AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 2003
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENERAL CABLE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1398235
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4 TESSENEER DRIVE
HIGHLAND HEIGHTS, KENTUCKY 41076
(859) 572-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT J. SIVERD
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
GENERAL CABLE CORPORATION
4 TESSENEER DRIVE
HIGHLAND HEIGHTS, KENTUCKY 41076
(859) 572-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copy to:
ALAN H. LIEBLICH
BRAD L. SHIFFMAN
BLANK ROME LLP
ONE LOGAN SQUARE
PHILADELPHIA, PENNSYLVANIA 19103
(215) 569-5500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement, as determined in
light of market and other conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), other than securities
offered only in connection with dividend or interest reinvestment plans, check
the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
Proposed Proposed maximum
Amount of maximum aggregate
Title of each class of securities shares to be offering price offering price Amount of
to be registered registered per security(1) (1) registration fee
--------------------------------------- ------------- --------------- ---------------- ----------------
5.75% Series A Redeemable Convertible
Preferred Stock, par value $0.01 per
share, and initial liquidation
preference $50.00 per share 2,070,000(1) $ 58.38(2) $120,846,600 $9,777
Common Stock, par value $0.01 per share 10,345,860(1) (3) (3) N/A
Common Stock, par value $0.01 per share 7,500,000(4) $ 8.14(5) $ 61,050,000 $4,939
(1) Exclusive of accrued dividends, if any.
(2) Estimated solely for purposes of calculating the amount of the
registration fee, pursuant to Rule 457(c) based upon the average of the
bid and asked prices of the preferred stock on The Portal(SM) Market of
the National Association of Securities Dealers, Inc. on December 17,
2003.
(3) Represents the underlying shares of common stock issuable upon
conversion of the preferred stock, together with an indeterminable
number of additional shares as may become issuable upon conversion of
the preferred stock as a result of anti-dilution adjustments. Pursuant
to Rule 457(i), no additional registration fee is required for the
common stock issuable upon conversion of the preferred stock because no
additional consideration will be received in connection with any such
conversion.
(4) Represents shares of common stock that the registrant may elect to
issue in connection with the payment of dividends on the preferred
stock.
(5) Estimated solely for purposes of calculating the amount of the
registration fee, pursuant to Rule 457(c), based on the average of the
high and low sales prices of the common stock on the New York Stock
Exchange on December 17, 2003.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES NOR DOES IT SEEK AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 22, 2003.
[GENERAL CABLE LOGO]
GENERAL CABLE CORPORATION
2,070,000 SHARES OF 5.75% SERIES A
REDEEMABLE CONVERTIBLE PREFERRED STOCK
10,345,860 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE PREFERRED STOCK
7,500,000 SHARES OF COMMON STOCK ISSUABLE IN
CONNECTION WITH THE PAYMENT OF DIVIDENDS
ON THE PREFERRED STOCK
We originally issued the preferred stock in a private placement on
November 24, 2003. This prospectus relates to resales of the preferred stock and
to common stock that may be issued upon conversion of the preferred stock by
securityholders named under the caption "Selling Securityholders" in this
prospectus and to sales by the transfer agent for the preferred stock on behalf
of the holders of preferred stock of common stock that may be issued in
connection with the payment of dividends on the preferred stock, all as
described under the caption "Plan of Distribution" in this prospectus.
Each share of preferred stock has an initial liquidation preference of
$50.00 and was convertible initially into 4.998 shares of our common stock,
based on an initial conversion price of $10.004 per share, subject in each case
to specified adjustments. Our common stock trades on The New York Stock Exchange
under the symbol "BGC." On December 17, 2003, the closing sale price of our
common stock was $8.25 per share.
Dividends on the preferred stock are payable on February 24, May 24,
August 24 and November 24 of each year, beginning on February 24, 2004.
Dividends accrue from the beginning of the relevant dividend period, which in
the case of the first dividend period is November 24, 2003, at the annual rate
of 5.75% of the liquidation preference per share. We will pay dividends on a
dividend payment date either, at our option and subject to agreed upon
conditions, in cash or by delivering shares of our common stock to the transfer
agent to be sold on the holders' behalf, resulting in net cash proceeds to be
distributed to the holders in an amount equal to the cash dividend otherwise
payable. If we do not pay dividends in full on more than six dividend payment
dates, whether or not consecutive, the per annum dividends rate will be deemed
to have increased by 2% on the date following such sixth dividend payment date.
We are obligated to redeem all outstanding shares of preferred stock on
November 24, 2013 at a redemption price equal to 100% of the then liquidation
preference, plus accrued and unpaid dividends. We may, at our option, elect to
pay the redemption price in cash or in shares of our common stock valued at a
discount of 5% from its market price, or any combination thereof. We have the
option to redeem some or all of the outstanding shares of preferred stock in
cash on or after November 24, 2008 at the redemption prices set forth in this
prospectus.
AN INVESTMENT IN THE PREFERRED STOCK OR COMMON STOCK INVOLVES A HIGH
DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE
7 OF THIS PROSPECTUS AND ANY OTHER INFORMATION IN THIS PROSPECTUS BEFORE
DECIDING TO PURCHASE THE PREFERRED STOCK OR COMMON STOCK.
The securities offered in this prospectus have not been recommended by
the Securities and Exchange Commission or any state or foreign securities
commission or any regulatory authority. These authorities have not confirmed the
accuracy or determined the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
This prospectus is dated , 2003.
TABLE OF CONTENTS
PAGE
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..... 1
WHERE YOU CAN FIND MORE INFORMATION................. 2
THE COMPANY......................................... 2
SUMMARY OF THE TERMS OF THE PREFERRED STOCK......... 3
RISK FACTORS........................................ 7
FORWARD-LOOKING STATEMENTS.......................... 16
USE OF PROCEEDS..................................... 16
RATIO OF EARNINGS TO FIXED CHARGES.................. 17
BUSINESS............................................ 18
DESCRIPTION OF THE PREFERRED STOCK.................. 34
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES........ 52
SELLING SECURITYHOLDERS............................. 57
PLAN OF DISTRIBUTION................................ 61
LEGAL REPRESENTATION................................ 63
EXPERTS............................................. 63
This prospectus includes trademarks, service marks and trade names
owned by us or other companies. All trademarks, service marks and trade names
included in this prospectus are the property of their respective owners.
i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC's rules allow us to "incorporate by reference" information into
this prospectus. This means that we can disclose important information to you by
referring you to another document. Any information referred to in this way is
considered part of this prospectus from the date we file that document. Any
reports filed by us with the SEC after the date of the initial filing of the
registration statement of which this prospectus forms a part and prior to the
effectiveness of such registration statement, as well as any reports filed by us
with the SEC after the date of this prospectus and before the date that the
offering of the securities is terminated, will automatically update and, where
applicable, supersede any information contained in this prospectus or
incorporated by reference in this prospectus.
We incorporate by reference into this prospectus the following
documents filed with the SEC:
- Our Annual Report on Form 10-K for the year ended December 31,
2002, as amended by Amendment No. 1 filed on August 29, 2003.
- Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2003, as amended by Amendment No. 1 to our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001 filed
on August 29, 2003.
- Our Quarterly Report on Form 10-Q for the quarter ended June
30, 2003, as amended by Amendment No. 1 to our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003 filed
on August 29, 2003.
- Our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003.
- Our Current Report on Form 8-K dated April 22, 2003 (except
for the information furnished in Item 9 or any related
exhibits).
- Our Current Report on Form 8-K dated July 11, 2003.
- Our Current Report on Form 8-K dated July 22, 2003 (except for
the information furnished in Item 9 or any related exhibits).
- Our Current Report on Form 8-K dated October 21, 2003 (except
for the information furnished in Item 9 or any related
exhibits).
- Our Current Report on Form 8-K dated October 28, 2003.
- Our Current Report on Form 8-K dated November 4, 2003.
- Our Current Report on Form 8-K dated November 18, 2003.
- Our Current Report on Form 8-K dated December 12, 2003.
- Our Current Report on Form 8-K dated December 18, 2003.
- The description of our common stock, filed in our Form 8-A
(File No. 1-1983), as filed with the SEC on May 13, 1997,
pursuant to Section 12(b) of the Exchange Act of 1934 as
incorporated by reference from our registration statement on
Form S-1 (File No. 333-22961) initially filed with the SEC on
March 7, 1997, and any amendment or report for the purpose of
updating such description.
- All documents filed by us under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 (excluding all
information and related exhibits furnished in a Current Report
on Form 8-K pursuant to Item 9 or Item 12) after the date of
this prospectus and before the termination of this offering.
We will provide without charge to each person to whom this prospectus
is delivered, upon his or her written or oral request, a copy of the filed
documents referred to above, excluding exhibits, unless they are specifically
incorporated by reference into those documents. You can request those documents
from our Director of Investor Relations, 4 Tesseneer Drive, Highland Heights,
Kentucky 41076, telephone (859) 572-8000.
