General Cable Corporation (NYSE: BGC) reported today results for the second quarter ended June 27, 2014. For the second quarter of 2014, excluding certain items, the Company recorded adjusted income per share of $0.29 and adjusted operating income of $57 million. For the second quarter of 2014, reported loss per share was ($0.51) and reported operating income was $14 million. A reconciliation of adjusted earnings per share to reported loss per share and adjusted operating income to reported operating income is included on page 3 of this press release.
Highlights
- Immediate action taken under the Company’s restructuring program with the announced closure of three manufacturing facilities
- Adjusted operating income of $57 million and adjusted EPS of $0.29 per share were both within management’s guidance range for the second quarter
- Submarine turnkey project business delivered better than expected results as key project milestones were achieved in the second quarter
Gregory B. Kenny, President and Chief Executive Officer, said, “Our restructuring program is off to a fast start as planned. While difficult, we have taken prompt action announcing the closure of the India and Peru greenfield locations in Rest of World (“ROW”) as well as the closure of one manufacturing facility in North America. The closure of these three facilities is expected to generate around $12 million in annual savings and result in one-time pre-tax charges in the range of $50 million including approximately $12 million of cash. Overall, the wire and cable industry has been wading through an uneven and lengthy global economic recovery over the past several years and these actions are important initial steps to improve our profitability and return on invested capital. Our top priority is the execution of our restructuring program while at the same time delivering perfect customer service and capturing market opportunities. We intend to support our important market position in Peru utilizing regional manufacturing facilities. In India, we will maintain a sales team focused on higher value added products such as extra high voltage power cables that we manufacture in France and Thailand.”
Q2 2014 versus Q2 2013
Net
sales for the second quarter of 2014 of $1,531 million were down 7% as
compared to the second quarter of 2013 on a metal adjusted basis. Global
unit volume for the second quarter of 2014 was also down 5% year over
year. This decline principally reflects lower shipments of aerial
transmission cables and construction products in North America and Latin
America as well as the impact of ongoing challenges in Spain and
Thailand. As a result of these trends, adjusted operating income for the
second quarter of 2014 of $57 million decreased $8 million or 12% from
$65 million in the second quarter of 2013 (excluding Venezuela from both
periods). Partially offsetting these trends were adjusted operating
results in Europe & Med which were up year over year primarily due to
the performance of the Company’s submarine turnkey project business.
Q2 2014 versus Q1 2014
Net
sales for the second quarter of 2014 increased 8% as compared to the
first quarter of 2014 as global unit volume increased 3% principally due
to seasonal demand patterns. Excluding Venezuela, adjusted operating
income for the second quarter of 2014 increased $34 million or 148% from
the first quarter of 2014 principally due to seasonal demand trends as
well as the strong performance of the Company’s submarine turnkey
project business which helped to offset the impact of selling higher
average cost inventory into a lower cost metal environment and ongoing
challenges in Spain and Thailand.
Other income
Other income was
$4 million in the second quarter of 2014, which principally reflects
gains of $4 million due to the remeasurement of the local balance sheet
in Venezuela as the SICAD I rate appreciated slightly during the second
quarter. Excluding the impact of Venezuela, mark to market gains of $4
million on derivative instruments accounted for as economic hedges which
are used to manage currency and commodity risk principally on the
Company’s project business globally were offset by foreign currency
transaction losses of $4 million.
Liquidity
Net debt was $1,256
million at the end of the second quarter of 2014, an increase of $104
million from the end of the first quarter of 2014. The increase in net
debt is principally the result of normal seasonal trends as the Company
funded higher working capital requirements in the second quarter of
2014. The Company continues to maintain adequate liquidity to fund
operations, internal growth, and continuing product expansion
opportunities.
The Company’s share repurchase authorization remains at $75 million under its current program as the Company did not repurchase any shares during the second quarter. The Company may utilize this authorization in the context of economic conditions as well as the then prevailing market price of the common stock of the Company, regulatory requirements, financial covenants and alternative deployments of capital.
