - 53.7 53.7
Dividends - - (4.2) (4.2)
Issuance of Restricted Stock - 1.0 - 1.0
Other - - (0.2) (0.2)
------ ----- ------ ------
Balance, September 30, 1998 $ 0.4 $84.3 $ 88.0 $172.7
====== ===== ====== ======
On April 17, 1998, the Board of Directors approved a three-for-two stock
split on the Company's Common Stock, effected in the form of a stock dividend
paid on May 14, 1998 to shareholders of record on April 28, 1998. An amount
equal to the par value of the common shares issued was transferred from
additional paid-in capital to the common stock account. The effect of the stock
split has been retroactively reflected as of December 31, 1997 in the
Consolidated Balance Sheet and related footnotes. All references to number of
shares and to per share information have been adjusted to reflect the stock
split on a retroactive basis.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. EARNINGS PER SHARE
------------------
A reconciliation of the numerator and denominator of earnings per common
share to earnings per common share assuming dilution is as follows (in
millions):
Three Months Ended September 30,
---------------------------------------------------------------------------------
1998 1997
------------------------------------ --------------------------------------
Per Share Per Share
Income(1) Shares(2) Amount Income(1) Shares(2) Amount
--------- --------- ------ --------- --------- ------
Earnings per common share $22.1 36.8 $0.60 $17.3 36.8 $0.47
===== =====
Dilutive effect of stock options - 0.7 - 0.6
----- ---- ----- ----
Earnings per common share-
Assuming dilution $22.1 37.5 $0.59 $17.3 37.4 $0.46
===== ==== ===== ===== ==== =====
Nine Months Ended September 30,
---------------------------------------------------------------------------------
1998 1997
----------------------------------- ---------------------------------------
Per Share Per Share
Income(1) Shares(2) Amount Income(1) Shares(2) Amount
--------- --------- ------ --------- --------- ------
Earnings per common share $53.7 36.8 $1.46 $37.9 36.6 $1.04
Dilutive effect of stock options - 0.8 - 0.2
----- ---- ----- ----
Earnings per common share-
Assuming dilution $53.7 37.6 $1.43 $37.9 36.8 $1.03
===== ==== ===== ===== ==== =====
(1) Numerator
(2) Denominator
5. SUBSEQUENT EVENT
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On October 1, 1998, General Cable announced it had entered an agreement
in principle to acquire all the capital stock of Industria Venezolana de Cables
Electricos, C.A. and related companies ("Cabel") from its shareholders. Cabel is
a producer of electrical and communications wire and cable in Venezuela.
Consummation of the transaction is subject to conditions, including negotiation
and execution of definitive acquisition agreements, completion of due diligence
and receipt of corporate and government approvals. It is intended that the
transaction will close before the end of the year.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
General Cable is a leader in the development, design, manufacture,
marketing and distribution of copper, aluminum and optical fiber wire and cable
products for the communications and electrical markets. Communications wire and
cable transmits low voltage signals for voice, data, video and control
applications. Electrical wire and cable conducts electrical current for power
and control applications. General Cable believes that its principal competitive
strengths include its breadth of product line; brand recognition; distribution
and logistics; customer relationships, sales and service; and improved operating
efficiency.
All statements, other than statements of historical fact, included in
this report, including the statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations", are, or may be
considered, forward-looking statements under Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. Important
factors that could cause results to differ materially from those discussed in
the forward-looking statements (Forward Statements) include: price competition,
particularly in certain segments of the building wire and cordset markets, and
other competitive pressures; general economic conditions, particularly those
affecting the non-residential construction industry; the Company's ability to
retain key customers and distributors; the Company's ability to increase
manufacturing capacity; the cost of raw materials, including copper; the level
of growth in demand for products serving various segments of the communications
markets; the Company's ability to introduce successfully new or enhanced
products; the impact of qualified technological changes; the Company's ability
to achieve productivity improvements; and the impact of changes in industry
standards and the regulatory environment. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting for the
Company are qualified in their entirety by the Forward Statements.
General Cable's reported net sales are directly influenced by the price
of copper. Copper prices have been volatile, with the copper cathode daily
selling price on the COMEX averaging $0.75 per pound during the third quarter
and $0.77 during the first nine months of 1998, $1.02 per pound during the third
quarter of 1997 and $1.09 per pound during the first nine months of 1997.