1
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and special reports, proxy
statements, any amendments to those reports and other information with the SEC.
You may read and copy any documents filed by us with the SEC at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
Reports, proxy statements and information statements, any amendments to those
reports and other information filed electronically by us with the SEC are
available to the public at the SEC's website at http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC
relating to the securities covered by this prospectus. This prospectus is a part
of the registration statement and does not contain all of the information in the
registration statement. Whenever a reference is made in this prospectus to a
contract or other document of General Cable, please be aware that the reference
is only a summary and that you should refer to the exhibits that are a part of
the registration statement for a copy of the contract or other document. You may
review a copy of the registration statement at the SEC's public reference room
in Washington, D.C., as well as through the SEC's website.
THE COMPANY
We are a FORTUNE 1000 company that is a leading global developer and
manufacturer in the wire and cable industry. Our operations are divided into
three main segments: energy, industrial & specialty and communications. Our
energy cable products include low-, medium- and high-voltage power distribution
and power transmission products for overhead and buried applications. Our
industrial & specialty wire and cable products conduct electrical current for
industrial, OEM, commercial and residential power and control applications. Our
communications wire and cable products transmit low-voltage signals for voice,
data, video and control applications. Our principal executive offices are
located at 4 Tesseneer Drive, Highland Heights, Kentucky 41076, telephone (859)
572-8000.
2
SUMMARY OF THE TERMS OF THE PREFERRED STOCK
The following is a brief summary of select terms of the preferred
stock. For a more complete description of the terms of the preferred stock, see
the section of this prospectus entitled "Description of the Preferred Stock."
Issuer General Cable Corporation
Securities Offered 2,070,000 shares of our 5.75% Series A
redeemable convertible preferred stock
Liquidation Preference $50.00 per share.
Dividends Dividend payment rate: annual rate of 5.75%
of the liquidation preference per share,
accruing from the beginning of the relevant
dividend period.
Dividend payment dates: quarterly in
arrears, on February 24, May 24, August 24
and November 24 of each year, beginning on
February 24, 2004.
Form of dividend payment: dividends are
payable, at our option:
- in cash; or
- in shares of our common stock
delivered to the transfer agent to
be sold on the holders' behalf
resulting in net cash proceeds to
be distributed to the holders in an
amount equal to the cash dividend
otherwise payable; or
- any combination of the foregoing.
If we pay dividends by delivering shares of
our common stock to the transfer agent,
those shares will be owned beneficially by
the holders of the preferred stock upon
delivery of such shares to the transfer
agent, and the transfer agent will hold
those shares and the net cash proceeds from
the sale of those shares for the exclusive
benefit of the holders.
If we do not pay dividends in full on the
preferred stock on more than six dividend
payment dates, whether or not consecutive,
the per annum dividend rate on the preferred
stock will be deemed to have increased by 2%
on the date following the sixth dividend
payment date. Once all accrued and unpaid or
accumulated dividends have been paid in
full, the dividend rate will return to the
rate set forth on the cover of this
prospectus. If we again do not pay dividends
in full on any dividend payment date, the
per annum dividend rate will again increase
by 2%.
Optional Redemption We will have the option to redeem some or
all of the outstanding shares of preferred
stock in cash on or after November 24, 2008
at the redemption prices set forth in this
prospectus under the heading "Description of
the Preferred Stock--Optional Redemption."
3
Mandatory Redemption We will be obligated to redeem all
outstanding shares of the preferred stock at
a redemption price equal to the liquidation
price thereof, plus all accrued and unpaid
or accumulated dividends, on November 24,
2013.
We may, at our option, elect to pay the
redemption price in cash or in shares of our
common stock at a discount of 5% from their
market price, or any combination thereof.
We may pay such redemption price only if we
have funds legally available for such
payment and may pay in shares of our common
stock only if such shares are eligible for
immediate sale in the public market either
(i) by non-affiliates of ours absent a
registration statement or (ii) pursuant to a
registration statement that has become
effective.
Conversion The preferred stock may be converted at the
option of the holder into our common stock
at any time.
Initial conversion price: $10.004 per share
of common stock, subject to adjustment in a
number of circumstances described under
"Description of the Preferred Stock--
Conversion Rights--Adjustments to the
Conversion Price." The initial conversion
price is equivalent to an initial conversion
rate of 4.998 shares of common stock for
each $50.00 liquidation preference of the
preferred stock.
Conversion at Our Option Under
Certain Circumstances We may cause the conversion of all
outstanding shares of preferred stock on or
after November 24, 2008, if less than
103,500 shares of preferred stock remain
outstanding, into shares of common stock
equal to the liquidation preference, plus
all accrued and unpaid or accumulated
dividends, divided by the lesser of (i) the
initial conversion price, as adjusted, and
(ii) the market price of our common stock
for a five trading day period ending on the
third trading day prior to the date of any
such mandatory conversion.
Anti-dilution Adjustments The initial conversion price may be adjusted
if certain events occur. See "Description of
the Preferred Stock--Conversion Rights--
Adjustments to the Conversion Price."
Voting Rights The holders of preferred stock are not
entitled to any voting rights except as
described in this prospectus under the
heading "Description of the Preferred Stock
--Voting Rights."
4
Change of Control If we undergo a Change of Control (as
defined under the heading "Description of
the Preferred Stock--Change of Control
Put"), we will be required to offer to
purchase the shares at a purchase price
equal to 100% of the then liquidation
preference, plus all accrued and unpaid and
accumulated dividends, unless (i) our common
stock trades at or above 105% of the
conversion price of the preferred stock
during specified periods, or (ii) 100% of
the consideration in the change of control
transaction consists of shares of capital
stock traded on a U.S. national securities
exchange or quoted on The Nasdaq National
Market.
This right of holders will be subject to our
obligation to repay or repurchase any
indebtedness required to be repaid or
repurchased in connection with a change of
control and to any contractual restrictions
then contained in our indebtedness. The
terms of our senior secured revolving credit
facility and our senior notes prohibit us
from purchasing the preferred stock in cash.
Our future credit facilities and other
existing or future indebtedness may contain
similar restrictions. When we have satisfied
these obligations, we will purchase all
shares tendered upon a change of control
offer, subject to the legal availability of
funds for this purpose.
Subject to certain limitations, we may, at
our option, elect to pay the purchase price
in cash or in shares of our common stock
valued at a discount of 5% from the market
price of our common stock, or any
combination thereof. However, we may pay
such purchase price only out of funds
legally available for such payment, and if
we pay the purchase price in shares of our
common stock, such shares must be eligible
for immediate sale in the public market
either (i) by non-affiliates of ours absent
a registration statement or (ii) pursuant to
a registration statement that has become
effective.
Registration Rights We have agreed to cause a shelf registration
statement covering resales of the preferred
stock and of common stock issued as
dividends or upon conversion of the
preferred stock to remain effective, subject
to some exceptions, until the earlier of (i)
November 24, 2005 and (ii) the date on which
all shares of convertible preferred stock or
common stock covered by that registration
statement have been sold under that
registration statement. If we do not satisfy
these obligations, we will be required to
pay additional dividends to holders of the
preferred stock.
DTC Eligibility The shares of preferred stock will be issued
in book-entry form and will be represented
by permanent global certificates deposited
with a custodian for, and registered in the
name of, a nominee of The Depository Trust
Company, or DTC, in New York, New York.
Beneficial interests in any such securities
will be shown on, and transfers will be
effected only through, records maintained by
DTC and its direct and indirect
participants. Except in limited
circumstances, no such interest may be
exchanged for certificated securities. See
"Description of the Preferred Stock--
Book-entry, Delivery and Form."
5
Trading Our common stock is listed on The New York
Stock Exchange under the symbol "BGC." We
have not applied and do not intend to apply
for the listing of the preferred stock on
any securities exchange.
Certain U.S. Federal Income Tax
Consequences For a discussion of certain U.S. federal
income tax considerations relating to the
purchase, ownership and disposition of the
preferred stock and common stock into which
the preferred stock is convertible, see
"Certain U.S. Federal Income Tax
Consequences."
6
RISK FACTORS
Investing in these securities involves a high degree of risk. You
should carefully consider the following risk factors and other information
contained herein before investing in these securities.
RISKS RELATED TO OUR BUSINESS
RISKS RELATING TO OUR MARKETS
OUR NET SALES, NET INCOME AND GROWTH DEPEND LARGELY ON THE ECONOMIES IN THE
GEOGRAPHIC MARKETS THAT WE SERVE.
Many of our customers use our products as components in their own
products or in projects undertaken for their customers. Our ability to sell our
products is largely dependent on general economic conditions, including how much
our customers and end-users spend on information technology, new construction
and building, maintaining or reconfiguring their communications network,
industrial manufacturing assets and power transmission and distribution
infrastructures. Over the past few years many companies have significantly
reduced their capital equipment and information technology budgets, and
construction activity that necessitates the building or modification of
communication networks and power transmission and distribution infrastructures
has slowed considerably as a result of a weakening of the U.S. and foreign
economies. As a result, our net sales and financial results have declined
significantly. In the event that these markets do not improve, or if they were
to become weaker, we could suffer further decreased sales and net income and we
could be required to enact further restructurings.