Full Year 2014 and Third Quarter Outlook
excluding Venezuela
Management reconfirms its outlook
for adjusted operating income for 2014 in the range of $200 to $230
million, which excludes the impact of Venezuela. Global unit volume is
expected to be flat to down low single digits year over year due to the
lack of consistent momentum in utility and construction spending in
North America and Latin America as well as ongoing challenges in Spain
and Thailand. The Company expects to generate $135 to $165 million of
operating cash flow in 2014 with capital spending below depreciation.
The revised operating cash flow outlook principally reflects funding
higher working capital for 2014. The Company’s full year and third
quarter outlook assumes copper (COMEX) and aluminum (LME) prices of
$3.21 and $0.90, respectively. Management expects the business in
Venezuela to generate $0 to $10 million in pre-tax income for the full
year.
Revenues in the third quarter are expected to be in the range of $1.5 to $1.55 billion as volume is anticipated to increase in the low single digit range sequentially. The Company anticipates adjusted operating income to be in the range of $60 to $75 million as the burden of selling higher average cost inventory subsides due to the relatively higher metal price environment. This expected result, at the midpoint, represents an improvement in adjusted operating income for the third quarter of 2014 of 52% as compared to the third quarter of 2013. Adjusted earnings per share are expected to be in the range of $0.35 to $0.55 per share. The third quarter outlook does not include the impact of Venezuela.
A reconciliation of expected GAAP earnings per share and operating income is as follows:
Q3 2014 Outlook | Q3 2013 | |||||||||||||||
Operating | Operating | |||||||||||||||
In millions, except per share amounts | Income | EPS | Income | EPS | ||||||||||||
As Reported, GAAP | $ | 60 - $75 | $0.34 - $0.54 | $ | 42.9 | $ | 0.11 | |||||||||
Restatement, forensic and acquisition costs | - | - | 1.0 | 0.01 | ||||||||||||
European severance charges | - | - | 0.7 | 0.01 | ||||||||||||
Legal and tax assessments | - | - | 4.8 | 0.05 | ||||||||||||
Mexico impairment | - | - | 14.0 | 0.20 | ||||||||||||
Non-cash convertible debt interest expense | - | 0.01 | - | 0.12 | ||||||||||||
Venezuela operations (income)/loss | - | - | (19.1 | ) | (0.25 | ) | ||||||||||
Mark to market (gain) loss on derivative instruments | - | - | - | (0.06 | ) | |||||||||||
Effective tax rate adjustment | - | - | - | 0.01 | ||||||||||||
Adjusted, Non-GAAP | $ | 60 - $75 | $0.35 - $0.55 | $ | 44.3 | $ | 0.20 | |||||||||
Reconciliation of Non-GAAP Measures
In
addition to reporting financial results in accordance with accounting
principles generally accepted in the United States (GAAP), we discuss
earnings per share and operating income for the second quarter of 2014
and 2013 and the first quarter of 2014 as adjusted for certain items,
which is summarized in the table below. These Company-defined adjusted
measures are being provided because management believes they are useful
in analyzing the operating performance of the business and are
consistent with how management reviews the underlying business trends.