However, as a result of a number of practices intended to match copper purchases
with sales, the Company's overall profitability has not been significantly
affected by changing copper prices. General Cable generally passes changes in
copper prices along to its customers, although there are timing delays of
varying lengths depending upon the type of product, competitive conditions and
particular customer arrangements. General Cable does not engage in speculative
metals trading or other speculative activities. Also, the Company does not
engage in activities to hedge the underlying value of its copper inventory.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
General Cable generally experiences certain seasonal trends in sales and
cash flow. Larger amounts of cash are generally required during the first and
third quarters of the year to build inventories in anticipation of higher demand
during the spring and summer, when construction activity increases. In general,
receivables related to higher sales activity during the spring and summer are
collected in the third and fourth quarters of the year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1997
General Cable continued to achieve record-setting results in earnings per
share in the third quarter of 1998. Fully diluted earnings per share increased
28% to $0.59, the best quarterly earnings in the Company's history, up from
$0.46 per share in the third quarter of 1997. Earnings increased significantly
as a result of higher sales volume and the results of the Company's continuing
productivity improvement initiatives.
After adjusting 1997 net sales to reflect the $0.27 decrease in the
average monthly Comex price per pound of copper in the third quarter of 1998,
net sales increased 9% to $304.5 million, up from $278.6 million for the same
period in 1997. The increase in copper-adjusted net sales reflected a 5%
increase in the copper-adjusted net sales of Electrical products and a 16%
increase in the copper-adjusted net sales of Communications products. Net sales
on an as reported basis decreased from $306.1 million in the third quarter of
1997 to $304.5 million in the third quarter of 1998 reflecting the lower average
price per pound of copper in the third quarter of 1998.
The growth in Communications products resulted from higher sales of
plastic insulated cable (PIC) to a broad base of Local Telephone Exchange
Carrier and distribution customers which increased 19% on a copper-adjusted
basis. The significant sales growth resulted in part from higher sales of PIC to
commercial distributors, primarily Graybar and Power & Telephone Supply Company.
Sales of telecommunications products to commercial distributors in the third
quarter of 1998 were double the sales in the same period of 1997. In addition,
copper-adjusted net sales of data communications products rose almost 12%, with
the largest increases coming in General Cable's high performing enhanced
category cables which increased almost 70% versus last year. Preferred customer
partnering continued to prove to be an effective strategy with sales to the
Company's largest data communications customer up 33% in the quarter compared to
the same period last year. The ongoing proliferation of personal computers,
growth in Internet use, expansion of local and wide area networks, high-speed
modems and access lines, and advanced voice, data and video applications
continue to drive sales growth in communications products.
The growth in Electrical products sales in the third quarter of 1998
compared to the same period in 1997 was primarily due to increased volume of
building wire, industrial power and control products, and consumer cordsets.
Consumer cordset products were up 26% in the third quarter with increased sales
to both TruServ and ACE Hardware. Cordset sales to The Home Depot also grew,
primarily due to the success of General Cable's new line of Romex(R) Brand
Contractor Tough(R) extension cords.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Selling, general and administrative expenses were $29.6 million in both
the third quarter of 1998 and 1997. The Company continued to leverage its sales
growth as evidenced by the fact that selling, general and administrative
expenses as a percentage of copper-adjusted net sales declined from 10.6% in the
third quarter of 1997, to 9.7% in the third quarter of 1998.
Operating profit increased 24% to $39.7 million in the third quarter of
1998 from $32.1 million in the third quarter of 1997. The substantial
improvement in operating profit reflects the 9% increase in copper-adjusted
sales, a reduction in costs associated with outsourcing less PIC cable in the
third quarter of 1998 compared to the third quarter of 1997 and an 6.3%
productivity improvement led by manufacturing cost reductions. The reduction in
PIC cable outsourcing was achieved despite an increase of more than 21% in PIC
cable sales volume by the timely, planned launch of new PIC cable production
capacity throughout the first nine months of 1998. The manufacturing cost
reductions are the result of process improvements to reduce material costs and
usage, and improved throughput. These improvements in operating profit were
partially offset by lower building wire pricing in the third quarter; the price
premium over copper cost was down 8% versus last year.
Net interest expense was $4.0 million in the third quarter of 1998
compared to $4.1 million in the third quarter of 1997.