THE MARKET FOR OUR PRODUCTS IS HIGHLY COMPETITIVE.
The markets for copper, aluminum and fiber optic wire and cable
products are highly competitive, and some of our competitors may have greater
financial resources than we do. We compete with at least one major competitor
with respect to each of our business segments, although no single competitor
competes with us across the entire spectrum of our product lines. Many of our
products are made to common specifications and therefore may be fungible with
competitors' products. Accordingly, we are subject to competition in many
markets on the basis of price, delivery time, customer service and our ability
to meet specific customer needs.
We believe our competitors will continue to improve the design and
performance of their products and to introduce new products with competitive
price and performance characteristics. We expect that we will be required to
continue to invest in product development, productivity improvements and
customer service and support in order to compete in our markets. Furthermore, an
increase in imports of products competitive with our products could adversely
affect our sales.
OUR BUSINESS IS SUBJECT TO THE ECONOMIC AND POLITICAL RISKS OF MAINTAINING
FACILITIES AND SELLING PRODUCTS IN FOREIGN COUNTRIES.
During 2002, approximately 26% of our sales and approximately 33% of
our assets were in markets outside North America. Our financial results may be
adversely affected by significant fluctuations in the value of the U.S. dollar
against foreign currencies or by the enactment of exchange controls or foreign
governmental or regulatory restrictions on the transfer of funds. In addition,
negative tax consequences relating to repatriating certain foreign currencies,
particularly cash generated by our operations in Spain, may adversely affect our
cash flows. During 2002, our operations outside North America generated
approximately 24% of our cash flows from operations. Furthermore, our foreign
operations are subject to risks inherent in maintaining operations abroad, such
as economic and political destabilization, international conflicts, restrictive
actions by foreign governments, nationalizations, changes in regulatory
requirements, the difficulty of effectively managing diverse global operations
and adverse foreign tax laws.
7
CHANGES IN INDUSTRY STANDARDS AND REGULATORY REQUIREMENTS MAY ADVERSELY AFFECT
OUR BUSINESS.
As a manufacturer and distributor of wire and cable products we are
subject to a number of industry standard-setting authorities, such as
Underwriters Laboratories, the Telecommunications Industry Association, the
Electronics Industries Association and the Canadian Standards Association. In
addition, many of our products are subject to the requirements of federal, state
and local or foreign regulatory authorities. Changes in the standards and
requirements imposed by such authorities could have an adverse effect on us. In
the event we are unable to meet any such standards when adopted our business
could be adversely affected. In addition, changes in the legislative environment
could affect the growth and other aspects of important markets served by us.
While certain legislative bills and regulatory rulings are pending in the energy
and telecommunications sectors which could improve our markets, any delay or
failure to pass such legislation and regulatory rulings could adversely affect
our opportunities and anticipated prospects may not arise. It is not possible at
this time to predict the impact that any such legislation or regulation or
failure to enact any such legislation or regulation, or other changes in laws or
industry standards that may be adopted in the future, could have on our
financial results, cash flows or financial position.
ADVANCING TECHNOLOGIES, SUCH AS FIBER OPTIC AND WIRELESS TECHNOLOGIES, MAY MAKE
SOME OF OUR PRODUCTS LESS COMPETITIVE.
Technological developments could have a material adverse effect on our
business. For example, a significant decrease in the cost and complexity of
installation of fiber optic systems or increase in the cost of copper-based
systems could make fiber optic systems superior on a price performance basis to
copper systems and may have a material adverse effect on our business. Also,
advancing wireless technologies, as they relate to network and communication
systems, may represent some threat to both copper and fiber optic cable-based
systems by reducing the need for premise wiring. While we sell some fiber optic
cable and components and cable that is used in certain wireless applications, if
fiber optic systems or wireless technology were to significantly erode the
markets for copper-based systems, our sales of fiber optic cable and products
for wireless applications may not be sufficient to offset any decrease in sales
or profitability of other products that may occur.
RISKS RELATING TO OUR OPERATIONS
VOLATILITY IN THE PRICE OF COPPER AND OTHER RAW MATERIALS, AS WELL AS FUEL AND
ENERGY, COULD ADVERSELY AFFECT OUR BUSINESSES.
The costs of copper and aluminum, the most significant raw materials we
use, have been subject to considerable volatility over the years. Volatility in
the price of copper, aluminum, polyethylene and other raw materials, as well as
fuel, natural gas and energy, will in turn lead to significant fluctuations in
our cost of sales. Additionally, sharp increases in the price of copper can also
reduce demand if customers decide to defer their purchases of copper wire and
cable products or seek to purchase substitute products. Moreover, we do not
engage in activities to hedge the underlying value of our copper and aluminum
inventory. Although we attempt to reflect copper and other raw material price
changes in the sale price of our products, there is no assurance that we can do
so.
INTERRUPTIONS OF SUPPLIES FROM OUR COPPER ROD MILL PLANT OR OUR KEY SUPPLIERS
MAY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL PERFORMANCE.
Interruptions of supplies from our copper rod mill plant or our key
suppliers could disrupt production or impact our ability to increase production
and sales. During 2002, our copper rod mill plant produced approximately 50% of
the copper rod used in our North American operations and two suppliers provided
an aggregate of approximately 36% of our North American copper purchases. Any
unanticipated problems or work stoppages at our copper rod mill facility could
have a material adverse effect on our business. Additionally, we use a limited
number of sources for most of the other raw materials that we do not produce. We
do not have long-term or volume purchase agreements with most of our suppliers,
and may have limited options in the short-term for alternative supply if these
suppliers fail, for any reason, including their business failure or financial
difficulties, to continue the supply of materials or components. Moreover,
identifying and accessing alternative sources may increase our costs.
8
FAILURE TO NEGOTIATE EXTENSIONS OF OUR LABOR AGREEMENTS AS THEY EXPIRE MAY
RESULT IN A DISRUPTION OF OUR OPERATIONS.
Approximately 65% of our employees are represented by various labor
unions. During the last five years, we have experienced only one strike, which
was settled on satisfactory terms. Labor agreements covering approximately 18%
of our employees expire prior to December 31, 2004. We cannot predict what
issues may be raised by the collective bargaining units representing our
employees and, if raised, whether negotiations concerning such issues will be
successfully concluded. A protracted work stoppage could result in a disruption
of our operations which could adversely affect our ability to deliver certain
products and our financial results.
OUR INABILITY TO CONTINUE TO ACHIEVE PRODUCTIVITY IMPROVEMENTS MAY RESULT IN
INCREASED COSTS.
Part of our business strategy is to increase our profitability by
lowering costs through improving our processes and productivity. In the event we
are unable to continue to implement measures improving our manufacturing
techniques and processes, we may not achieve desired efficiency or productivity
levels and our manufacturing costs may increase. In addition, productivity
increases are related in part to factory utilization rates. Our decreased
utilization rates over the past few years have adversely impacted productivity.
WE ARE SUBSTANTIALLY DEPENDENT UPON DISTRIBUTORS AND RETAILERS FOR SALES OF OUR
PRODUCTS.
During 2002, approximately 36% of our domestic net sales were to
independent distributors and four of our ten largest customers were
distributors. Distributors accounted for a substantial portion of sales of our
communications products and industrial & specialty products. During 2002,
approximately 14% of our domestic net sales were to retailers and the two
largest retailers, AutoZone and The Home Depot, accounted for approximately 3.3%
and 3.1%, respectively, of our net sales.
These distributors and retailers are not contractually obligated to
carry our product lines exclusively or for any period of time. Therefore, these
distributors and retailers may purchase products that compete with our products
or cease purchasing our products at any time. The loss of one or more large
distributors or retailers could have a material adverse effect on our ability to
bring our products to end users and on our results of operations. Moreover, a
downturn in the business of one or more large distributors or retailers could
adversely affect our sales and could create significant credit exposure.
WE FACE PRICING PRESSURES IN EACH OF OUR MARKETS THAT COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS AND FINANCIAL PERFORMANCE.
We face pricing pressures in each of our markets as a result of
significant competition or over-capacity, and price levels for most of our
products have declined over the past few years. While we will work toward
reducing our costs to respond to the pricing pressures that may continue, we may
not be able to achieve proportionate reductions in costs. As a result of
over-capacity and the current economic and industry downturn in the
communications and industrial markets in particular, pricing pressures increased
in 2002 and 2003. Pricing pressures are expected to continue throughout 2003 and
for the foreseeable future. Further declines in prices, without offsetting
cost-reductions, would adversely affect our financial results.
OTHER RISKS RELATING TO OUR BUSINESS
OUR SUBSTANTIAL DEBT COULD ADVERSELY AFFECT OUR BUSINESS.