Use of these non-GAAP measures may be inconsistent with similar measures
presented by other companies and should only be used in conjunction with
our results reported according to GAAP. A reconciliation of operating
income and earnings per share to adjusted non-GAAP operating income and
earnings per share follows:
2nd Quarter | 1st Quarter | |||||||||||||||||||||||||
2014 | 2013 | 2014 | ||||||||||||||||||||||||
Operating | Operating | Operating | ||||||||||||||||||||||||
In millions, except per share amounts | Income | EPS | Income | EPS | Income | EPS | ||||||||||||||||||||
As reported | $ | 14.1 | $ | (0.51 | ) | $ | 70.8 | $ | 0.16 | $ | (237.1 | ) | $ | (6.42 | ) | |||||||||||
Adjustments to Reconcile Operating Income/EPS | ||||||||||||||||||||||||||
Non-cash convertible debt interest expense | - | 0.01 | - | 0.11 | - | 0.01 | ||||||||||||||||||||
Mark to market (gain) loss on derivative instruments | - | (0.05 | ) | - | 0.19 | - | 0.13 | |||||||||||||||||||
Restructuring activities | 34.7 | 0.64 | 0.4 | 0.01 | 1.0 | 0.01 | ||||||||||||||||||||
Severance charges | 1.5 | 0.02 | 1.2 | 0.01 | 1.1 | 0.01 | ||||||||||||||||||||
Restatement, forensic and acquisition costs | 3.7 | 0.05 | 2.9 | 0.03 | 2.9 | 0.04 | ||||||||||||||||||||
European Commission | - | - | - | - | 2.5 | 0.03 | ||||||||||||||||||||
Submarine cable business | - | - | 8.2 | 0.16 | - | - | ||||||||||||||||||||
Goodwill/intangible asset impairment | 2.1 | 0.03 | - | - | 248.5 | 4.29 | ||||||||||||||||||||
Venezuelan currency devaluation(1) | - | - | - | - | - | 1.69 | ||||||||||||||||||||
Venezuela (income)/loss | 1.1 | (0.02 | ) | (19.0 | ) | (0.33 | ) | 4.2 | 0.11 | |||||||||||||||||
Effective tax rate adjustment (2) | - | 0.12 | - | 0.01 | - | - | ||||||||||||||||||||
Total Adjustments | 43.1 | 0.80 | (6.3 | ) | 0.19 | 260.2 | 6.32 | |||||||||||||||||||
Adjusted | $ | 57.2 | $ | 0.29 | $ | 64.5 | $ | 0.35 | $ | 23.1 | $ | (0.10 | ) | |||||||||||||
(1) | Reflects the impact of the currency devaluation due to the change from the official foreign currency exchange rate of 6.3 Bolivars to US Dollar to the SICAD I rate of 10.8 as of Q1 2014 | ||||
(2) | Reflects an adjusted effective tax rate of 40% and 45% for the second quarter of 2014 and 2013, respectively. | ||||
General Cable will discuss second quarter results on a conference call that will be broadcast live at 8:30 a.m., ET, on July 31, 2014. The live webcast of the Company’s conference call will be available in listen only mode and can be accessed through the Investor Relations page on our website at www.generalcable.com. Also available on our website is a copy of an Investor Presentation that will be referenced throughout the conference call.
General Cable Corporation (NYSE:BGC), a Fortune 500 Company, is a global leader in the development, design, manufacture, marketing and distribution of copper, aluminum and fiber optic wire and cable products and systems for the energy, industrial, specialty, construction and communications markets. Visit our website at www.generalcable.com.
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements in this press release are
forward-looking statements that involve risks and uncertainties, predict
or describe future events or trends and that do not relate solely to
historical matters. Forward looking statements include, among others,
expressed expectations with regard to the following: “believe,”
“expect,” “may,” “will,” “anticipate,” “intend,” “estimate,” “project,”
“plan,” “assume,” “seek to” or other similar expressions, although not
all forward-looking statements contain these identifying words. Actual
results may differ materially from those discussed in forward-looking
statements as a result of factors, risks and uncertainties over many of
which we have no control. These factors include, but are not limited to:
the economic strength and competitive nature of the geographic markets
that the Company serves; our ability to increase manufacturing capacity
and productivity; our ability to increase our selling prices during
periods of increasing raw material costs; our ability to service, and
meet all requirements under, our debt, and to maintain adequate domestic
and international credit facilities and credit lines; our ability to
establish and maintain internal controls; the impact of unexpected
future judgments or settlements of claims and litigation; impact of
foreign currency exchange rate fluctuations; impact of future impairment
charges; compliance with U.S. and foreign laws, including the Foreign
Corrupt Practices Act; our ability to implement and make appropriate,
timely and beneficial decisions as to when, how and if to purchase
shares under the repurchase program and the other risks detailed from
time to time in the Company’s filings with the Securities and Exchange
Commission (“SEC”), including but not limited to, its annual report on
Form 10-K filed with the SEC on March 3, 2014, and subsequent SEC
filings. You are cautioned not to place undue reliance on these
forward-looking statements. General Cable does not undertake, and hereby
disclaims, any obligation, unless required to do so by applicable
securities laws, to update any forward-looking statements as a result of
new information, future events or other factors.