The effective income tax rate for the third quarter of 1998 was 38.1%
compared to 38.2% for the third quarter of 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1997
General Cable's continued record-setting results during the first nine
months of 1998 included substantial growth in earnings per share, return on net
assets and copper-adjusted net sales. Fully diluted earnings per share increased
39% to $1.43, up from $1.03 per share in the first nine months of 1997. The
significant improvement was fueled by substantially higher sales volume and
continuing productivity improvement initiatives. In addition, return on net
assets for the first nine months of 1998 of 18.4% was up 3.6 points over the
same period in the prior year.
Net sales for the nine months ended September 30, 1998 increased $40.5
million, or 5% to $889.8 million from net sales of $849.3 million for the same
period in 1997 despite a $0.32 decrease in the average monthly COMEX price per
pound of copper in the nine months ended September 30, 1998 compared to the same
period in 1997. After adjusting the net sales for the first nine months of 1997
to reflect the $0.32 lower average monthly COMEX price per pound of copper in
the first nine months of 1998, net sales were $128.2 million, or 17%, higher
than the first nine months of 1997. The increase in copper-adjusted net sales
reflects a 9% increase in the copper-adjusted net sales of Electrical products
and 30% increase in the copper-adjusted net sales of Communications products.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
The 30% increase in Communications product sales was the result of
significantly higher sales of PIC and datacom products. The PIC sales increases
include sales to a broadening base of Local Telephone Exchange Carrier
customers. PIC sales through key distribution customers were also up about 28%.
Sales growth of data communication products was primarily in high-performance,
enhanced category cables. The 9% growth in Electrical product sales resulted
from increased volume of building wire products and to a lesser extent,
increased volume in instrumentation cable, industrial power and control
products, consumer cordset products, and products for the automotive
aftermarket.
General Cable continued to show excellent sales growth with key customers
through "The Power of One" strategy. Copper-adjusted net sales to the Company's
top 20 customers increased 31% through the first nine months of 1998, reflecting
General Cable's continuing ability to partner with customers for mutually
beneficial growth in revenues and earnings.
Despite substantial top-line growth, selling, general and administrative
expenses increased only $4.6 million, or 5% to $94.2 million in the first nine
months of 1998 from $89.6 million in the first nine months of 1997. The increase
reflected higher transportation costs related to higher volume, increased
salaries for additional staffing to support sales growth and costs associated
with year 2000 compliance. Selling, general and administrative expenses as a
percentage of copper-adjusted net sales declined from 11.8% in the first nine
months of 1997, to 10.6% in the first nine months of 1998 as the Company
continued to leverage its sales growth.
Operating profit increased 30% to $99.0 million in the first nine months
of 1998 from $75.9 million in the first nine months of 1997. The significant
improvement in operating profit reflects the 17% increase in copper-adjusted net
sales, manufacturing productivity of 5.9%, and selling, general and
administrative expense productivity. These were partially offset by lower
building wire pricing and higher costs associated with temporarily purchasing
PIC products from third parties at a cost in excess of General Cable's
manufacturing cost to satisfy PIC demand in excess of capacity. General Cable
brought PIC capacity on stream during the first quarter of 1998 and an
additional PIC capacity expansion was completed at the Bonham, Texas plant in
September 1998. These capacity additions have reduced and will continue to
reduce the adverse effect on operating margins of outsourcing PIC products.
Net interest expense was $11.5 million in the first nine months of 1998
compared to $13.6 million in the first nine months of 1997. The reduction
reflects the impact of refinancing the remaining related party debt in May, 1997
with borrowing under a new credit facility at a lower effective interest rate.
The effective income tax rate for the nine months ended September 30,
1998 was 38.6% compared to 39.2% for the nine months ended September 30, 1997
due to a lower state effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
In general, General Cable requires cash for working capital, capital
expenditures, debt repayment, interest and taxes. General Cable's working
capital requirements increase when it experiences strong incremental demand for
products and/or significant copper price increases.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Cash flow provided by operating activities in the first nine months of
1998 was $38.5 million. Net income before depreciation and deferred taxes of
$69.6 million and an $6.5 million increase in accounts payable, accrued
liabilities and other long-term liabilities were partially offset by a $3.0
million increase in other assets, a $19.4 million increase in accounts
receivable and an $15.2 million increase in inventories. The increase in
accounts receivable was due to the strong growth in sales in the last two months
of the third quarter of 1998 compared to the last two months of the fourth
quarter of 1997 partially offset by lower copper cost in 1998. The 9% increase
in inventory was due to the 17% sales growth experienced during 1998, and
reveals a 10% improvement in inventory turnover.