We have a significant amount of debt. As of September 30, 2003,
assuming that our refinancing transactions had occurred on that date, we would
have had $365.4 million of debt outstanding, $80.4 million of which would have
been secured indebtedness and none of which would have been subordinated to our
senior notes, and had approximately $140 million of additional borrowing
available (which is calculated after giving effect to $36.6 million of letters
of credit outstanding) under our senior secured revolving credit facility. In
addition, subject to the terms of the indenture governing our senior notes, we
may also incur additional indebtedness, including secured debt, in the future.
9
The degree to which we are leveraged could have important adverse
consequences to us. For example, it could:
- make it difficult for us to make payments on or otherwise
satisfy our obligations with respect to our indebtedness;
- limit our ability to borrow additional amounts for working
capital, capital expenditures, potential acquisition
opportunities and other purposes;
- limit our ability to withstand competitive pressures and
reduce our flexibility in responding to changing business,
regulatory and economic conditions in our industry;
- place us at a competitive disadvantage against our less
leveraged competitors;
- subject us to increased costs, to the extent of the portion of
our indebtedness that is subject to floating interest rates;
and
- cause us to fail to comply with applicable debt covenants and
could result in an event of default that could result in all
of our indebtedness being immediately due and payable.
In addition, our ability to generate cash flow from operations
sufficient to make scheduled payments on our debts as they become due will
depend on our future performance, our ability to successfully implement our
business strategy and our ability to obtain other financing.
IF EITHER OF OUR UNCOMMITTED ACCOUNTS PAYABLE OR ACCOUNTS RECEIVABLE FINANCING
ARRANGEMENTS FOR OUR EUROPEAN OPERATIONS IS CANCELLED BY OUR LENDERS, OUR
LIQUIDITY WILL BE NEGATIVELY IMPACTED.
Our European operation participates in arrangements with several
European financial institutions which provide extended accounts payable terms to
us. In general, the arrangements provide for accounts payable terms of up to 180
days. At September 30, 2003, the arrangements had a maximum availability limit
of the equivalent of approximately $94 million of which approximately $77
million was drawn. We do not have firm commitments from these European financial
institutions requiring them to continue to extend credit and they may decline to
advance additional funding. We also have an approximate $25 million uncommitted
facility in Europe, which allows us to sell at a discount, with limited
recourse, a portion of our accounts receivable to a financial institution. At
September 30, 2003, this facility was not drawn upon. We do not have a firm
commitment from this institution to purchase our accounts receivable. Should the
availability under these arrangements be reduced or terminated, we would be
required to negotiate longer payment terms with our suppliers or repay the
outstanding obligations with our suppliers under these arrangements over 180
days and/or seek alternative financing arrangements which could increase our
interest expense. We cannot assure you that such longer payment terms or
alternate financing will be available on favorable terms or at all. Failure to
obtain alternative financing arrangements in such case would negatively impact
our liquidity.
In addition, in order to avoid an event of default under our senior
secured credit facility, we must maintain foreign credit lines of at least the
equivalent of $80.0 million during those periods when our average excess
available funds under our senior secured credit facility is less than $100.0
million for a period of three consecutive months.
WE WILL BE REQUIRED TO TAKE A CHARGE IN CONNECTION WITH A PLANT CLOSURE AND THE
RATIONALIZATION OF ANOTHER PLANT AND WE MAY BE REQUIRED TO TAKE CERTAIN CHARGES
TO OUR EARNINGS IN FUTURE PERIODS IN CONNECTION WITH A POTENTIAL PLANT CLOSURE
AND OUR INVENTORY ACCOUNTING PRACTICES.
We are in the process of closing one of our manufacturing facilities
which we expect will result in approximately $7 million of costs, of which
approximately $4 million will be cash costs. We are also in the process of
significantly reducing operations at another facility which will result in
approximately $16.0 million of costs, of which approximately $6.6 million will
be cash costs. In addition, we are currently evaluating the closure of one
additional facility. We plan to announce the result of our evaluation early in
2004. The cost to rationalize this facility could approximate $4 million, with
cash costs of approximately $1.5 million. The costs to be incurred as a result
of the above actions will be reported over the period the operations are wound
down.
10
As a result of declining copper prices, the historic LIFO cost of our
copper inventory exceeded its replacement cost by approximately $16 million at
December 31, 2002 and $5 million at September 30, 2003. If we were not able to
recover the LIFO value of our inventory at a profit in some future period when
replacement costs were lower than the LIFO value of the inventory, we would be
required to take a charge to recognize in our income statement all or a portion
of the higher LIFO value of the inventory. During 2002 and in the nine months
ended September 30, 2003, we recorded a $2.5 million and a $0.8 million charge,
respectively, for the liquidation of LIFO inventory in North America as we
significantly reduced our inventory levels. We expect to further reduce
inventory quantities in the fourth quarter of 2003 which is expected to result
in an additional LIFO liquidation charge. The amount of the charge to be
incurred in the fourth quarter of 2003 will be dependent upon the quantity of
the inventory reduction and the market price of the metals at the time of the
inventory liquidation. If LIFO inventory quantities are reduced in a future
period when replacement costs are lower than the LIFO value of the inventory, we
would experience a decline in reported earnings.
WE ARE SUBJECT TO CERTAIN ASBESTOS LITIGATION.
There are approximately 15,000 pending non-maritime asbestos cases
involving our subsidiaries. The majority of these cases involve plaintiffs
alleging exposure to asbestos-containing cable manufactured by our predecessors.
In addition to our subsidiaries, numerous other wire and cable manufacturers
have been named as defendants in these cases. Our subsidiaries have also been
named, along with numerous other product manufacturers, as defendants in
approximately 33,000 suits in which plaintiffs alleged that they suffered an
asbestos-related injury while working in the maritime industry. These cases are
referred to as MARDOC cases and are currently managed under the supervision of
the U.S. District Court for the Eastern District of Pennsylvania. On May 1,
1996, the District Court ordered that all pending MARDOC cases be
administratively dismissed without prejudice and the cases cannot be reinstated,
except in certain circumstances involving specific proof of injury. We cannot
assure you that any judgments or settlements of the pending non-maritime and/or
MARDOC asbestos cases or any cases which may be filed in the future will not
have a material adverse effect on our financial results, cash flows or financial
position. Moreover, certain of our insurers may be financially unstable and in
the event one or more of these insurers enter into insurance liquidation
proceedings, we will be required to pay a larger portion of the costs incurred
in connection with these cases.
ENVIRONMENTAL LIABILITIES COULD POTENTIALLY ADVERSELY IMPACT US AND OUR
AFFILIATES.
We are subject to federal, state, local and foreign environmental
protection laws and regulations governing our operations and use, handling,
disposal and remediation of hazardous substances currently or formerly used by
us and our affiliates. A risk of environmental liability is inherent in our and
our affiliates' current and former manufacturing activities in the event of a
release or discharge of a hazardous substance generated by us or our affiliates.
Under certain environmental laws, we could be held jointly and severally
responsible for the remediation of any hazardous substance contamination at our
facilities and at third party waste disposal sites and could also be held liable
for any consequences arising out of human exposure to such substances or other
environmental damage. We and our affiliates have been named as potentially
responsible parties in proceedings that involve environmental remediation. There
can be no assurance that the costs of complying with environmental, health and
safety laws and requirements in our current operations or the liabilities
arising from past releases of, or exposure to, hazardous substances, will not
result in future expenditures by us that could materially and adversely affect
our financial results, cash flows or financial condition.
WE MAY NOT BE ABLE TO SUCCESSFULLY IDENTIFY, FINANCE OR INTEGRATE ACQUISITIONS.
Growth through acquisition has been, and is expected to continue to be,
a significant part of our strategy. We regularly evaluate possible acquisition
candidates and currently have identified one potential candidate with which we
are engaged in preliminary discussions. We believe that an acquisition of this
potential candidate would enhance our global business. However, we have no
agreement or understanding with respect to this potential candidate and we
cannot assure you that any such acquisition will be successfully completed. We
cannot assure you that we will be successful in identifying, financing and
closing acquisitions at favorable prices and terms. Potential acquisitions may
require us to issue additional shares of stock or obtain additional or new
financing, and such financing may not be available on terms acceptable to us, or
at all. The issuance of our common or preferred shares may dilute the value of
shares held by our equityholders. Further, we cannot assure you that we will be
successful in integrating
11
any such acquisitions that are completed. Integration of any such acquisitions
may require substantial management, financial and other resources and may pose
risks with respect to production, customer service and market share of existing
operations. In addition, we may acquire businesses that are subject to
technological or competitive risks, and we may not be able to realize the
benefits expected from such acquisitions.
TERRORIST ATTACKS AND OTHER ATTACKS OR ACTS OF WAR MAY ADVERSELY AFFECT THE
MARKETS IN WHICH WE OPERATE, OUR OPERATIONS AND OUR PROFITABILITY.