TABLES TO FOLLOW
General Cable Corporation and Subsidiaries | ||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Three Fiscal Months Ended | Six Fiscal Months Ended | |||||||||||||||||
June 27, | June 28, | June 27, | June 28, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Net sales | $ | 1,531.3 | $ | 1,659.1 | $ | 2,961.4 | $ | 3,202.8 | ||||||||||
Cost of sales | 1,399.5 | 1,466.3 | 2,697.5 | 2,853.1 | ||||||||||||||
Gross profit | 131.8 | 192.8 | 263.9 | 349.7 | ||||||||||||||
Selling, general and administrative expenses | 115.6 | 122.0 | 236.3 | 246.1 | ||||||||||||||
Goodwill impairment charge | - | - | 155.1 | - | ||||||||||||||
Indefinite-lived intangible asset impairment charge | 2.1 | - | 95.5 | - | ||||||||||||||
Operating income (loss) | 14.1 | 70.8 | (223.0 | ) | 103.6 | |||||||||||||
Other income (expense) | 3.6 | (15.6 | ) | (94.1 | ) | (68.3 | ) | |||||||||||
Interest income (expense): | ||||||||||||||||||
Interest expense | (29.7 | ) | (30.6 | ) | (57.1 | ) | (60.1 | ) | ||||||||||
Interest income | 1.0 | 1.5 | 2.2 | 3.0 | ||||||||||||||
(28.7 | ) | (29.1 | ) | (54.9 | ) | (57.1 | ) | |||||||||||
Income (loss) before income taxes | (11.0 | ) | 26.1 | (372.0 | ) | (21.8 | ) | |||||||||||
Income tax (provision) benefit | (12.1 | ) | (17.5 | ) | 9.3 | (13.7 | ) | |||||||||||
Equity in net earnings of affiliated companies | 0.4 | 0.4 | 0.6 | 0.6 | ||||||||||||||
Net income (loss) including noncontrolling interests | (22.7 | ) | 9.0 | (362.1 | ) | (34.9 | ) | |||||||||||
Less: preferred stock dividends | - | 0.1 | - | 0.2 | ||||||||||||||
Less: net income (loss) attributable to noncontrolling interest | 2.1 | 0.7 | (21.9 | ) | 2.5 | |||||||||||||
Net income (loss) attributable to Company common shareholders | $ | (24.8 | ) | $ | 8.2 | $ | (340.2 | ) | $ | (37.6 | ) | |||||||
Earnings (loss) per share | ||||||||||||||||||
Earnings (loss) per common share - basic | $ | (0.51 | ) | $ | 0.17 | $ | (6.96 | ) | $ | (0.76 | ) | |||||||
Weighted average common shares - basic | 48.7 | 49.5 | 48.9 | 49.6 | ||||||||||||||
Earnings (loss) per common share- assuming dilution | $ | (0.51 | ) | $ | 0.16 | $ | (6.96 | ) | $ | (0.76 | ) | |||||||
Weighted average common shares- assuming dilution | 48.7 | 51.0 | 48.9 | 49.6 | ||||||||||||||
General Cable Corporation and Subsidiaries | ||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||
Segment Information | ||||||||||||||||||
(in millions) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Three Fiscal Months Ended | Six Fiscal Months Ended | |||||||||||||||||
June 27, | June 28, | June 27, | June 28, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Revenues (as reported) | ||||||||||||||||||