Cash flow used in investing activities was $47.9 million in the first
nine months of 1998, principally reflecting $52.0 million of capital
expenditures, primarily focused on increased capacity and improved manufacturing
productivity, offset by $3.5 million from the proceeds of sale of other
property.
Cash flow provided by financing activities in the first nine months of
1998 was $10.8 million, primarily reflecting proceeds of borrowings of $15.6
million under General Cable's revolving credit line, partially offset by $4.2
million of dividends paid during the first nine months.
In May 1997, as part of the initial public offering of common stock,
General Cable entered into a new $350.0 million credit facility with The Chase
Manhattan Bank as administrative agent, and a syndicate of banks (the Credit
Facility). The Credit Facility consists of a five-year senior unsecured
revolving credit and competitive advance facility in an aggregate principal
amount of $350.0 million. Borrowings are guaranteed by General Cable's principal
operating subsidiaries.
General Cable made an initial borrowing of $268.0 million and used the
proceeds of such borrowing to (i) repay all of its revolving bank debt, (ii)
repay all intercompany debt and advances owed to Wassall and its subsidiaries;
(iii) pay $42.6 million as a dividend to Wassall; (iv) pay $2.0 million for the
purchase of two related companies, Carol Cable Europe Ltd. and Carol Cable Ltd.,
from Wassall; and (v) pay expenses of the refinancing of $0.4 million.
Borrowings under the Credit Facility were $245.6 million at September 30, 1998.
The Credit Facility loans bear interest, at General Cable's option, at
(i) a spread over LIBOR or (ii) the Alternate Base Rate, which is defined as the
higher of (a) the Agent's Prime Rate, (b) the secondary market rate for
certificates of deposit (adjusted for reserve requirements) plus 1% or (c) the
Federal Funds Effective Rate.
In November 1997, General Cable entered into interest rate swap
agreements with the three banks which effectively fix interest rates for
specific amounts borrowed under the Credit Facility as follows (dollars in
millions):
Fixed
Notional Interest
Period Amounts Rate
------ ------- ----
November 1997 to November 1998 $180.0 5.9%
November 1998 to November 1999 125.0 6.2%
November 1999 to November 2000 75.0 6.2%
November 2000 to November 2001 25.0 6.2%
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
A facility fee accrues on the full amount of the Credit Facility,
regardless of usage. The facility fee ranges between 8.0 and 20.0 basis points
per annum and the spread over LIBOR ranges between 17.0 and 42.5 basis points
per annum. Both the facility fee and the spread over LIBOR are subject to
periodic adjustment depending upon General Cable's Leverage Ratio. As a result
of the Company's continuing strong financial performance, both the facility fee
and the spread over LIBOR were adjusted down effective March 31, 1998 to the
minimum amount provided under the Credit Facility. The Credit Facility restricts
certain corporate acts and contains required minimum financial ratios and other
covenants.
YEAR 2000
In the fourth quarter of 1997, General Cable completed a study to
determine the cost of upgrading and modifying computer software for Year 2000
compliance. The Company estimates that these costs will not exceed $2.0 million.
The majority of the work necessary to upgrade to Year 2000 compliance has been
completed. In addition, the Company is communicating with third parties with
whom it conducts business to determine the extent to which General Cable may be
vulnerable if their systems are not Year 2000 compliant in a timely manner.
Where practicable, the Company will assess and attempt to mitigate its risks
with respect to the failure of these third parties to convert their systems. The
effect, if any, on the Company's results of operations from the failure of third
parties to be Year 2000 ready, is not reasonably estimable. Initial work will
begin in the fourth quarter to develop a contingency plan to protect the
business for Year 2000 related interruption. These plans are anticipated to be
completed by the second quarter of 1999.
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - General Cable Corporation Stock Loan Incentive Plan
27.1 - Financial Data Schedule
(b) Reports on Form 8-K - None
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, General
Cable Corporation has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENERAL CABLE CORPORATION
Signed: November 9, 1998 By: s/CHRISTOPHER F. VIRGULAK
--------------------------
Christopher F. Virgulak
Executive Vice President, Chief
Financial Officer and Treasurer
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