The attacks of September 11, 2001 and subsequent events, including the
military action in Iraq, has caused and may continue to cause instability in our
markets and have led and may continue to lead to, further armed hostilities or
further acts of terrorism worldwide, which could cause further disruption in our
markets. Acts of terrorism may impact any or all of our facilities and
operations, or those of our customers or suppliers and may further limit or
delay purchasing decisions of our customers. Depending on their magnitude, acts
of terrorism or war could have a material adverse effect on our business,
financial results, cash flows and financial position.
We carry insurance coverage on our facilities of types and in amounts
that we believe are in line with coverage customarily obtained by owners of
similar properties. We continue to monitor the state of the insurance market in
general and the scope and cost of coverage for acts of terrorism in particular,
but we cannot anticipate what coverage will be available on commercially
reasonable terms in future policy years. Currently, we do not carry terrorism
insurance coverage. If we experience a loss that is uninsured or that exceeds
policy limits, we could lose the capital invested in the damaged facilities, as
well as the anticipated future net sales from those facilities. Depending on the
specific circumstances of each affected facility, it is possible that we could
be liable for indebtedness or other obligations related to the facility. Any
such loss could materially and adversely affect our business, financial results,
cash flows and financial position.
IF WE FAIL TO RETAIN OUR KEY EMPLOYEES, OUR BUSINESS MAY BE HARMED.
Our success has been largely dependent on the skills, experience and
efforts of our key employees, and the loss of the services of any of our
executive officers or other key employees could have an adverse effect on us.
The loss of our key employees who have intimate knowledge of our manufacturing
process could lead to increased competition to the extent that those employees
are able to recreate our manufacturing process. Our future success will also
depend in part upon our continuing ability to attract and retain highly
qualified personnel, who are in great demand.
DECLINING RETURNS IN THE INVESTMENT PORTFOLIO OF OUR DEFINED BENEFIT PLANS WILL
INCREASE OUR PENSION EXPENSE AND REQUIRE US TO INCREASE CASH CONTRIBUTIONS TO
THE PLANS.
Pension expense for the defined benefit pension plans sponsored by us
is determined based upon a number of actuarial assumptions, including an
expected long-term rate of return on assets and discount rate. During the fourth
quarter of 2002, as a result of declining returns in the investment portfolio of
our defined benefit pension plans, we were required to record a minimum pension
liability equal to the underfunded status of our plans. As of December 31, 2002,
the defined benefit plans were underfunded by approximately $52 million based on
the actuarial methods and assumptions utilized for purposes of FAS 87. We will
experience an increase in our future pension expense and in our cash
contributions to our defined benefit pension plan. Pension expense for our
defined benefit plans is expected to increase from $2.0 million in 2002 to
approximately $7.7 million in 2003 and our required cash contributions are
expected to increase to $5.9 million in 2003 from $3.0 million in 2002. In 2004,
cash contributions are expected to increase to $12.6 million. In the event that
actual results differ from the actuarial assumptions, the funded status of our
defined benefit plans may change and any such deficiency could result in
additional charges to equity and an increase in future pension expense and cash
contributions.
AN OWNERSHIP CHANGE COULD RESULT IN A LIMITATION OF THE USE OF OUR NET OPERATING
LOSSES.
As of December 31, 2002, we had net operating loss, or NOL,
carryforwards of approximately $177 million available to reduce taxable income
in future years. Specifically, we generated NOL carryforwards of $55.2 million
in 2000 and $68.4 million in 2002, which expire in 2020 and 2022, respectively.
The 2001 NOL, which was
12
reflected as a carryforward in the 2001 financial statements, was instead
carried back to obtain a $37.0 million tax refund in 2002. We also have other
NOL carryforwards that are subject to an annual limitation under section 382 of
the Internal Revenue Code of 1986, as amended, or the Code. These section 382
limited NOL carryforwards expire in varying amounts from 2006 to 2009. The total
section 382 limited NOL carryforwards that may be utilized prior to expiration
is estimated at $53.9 million.
Our ability to utilize our NOL carryforwards may be further limited by
section 382 if we undergo an ownership change as a result of the sale of our
stock by the selling securityholders and/or as a result of subsequent changes in
the ownership of our outstanding stock. We would undergo an ownership change if,
among other things, the stockholders, or group of stockholders, who own or have
owned, directly or indirectly, 5% or more of the value of our stock or are
otherwise treated as 5% stockholders under section 382 and the regulations
promulgated thereunder increase their aggregate percentage ownership of our
stock by more than 50% over the lowest percentage of our stock owned by these
stockholders at any time during the testing period, which is generally the
three-year period preceding the potential ownership change. In the event of an
ownership change, section 382 imposes an annual limitation on the amount of
post-ownership change taxable income a corporation may offset with pre-ownership
change NOL carryforwards and certain recognized built-in losses. The limitation
imposed by section 382 for any post-change year would be determined by
multiplying the value of our stock immediately before the ownership change
(subject to certain adjustments) by the applicable long-term tax-exempt rate,
which is 4.74% for December 2003. Any unused annual limitation may be carried
over to later years, and the limitation may under certain circumstances be
increased by built-in gains which may be present in assets held by us at the
time of the ownership change that are recognized in the five-year period after
the ownership change.
Based upon our review of the aggregate change in percentage ownership
during the current testing period and subject to any unanticipated increases in
ownership by our "five percent shareholders" (as described above) with respect
to our common stock, or the sale of our stock by the selling securityholders, we
do not believe that we will experience a change in ownership as a result of the
sale of our stock by the selling securityholders. However, such a determination
is complex and there can be no assurance that the Internal Revenue Service could
not successfully challenge our conclusion. In addition, there are circumstances
beyond our control, such as the purchase of our stock by investors who are
existing 5% shareholders or become 5% shareholders as a result of such purchase,
which could result in an ownership change with respect to our stock. Even if the
sale of our stock by the selling securityholders does not cause an ownership
change to occur immediately, we expect to use a large portion of our available
50% ownership shift limitation in connection with the sale of our stock by the
selling securityholders, and we may not be able to engage in significant
transactions that would create a further shift in ownership within the meaning
of section 382 within the subsequent three-year period without triggering an
ownership change. Thus, while it is our general intention to maximize
utilization of our NOL carryforwards by avoiding the triggering of an ownership
change, there can be no assurance that our future actions or future actions by
our stockholders will not result in the occurrence of an ownership change.
IF WE ARE REQUIRED TO CLASSIFY THE PREFERRED STOCK AS DEBT IN THE FUTURE, OUR
BALANCE SHEET WILL BE ADVERSELY AFFECTED.
The preferred stock is presently classified as equity on our balance
sheet in accordance with Statement of Financial Accounting Standards No. 150
"Accounting for Certain Financial Investments with Characteristics of both
Liabilities and Equity," or SFAS 150, since the preferred stock contains a
substantive conversion feature. Under SFAS 150, in each fiscal period, we will
be required to determine whether the conversion feature remains substantive. If
we determine the conversion feature becomes nonsubstantive, as a result of a
substantive decline in the market price of our common stock or otherwise, we
will be required to reclassify the preferred stock as a liability on our balance
sheet. Additionally, in adopting SFAS 150, the Financial Accounting Standards
Board indicated that it is considering changes to the accounting treatment for
certain instruments with liability and equity characteristics. As a result, we
cannot assume that the preferred stock will continue to be classified as equity
in future periods. However, any such reclassification of the preferred stock
would not, in any material respect, affect our compliance with the indenture
governing our senior notes or our senior secured revolving credit facility.
13
RISKS RELATED TO THE PREFERRED STOCK AND OUR COMMON STOCK
ILLIQUIDITY AND AN ABSENCE OF A PUBLIC MARKET FOR THE PREFERRED STOCK COULD
CAUSE PURCHASERS OF THE PREFERRED STOCK TO BE UNABLE TO RESELL THE PREFERRED
STOCK FOR AN EXTENDED PERIOD OF TIME.
The preferred stock was issued on November 24, 2003 in a private
transaction, and the private trading market is limited. There is no public
market for the preferred stock. The relatively small size of this issue could
have a negative impact on the liquidity of the preferred stock. Holders of the
preferred stock may experience difficulty in reselling, or an inability to sell,
the preferred stock. Future trading prices for the preferred stock will depend
on many factors including, among other things, the price of our common stock
into which the preferred stock is convertible, prevailing interest rates, our
financial results, liquidity of the issue, the market for similar securities and
other factors including our financial condition.