North America | $ | 645.3 | $ | 706.5 | $ | 1,240.0 | $ | 1,411.5 | ||||||||||
Europe and Mediterranean | 394.3 | 422.4 | 762.6 | 797.0 | ||||||||||||||
Rest of World | 491.7 | 530.2 | 958.8 | 994.3 | ||||||||||||||
Total | $ | 1,531.3 | $ | 1,659.1 | $ | 2,961.4 | $ | 3,202.8 | ||||||||||
Revenues (metal adjusted) | ||||||||||||||||||
North America | $ | 645.3 | $ | 702.7 | $ | 1,240.0 | $ | 1,381.9 | ||||||||||
Europe and Mediterranean | 394.3 | 418.2 | 762.6 | 777.6 | ||||||||||||||
Rest of World | 491.7 | 522.3 | 958.8 | 961.8 | ||||||||||||||
Total | $ | 1,531.3 | $ | 1,643.2 | $ | 2,961.4 | $ | 3,121.3 | ||||||||||
Metal Pounds Sold | ||||||||||||||||||
North America | 134.3 | 143.5 | 269.0 | 296.1 | ||||||||||||||
Europe and Mediterranean | 61.6 | 75.2 | 121.2 | 144.9 | ||||||||||||||
Rest of World | 122.9 | 115.3 | 237.4 | 210.3 | ||||||||||||||
Total | 318.8 | 334.0 | 627.6 | 651.3 | ||||||||||||||
Operating Income (loss) | ||||||||||||||||||
North America | $ | 17.6 | $ | 43.7 | $ | 49.9 | $ | 81.4 | ||||||||||
Europe and Mediterranean | 19.3 | 0.8 | 10.2 | (15.4 | ) | |||||||||||||
Rest of World | (22.8 | ) | 26.3 | (283.1 | ) | 37.6 | ||||||||||||
Total | $ | 14.1 | $ | 70.8 | $ | (223.0 | ) | $ | 103.6 | |||||||||
Adjusted Operating Income (loss) (1) | ||||||||||||||||||
North America | $ | 36.1 | $ | 47.0 | $ | 72.3 | $ | 92.7 | ||||||||||
Europe and Mediterranean | 19.3 | 10.2 | 13.8 | 0.2 | ||||||||||||||
Rest of World | 1.8 | 7.3 | (5.8 | ) | 12.8 | |||||||||||||
Total | $ | 57.2 | $ | 64.5 | $ | 80.3 | $ | 105.7 | ||||||||||
Return on Metal Adjusted Sales (2) | ||||||||||||||||||
North America | 5.6 | % | 6.7 | % | 5.8 | % | 6.7 | % | ||||||||||
Europe and Mediterranean | 4.9 | % | 2.4 | % | 1.8 | % | 0.0 | % | ||||||||||
Rest of World | 0.4 | % | 1.4 | % | -0.6 | % | 1.3 | % | ||||||||||
Total Company | 3.7 | % | 3.9 | % | 2.7 | % | 3.4 | % | ||||||||||
Capital Expenditures | ||||||||||||||||||
North America | $ | 6.6 | $ | 8.3 | $ | 15.9 | $ | 16.8 | ||||||||||
Europe and Mediterranean | 3.1 | 5.2 | 7.2 | 10.8 | ||||||||||||||
Rest of World | 8.8 | 5.2 | 22.4 | 17.8 | ||||||||||||||
Total | $ | 18.5 | $ | 18.7 | $ | 45.5 | $ | 45.4 | ||||||||||
Depreciation & Amortization | ||||||||||||||||||
North America | $ | 11.7 | $ | 11.1 | $ | 22.9 | $ | 22.4 | ||||||||||
Europe and Mediterranean | 10.3 | 9.8 | 20.5 | 19.7 | ||||||||||||||
Rest of World | 11.7 | 12.5 | 22.6 | 24.7 | ||||||||||||||
Total | $ | 33.7 | $ | 33.4 | $ | 66.0 | $ | 66.8 | ||||||||||
Revenues by Major Product Lines | ||||||||||||||||||
Electric Utility | $ | 517.3 | $ | 533.9 | $ | 970.1 | $ | 1,009.0 | ||||||||||