OUR ABILITY TO PAY DIVIDENDS ON THE PREFERRED STOCK AND OUR COMMON STOCK IS
LIMITED
Under the Delaware General Corporation Law, we may pay dividends, in
cash or otherwise, only if we have surplus in an amount at least equal to the
amount of the relevant dividend payment. Any payment of cash dividends will
depend upon our financial condition, capital requirements, earnings and other
factors deemed relevant by our board of directors. Further, our senior secured
revolving credit facility and the indenture governing our senior notes restrict
our ability to pay cash dividends. The indenture permits us to pay cash
dividends on the preferred stock through November 24, 2005, so long as no
default exists under the indenture, and thereafter only if we meet certain
financial conditions. The senior secured revolving credit facility permits us to
pay cash dividends on the preferred stock at any time only if no default exists
thereunder and if we meet certain financial conditions, and prohibits us from
paying dividends on our common stock. In addition, the certificate of
designations for the preferred stock prohibits us from the payment of any cash
dividends on our common stock if we are not current on dividend payments with
respect to the preferred stock. Agreements governing future indebtedness will
likely contain restrictions on our ability to pay cash dividends.
THE PREFERRED STOCK RANKS JUNIOR TO ALL OF OUR LIABILITIES AS WELL AS THE
LIABILITIES OF OUR SUBSIDIARIES.
The ranking of the preferred stock with respect to the payment of
dividends and upon liquidation, dissolution or winding up may prevent us from
paying cash dividends. The preferred stock ranks junior in right of payment to
all of our existing and future liabilities, including our obligations under our
senior secured revolving credit facility and our senior notes. In the event that
we do not have sufficient funds to pay both our debt service and accrued
dividends on the preferred stock, we will first limit or stop paying such
dividends to holders of preferred stock until all amounts due on our liabilities
are paid.
In the event of our bankruptcy, liquidation or winding-up, our assets
will be available to pay the liquidation preference of, and accrued dividends
on, the preferred stock only after all our indebtedness and other liabilities
have been paid. In addition, the preferred stock effectively ranks junior to all
existing and future liabilities of our subsidiaries and the capital stock (other
than common stock) of our subsidiaries held by third parties. The rights of
holders of the preferred stock to participate in the assets of our subsidiaries
upon any liquidation or reorganization of any subsidiary ranks junior to the
prior claims of that subsidiary's creditors and equity holders. As of September
30, 2003, we had total consolidated liabilities of $894.3 million. In the event
of our bankruptcy, liquidation or winding-up, there may not be sufficient assets
remaining to pay amounts due on any or all of the preferred stock then
outstanding.
WE MAY NOT BE ABLE TO PAY THE PURCHASE PRICE OF THE PREFERRED STOCK UPON A
CHANGE OF CONTROL IF THE HOLDERS EXERCISE THEIR RIGHT TO REQUIRE US TO PURCHASE
SUCH SECURITIES.
If we undergo a change of control, subject to limited exceptions, we
will be required to offer to purchase the preferred stock at a purchase price
equal to 100% of the then liquidation preference, plus accrued and unpaid and
accumulated dividends. Under certain circumstances, we will have the option to
pay for those shares either in cash or in shares of our common stock valued at a
discount of 5% from the market price of our common stock.
14
Under the terms of our senior secured revolving credit facility,
however, we are prohibited from paying the purchase price of the preferred stock
in cash. Our future credit facilities and other existing and future indebtedness
may contain similar restrictions.
OUR STOCK PRICE HAS BEEN AND CONTINUES TO BE VOLATILE.
The market price for our common stock could fluctuate due to various
factors. These factors include:
- announcements relating to significant corporate transactions;
- fluctuations in our quarterly and annual financial results;
- operating and stock price performance of companies that
investors deem comparable to us;
- changes in government regulation or proposals relating
thereto;
- general industry and economic conditions; and
- sales or the expectation of sales of a substantial number of
shares of our common stock in the public market.
In addition, the stock markets have, in recent years, experienced
significant price fluctuations. These fluctuations often have been unrelated to
the operating performance of the specific companies whose stock is traded.
Market fluctuations, as well as economic conditions, have adversely affected,
and may continue to adversely affect, the market price of our common stock.
Fluctuations in the price of our common stock will affect the value of any
outstanding preferred stock.
SHARES ELIGIBLE FOR FUTURE SALE MAY HARM OUR COMMON STOCK PRICE.
Sales of substantial numbers of additional shares of common stock or
any shares of our preferred stock, including sales of shares in connection with
future acquisitions, or the perception that such sales could occur, may have a
harmful effect on prevailing market prices for our common stock and our ability
to raise additional capital in the financial markets at a time and price
favorable to us. Our amended and restated certificate of incorporation provides
that we have authority to issue 75 million shares of common stock. There are
approximately 39 million shares of common stock outstanding, approximately 3.5
million shares of common stock are issuable upon exercise of currently
outstanding stock options and approximately 10.3 million shares of common stock
issuable upon conversion of the preferred stock.
ISSUANCES OF ADDITIONAL SERIES OF PREFERRED STOCK COULD ADVERSELY AFFECT HOLDERS
OF OUR COMMON STOCK.
Our board of directors is authorized to issue additional series of
preferred stock without any action on the part of our shareholders. Our board of
directors also has the power, without shareholder approval, to set the terms of
any such series of preferred stock that may be issued, including voting rights,
conversion rights, dividend rights, preferences over our common stock with
respect to dividends or if we liquidate, dissolve or wind up our business and
other terms. If we issue preferred stock in the future that has preference over
our common stock with respect to the payment of dividends or upon our
liquidation, dissolution or winding-up, or if we issue preferred stock with
voting rights that dilute the voting power of our common stock, the rights of
holders of our common stock or the market price of our common stock could be
adversely affected.
PROVISIONS IN OUR CONSTITUENT DOCUMENTS COULD MAKE IT MORE DIFFICULT TO ACQUIRE
OUR COMPANY.
Our amended and restated certificate of incorporation and amended and
restated by-laws contain provisions that may discourage, delay or prevent a
third party from acquiring us, even if doing so would be beneficial to our
shareholders. Under our amended and restated certificate of incorporation, only
our board of directors may call special meetings of shareholders, and
shareholders must comply with advance notice requirements for nominating
candidates for election to our board of directors or for proposing matters that
can be acted upon by shareholders at shareholder meetings. Directors may be
removed by shareholders only for cause and only by the effective vote of at
least 66 2/3% of the voting power of all shares of capital stock then entitled
to vote generally in the election of
15
directors, voting together as a single class. Additionally, agreements with
certain of our executive officers may have the effect of making a change of
control more expensive and, therefore, less attractive.
Pursuant to our amended and restated certificate of incorporation, our
board of directors may by resolution establish one or more series of preferred
stock, having such number of shares, designation, relative voting rights,
dividend rates, conversion rights, liquidation or other rights, preferences and
limitations as may be fixed by our board of directors without any further
shareholder approval. Such rights, preferences, privileges and limitations as
may be established could have the further effect of impeding or discouraging the
acquisition of control of our company.
HOLDERS OF THE PREFERRED STOCK HAVE NO RIGHTS AS COMMON SHAREHOLDERS UNTIL THEY
ACQUIRE OUR COMMON STOCK.
Until you acquire shares of our common stock upon conversion of the
preferred stock you will have no rights with respect to our common stock,
including voting rights (except as required by applicable state law or our
amended and restated certificate of incorporation, and as described under
"Description of the Preferred Stock--Voting Rights"), rights to respond to
tender offers and rights to receive any dividends or other distributions on our
common stock. Upon conversion, you will be entitled to exercise the rights of a
holder of common stock only as to matters for which the record date occurs after
the conversion date.
FORWARD-LOOKING STATEMENTS
Certain of the matters we discuss in this prospectus may constitute
forward-looking statements. You can identify a forward-looking statement because
it contains words such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "estimates," or "anticipates" or
similar expressions which concern strategy, plans or intentions. All statements
we make relating to estimated and projected earnings, margins, costs,
expenditures, cash flows, growth rates and financial results are forward-looking
statements. In addition, we, through our senior management, from time to time
make forward-looking public statements concerning our expected future operations
and performance and other developments. These statements are necessarily
estimates reflecting our judgment based upon current information and involve a
number of risks and uncertainties. We cannot assure you that other factors will
not affect the accuracy of these forward-looking statements or that our actual
results will not differ materially from the results we anticipate in the
forward-looking statements. While it is impossible for us to identify all the
factors which could cause our actual results to differ materially from those we
estimated, we describe some of these factors under the heading "Risk Factors."
We do not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by or on behalf of us.
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the preferred stock or the issue or subsequent sale by any
selling securityholder of the common stock issuable upon conversion of the
preferred stock. We will not receive proceeds from any sale made by the transfer
agent for the preferred stock, on behalf of the holders of the preferred stock,
of the common stock that may be issued to the transfer agent in connection with
the payment of dividends on the preferred stock as these proceeds will be used
to satisfy our dividend payment obligations in relation to the preferred stock.
16
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to
fixed charges for each of the periods indicated.
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of pretax income from continuing operations before income taxes
and fixed charges. Fixed charges include: (i) interest expense, whether expensed
or capitalized; (ii) amortization of debt issuance cost; (iii) the portion of
rent expense representative of the interest factor and (iv) the amount of pretax
earnings required to cover preferred stock dividends and any accretion in the
carrying value of the preferred stock. The ratio of earnings to fixed charges
and preferred stock dividends is the same as the ratio of earnings to fixed
charges in all periods as we did not have any preferred stock outstanding in the
periods presented.
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31, ---------------------
1998 1999 2000 2001 2002 2002 2003
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed 6.5x 2.3x - 2.1x - - 1.2x
Charges(1)
--
(1) For the years ended December 31, 2000 and 2002 and the nine months ended
September 30, 2002, earnings were insufficient to cover fixed charges by
$28.9 million, $27.6 million and $16.5 million, respectively.
17
BUSINESS
OUR COMPANY
We are a FORTUNE 1000 company that is a leading global developer and
manufacturer in the wire and cable industry, an industry which is estimated to
have had $58 billion in sales in 2002. We have leading market positions in the
segments in which we compete due to our product, geographic and customer
diversity and our ability to operate as a low cost provider. We sell over 11,500
copper, aluminum and fiber optic wire and cable products, which we believe
represent the most diversified product line of any U.S. manufacturer. As a
result, we are able to offer our customers a single source for most of their
wire and cable requirements. We manufacture our product lines in 28 facilities
and sell our products worldwide through our operations in North America, Europe
and Oceania. Major customers for our products include leading utility companies
such as Consolidated Edison and Arizona Public Service; leading distributors
such as Graybar and Anixter; leading retailers such as The Home Depot and
AutoZone; and leading original equipment manufacturers, or OEMs, such as GE
Medical Systems; and leading telecommunications companies such as Qwest
Communications, Verizon Communications and SBC/Ameritech. Technical expertise
and implementation of Lean Six Sigma strategies have allowed us to maintain our
position as a low cost provider.
Our operations are divided into three main segments: energy, industrial
& specialty and communications. Our energy cable products include low-, medium-
and high-voltage power distribution and power transmission products for overhead
and buried applications. Our industrial & specialty wire and cable products
conduct electrical current for industrial, OEM, commercial and residential power
and control applications. Our communications wire and cable products transmit
low-voltage signals for voice, data, video and control applications. We believe
we are the number one supplier of energy and industrial & specialty cable
products and the number three supplier of communications products in North
America and a top three supplier in the majority of the segments in which we
compete in Oceania. We believe we are the largest supplier in the Iberian region
and a strong regional wire and cable manufacturer in the rest of Europe. For the
twelve-month period ended September 30, 2003, we had net sales of $1.5 billion
and a net loss of $(4.0) million.
PRODUCTS AND MARKETS
The net sales generated by each of our three main segments (as a
percentage of our total company results) over the twelve-month period ended
September 30, 2003 are summarized below:
[Pie Chart Omitted]
Products and Markets Percentage
-------------------- ----------
Energy 36%
Industrial & Specialty 35%
Communications 29%
Our energy and industrial & specialty segments accounted for 84.2% and 18.0% of
our operating income, after allocating corporate charges, for the twelve-month
period ended September 30, 2003, while our communications segment reduced our
operating income, after allocating corporate charges, for such period.
18
The principal products, markets, distribution channels and end-users of
each of our product categories are summarized below:
PRODUCT CATEGORY PRINCIPAL PRODUCTS PRINCIPAL MARKETS PRINCIPAL END-USERS
---------------- ------------------ ----------------- -------------------
ENERGY
Utility Low-Voltage, Power Utility Investor-Owned Utility
Medium-Voltage Companies; State and
Distribution; Bare Local Public Power
Overhead Conductor; Companies; Rural
High-Voltage Electric Associations;
Transmission Cable Contractors
INDUSTRIAL & SPECIALTY
Instrumentation, Power, Control Rubber and Plastic- Industrial Power and Industrial Consumers;
and Specialty Jacketed Wire and Cable; Control; Utility/Marine/ Contractors; OEMs;
Power and Industrial Cable; Transit; Military; Military Customers;
Instrumentation and Mining; Oil and Gas Telecommunications
Control Cable Industrial; Power System Operators
Generation;
Infrastructure;
Residential Construction
Automotive Ignition Wire Sets; Automotive Aftermarket Consumers; OEMs
Booster Cables
COMMUNICATIONS
Outside Voice and Data Outside Plant Telecom Local Loop Telecommunications
(Telecommunications) Telecommunications Systems Operators
Exchange Cable; Outside
Service Wire
Data Communications Multi-Conductor/Multi-Pair; Computer Networking Contractors; OEMs;
Fiber Optic; Shipboard; and Multimedia Systems Integrators;
Military Fiber Cable Applications Systems Operators;
Military Customers
Electronics Multi-Conductor; Building Management; Contractors; Consumers;
Coaxial; Sound, Entertainment; Equipment Industrial
Security/Fire Alarm Cable Control
Assemblies Cable Harnesses; Telecommunications; Communications and
Connector Cable Industrial Equipment; Industrial Equipment
Medical Equipment Manufacturers
We operate our business globally, with 74% of net sales in 2002
generated from North America, 22% from Europe and 4% from Oceania. We estimate
that we sold our products and services to customers in more than 70 countries in
2002.
19
STRATEGIC INITIATIVES
Due to a decrease in net sales resulting from the global economic
downturn in 2001 and 2002 and its impact particularly in the telecommunications
markets globally and the industrial & specialty market in North America, we have
implemented various management initiatives to improve productivity and maximize
cash flow. These initiatives include the following:
- Consolidating our North American manufacturing and
distribution facilities, including closing three of seven
plants that manufacture communications products and four of
six distribution centers.
- Reducing head count by 1,700 persons, or 22% of our work force
employed in our continuing operations since September 30,
2000.
- Reducing outstanding aggregate indebtedness, and borrowings
under an off-balance sheet facility, by approximately 42%, or
$347.8 million, from June 30, 2000 (our historical peak
borrowing level) to September 30, 2003.
- Reducing inventory levels related to continuing operations
from $296.4 million at September 30, 2000 to $247.0 million at
September 30, 2003, a 17% decrease; this decrease is net of a
$17.3 million impact from foreign exchange rate fluctuations
on our reported inventory international levels. On a
consistent foreign exchange basis, the decrease in inventory
levels was $66.7 million, or 23%.
- Reducing capital expenditures from continuing operations from
$35.8 million in 2000 to $31.4 million in 2002 and further to
$20.4 million in the twelve months ended September 30, 2003.
- Exiting less profitable, non-core businesses, such as building
wire and consumer cordsets.
- Focusing on non-capital based productivity, such as Lean Six
Sigma and reduction of manufacturing cycle time.
In addition, in connection with reinforcing our position as a low-cost
provider, we have announced the closure of and the reduced operation at another
one of our North American manufacturing facilities for our industrial &
specialty segment. We also have initiated a study at one of our other North
American industrial & specialty manufacturing facility to determine the
feasibility of continuing manufacturing operations at that location.
We believe that many of our markets have begun to stabilize as end
users begin to increase their spending on infrastructure maintenance and new
construction. Furthermore, the 2003 power outages in the U.S., Canada and Europe
emphasize the need to upgrade the power transmission infrastructure used by
electric utilities, which may over time cause an increase in demand for our
products. As a result of our strategic initiatives and adequate manufacturing
capacity in all our businesses, we believe that we are well positioned to
capitalize on any upturn in our markets without significant additional capital
expenditures.
COMPETITIVE STRENGTHS
We have adopted a "One Company" approach for our dealings with
customers and vendors. This approach is becoming increasingly important as the
electrical, industrial, data communications and electronic distribution
industries continue to consolidate into a smaller number of larger regional and
national participants with broader product lines. As part of our One Company
approach, we have established cross-functional business teams, which seek
opportunities to increase sales to existing customers and to new customers
inside and outside of traditional market channels. Our One Company approach
better integrates us with our major customers, thereby allowing us to become
their leading source for wire and cable products. We believe this approach also
provides us with purchasing leverage as we coordinate our North American
sourcing requirements. Our competitive strengths include:
Leading Market Positions. We have achieved leading market positions in
many of our business segments. For example, we believe that in 2002:
- In the energy segment, we were the number one producer in
North America, the number three producer in Oceania and a
strong regional producer in Europe;
20
- In the industrial & specialty segment, we were the number one
producer in North America and the number three producer in
Oceania; and
- In the communications segment, we were the number three
producer in North America and Oceania.
Product, Geographic and Customer Diversity. We sell over 11,500
products under well-established brand names, including General Cable(R),
Anaconda(R), BICC(R) and Carol(R), which we believe represent the most
diversified product line of any U.S. wire and cable manufacturer. The breadth of
our product line has enhanced our market share and operating performance by
enabling us to offer a diversified product line to customers who previously
purchased wire and cable from multiple vendors but prefer to deal with a smaller
number of broader-based suppliers. We believe that the breadth of our products
gives us the opportunity to expand our product offerings to existing customers.