Electrical Infrastructure | 400.4 | 425.8 | 799.8 | 849.1 | ||||||||||||||
Construction | 353.8 | 428.0 | 703.9 | 816.0 | ||||||||||||||
Communications | 155.7 | 195.8 | 282.6 | 379.1 | ||||||||||||||
Rod Mill Products | 104.1 | 75.6 | 205.0 | 149.6 | ||||||||||||||
Total | $ | 1,531.3 | $ | 1,659.1 | $ | 2,961.4 | $ | 3,202.8 | ||||||||||
(1) | Adjusted operating income excludes certain items. | ||||
(2) | Return on Metal Adjusted Sales is calculated on Adjusted Operating Income | ||||
GENERAL CABLE CORPORATION AND SUBSIDIARIES | ||||||||||
Consolidated Balance Sheets | ||||||||||
(in millions, except share data) | ||||||||||
June 27, | December 31, | |||||||||
Assets | 2014 | 2013 | ||||||||
(unaudited) | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | $ | 299.1 | $ | 418.8 | ||||||
Receivables, net of allowances of $36.4 million at June 27, 2014 and $39.2 million at December 31, 2013 | 1,259.5 | 1,171.7 | ||||||||
Inventories | 1,338.4 | 1,239.6 | ||||||||
Deferred income taxes | 49.3 | 50.2 | ||||||||
Prepaid expenses and other | 119.2 | 126.2 | ||||||||
Total current assets | 3,065.5 | 3,006.5 | ||||||||
Property, plant and equipment, net | 1,029.5 | 1,092.0 | ||||||||
Deferred income taxes | 16.4 | 15.8 | ||||||||
Goodwill | 27.3 | 184.6 | ||||||||
Intangible assets, net | 78.8 | 182.9 | ||||||||
Unconsolidated affiliated companies | 19.3 | 19.0 | ||||||||
Other non-current assets | 85.0 | 78.1 | ||||||||
Total assets | $ | 4,321.8 | $ | 4,578.9 | ||||||
Liabilities and Total Equity | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | $ | 930.2 | $ | 870.6 | ||||||
Accrued liabilities | 392.3 | 434.9 | ||||||||
Current portion of long-term debt | 422.2 | 250.3 | ||||||||
Total current liabilities | 1,744.7 | 1,555.8 | ||||||||
Long-term debt | 1,132.5 | 1,136.6 | ||||||||
Deferred income taxes | 212.4 | 233.8 | ||||||||
Other liabilities | 238.2 | 255.9 | ||||||||
Total liabilities | 3,327.8 | 3,182.1 | ||||||||
Commitments and Contingencies | ||||||||||
Redeemable noncontrolling interest | 17.5 | 17.0 | ||||||||
Total Equity: | ||||||||||
Common stock, $0.01 par value, issued and outstanding shares: | 0.6 | 0.6 | ||||||||
Additional paid-in capital | 704.8 | 699.6 | ||||||||
Treasury stock | (185.3 | ) | (155.3 | ) | ||||||
Retained earnings | 489.4 | 847.4 | ||||||||
Accumulated other comprehensive loss | (106.5 | ) | (112.1 | ) | ||||||
Total Company shareholders' equity | 903.0 | 1,280.2 | ||||||||
Noncontrolling interest | 73.5 | 99.6 | ||||||||
Total equity | 976.5 | 1,379.8 | ||||||||
Total liabilities and equity | $ | 4,321.8 | $ | 4,578.9 |
Contacts:
Len Texter, Vice President, Investor
Relations, 859-572-8684