We distribute our products to over 3,000 customers through our operations in
North America, Europe and Oceania. Our customers include utility companies,
telecommunications systems operators, contractors, OEMs, system integrators,
military customers, consumers and municipalities. The following summarizes sales
as a percentage of our 2002 domestic net sales by each category of customers:
[Pie Chart Omitted]
2002 Domestic Net Sales by
Each Category of Customers Percentage
--------------------------- ----------
Electric Utility 32%
OEMs & Electrical/Industrial Distributors 21%
Telco Utility 17%
Communication Distributors 15%
Automotive Retail 8%
Electrical Retail 6%
Other 1%
We strive to develop supply relationships with leading customers who
have a favorable combination of volume, product mix, business strategy and
industry position. Our customers are some of the largest consumers of wire and
cable products in their respective markets and include the following companies:
Consolidated Edison, an electric utility company serving the New York City
metropolitan area; Arizona Public Service, Arizona's largest electricity
utility; Graybar, one of the largest electrical and communications distributors
in the United States; Anixter, one of the largest domestic distributors of wire,
cable and communications connectivity products; The Home Depot, a leading home
center retail chain; AutoZone, the largest retailer of automotive aftermarket
parts in the United States; GE Medical Systems, a global leader in medical
imaging, interventional procedures, healthcare services and information
technology; Verizon Communications, a leading provider of communications
services in the Northeastern United States; and Qwest Communications and
SBC/Ameritech, former regional bell operating companies.
Our top 20 customers in 2002 accounted for 44% of our net sales, and no
one customer accounted for more than 5% of our net sales. We believe that our
diversity mitigates the risks associated with an excess concentration of sales
in any one market or geographic region or to any one customer.
Low Cost Provider. We are a low cost provider primarily because of our
focus on lean manufacturing, centralized sourcing and distribution and
logistics. We continuously focus on maintaining and optimizing our manufacturing
infrastructure by promoting an organization-wide "lean" mentality in order to
improve efficiencies. This enables us to maintain a low manufacturing cost
structure, reduce waste, inventory levels and cycle time, as well as retain a
high level of customer service. We have made a significant investment in Lean
Six Sigma training and have established a formal training program for employees
supporting this. We also facilitate the sharing of manufacturing techniques
through the exchange of best practices among design and manufacturing engineers
across our global business units. We believe that these initiatives have enabled
us to achieve a high degree of non-capital based productivity which will allow
us to achieve further productivity improvements.
Experienced and Proven Management Team. Our senior management team has,
on average, over 15 years of experience in the wire and cable industry and 11
years with our company, and has successfully created a corporate-
21
wide culture that focuses on our One Company approach and continuous improvement
in all aspects of our operations. In addition, our senior management team has
successfully reduced overhead and operating costs, improved productivity and
increased working capital efficiency. For example, our SG&A expenses excluding
corporate items have declined from $226.6 million, or 10.5% of net sales, in
2000 to $123.1 million, or 8.5% of net sales, in 2002. We believe that the level
of our SG&A expenses as a percentage of our net sales is one of the lowest in
the wire and cable industry. Additionally, our senior management team has
restructured our business portfolio to eliminate less profitable, non-core
businesses and capitalize on market opportunities by anticipating market trends
and risks.
BUSINESS STRATEGY
We seek to distinguish ourselves from other wire and cable
manufacturers through the following business strategies:
Improving Operating Efficiency and Productivity. Our operations benefit
from management's ongoing evaluations of operating efficiency. These evaluations
have resulted in cost-saving initiatives designed to improve our profitability
and productivity across all areas of our operations. Recent initiatives include
rationalization of manufacturing facilities and product lines, consolidation of
distribution locations, product redesign, improvement in materials procurement
and usage, product quality and waste elimination and other non-capital based
productivity initiatives. We also expect that continued successful execution of
our One Company approach will provide more efficient purchasing, manufacturing,
marketing and distribution for our products.
Focus on Establishing and Expanding Long-Term Customer Relationships.
Each of our top 20 customers has been our customer for at least five years. Our
customer relationship strategy is focused on being the "wire provider of choice"
for the most demanding customers by providing a diverse product line coupled
with a high level of service. We place great emphasis on customer service and
provide technical resources to solve customer problems and maintain inventory
levels of critical products that are sufficient to meet fluctuating demands for
such products.
We have implemented a number of service and support programs, including
Electronic Data Interchange ("EDI") transactions, web-based product catalogues,
ordering and order tracking capabilities and Vendor Managed Inventory ("VMI")
systems. VMI is an inventory management system integrated into certain of our
customers' internal systems which tracks inventory turnover and places orders
with us for wire and cable on an automated basis. These technologies create high
supplier integration with these customers and position us to be their leading
source for wire and cable products.
Actively Pursue Strategic Initiatives. We believe that our management
has the ability to identify key trends in the industry, which allows us to
migrate our business to capitalize on expanding markets and new niche markets
and exit declining or non-strategic markets in order to achieve better returns.
For example, we exited the North American building wire business in late 2001.
This business had historically been highly cyclical, very price competitive and
had low barriers to entry. We also set aggressive performance targets for our
businesses and intend to refocus, turn around or divest those activities that
fail to meet our targets or do not fit our long-term strategies.
We regularly consider selective acquisitions and joint ventures to
strengthen our existing business lines. We believe there are strategic
opportunities in many international markets, including South America and Asia,
as countries in these markets continue to look to upgrade their power
transmission and generation infrastructure and invest in new communications
networks in order to participate in high-speed, global communications. We are
seeing increased opportunities in the European Union for our European
manufacturing operations. See "Risk Factors--Other Risks Relating to Our
Business--We may not be able to successfully identify, finance or integrate
acquisitions."
Reduce Leverage. We intend to reduce our leverage in the near to
intermediate term. As a result of our well-diversified business portfolio and
recent operating initiatives, we believe we can improve our existing operating
margin, which will allow us to generate increased cash flows. In order to
achieve this goal of debt reduction, we currently expect to use a substantial
portion of cash flow from operations and the net proceeds from any sale of
non-strategic assets to strengthen our balance sheet. In pursuit of this
strategy, we have reduced outstanding aggregate indebtedness, and borrowings
under an off-balance sheet facility, by $347.8 million, or 42%, from June 30,
2000 to September 30, 2003 through a combination of cash flow from operations
and strategic divestitures. We have
22
adequate manufacturing capacity in all of our businesses and are well positioned
to capitalize on any upturns in our markets without significant additional
capital expenditures.
INDUSTRY AND MARKET OVERVIEW
The global wire and cable market was estimated to have had $58 billion
in sales in 2002 by CRU International Limited. This marks a 12% and 19% decline
from the $66 billion and $72 billion in sales in 2001 and 2000, respectively.
The decline in the North American and European markets was even greater. The
decline in the wire and cable market is directly related to the global economic
slowdown in 2001 and 2002, which has resulted in reduced spending by customers
in all wire and cable markets as well as price erosion caused in part by excess
inventory sell off.
The wire and cable industry is competitive, mature and cost driven.
Wire and cable is relatively low value-added, higher weight (and therefore
relatively expensive to transport) and often subject to regional or country
specifications. In many business segments there is little differentiation among
participants from a manufacturing standpoint. The industry is highly fragmented
with many participants in both the United States and worldwide. However, the 20
largest companies control approximately 47% of the overall global market. Since
the 1990's, the industry has been undergoing consolidation. Additionally, over
the past few years, some large market participants have been willing to divest
businesses that are underperforming or not perceived as good growth
opportunities.
The wire and cable industry is raw materials intensive with copper and
aluminum comprising the major cost component for cable products. Changes in the
cost of copper and aluminum are generally passed through to the customer,
although there can be timing delays of varying lengths depending on the type of
product, competitive conditions and particular customer arrangements.
PRODUCT MARKETS
As a result of asset sales and divestitures, we have repositioned our
operations into three main lines or segments: energy, industrial & specialty,
and communications businesses. We distribute our products to over 3,000
customers from our operations in North America, Europe and Oceania. Our
customers include: utility companies, telecommunications systems operators,
contractors, OEMs, system integrators, military customers, consumers and
municipalities.
Beginning in the third quarter of 2001, we have reported the building
wire and cordsets segment as discontinued operations for financial reporting
purposes. The prior periods have been restated to reflect this change. For year
2000, the financial information has been shown for the total company on an as
reported basis and for the ongoing businesses after the closing of the sale of
certain businesses to Pirelli on a pro forma basis. The pro forma presentation
is provided as it provides the reader of our financial statements with a
consistent basis of presentation when comparing our results in 2000 to the
results for 2001, 2002 and 2003. The following table sets forth summarized
financial information by reportable segment for the years ended December 31,
2000, 2001 and 2002 and the nine months ended September 30, 2002 and 2003 (in
millions of dollars).
PRO FORMA NINE MONTHS ENDED
TOTAL ONGOING SEPTEMBER 30,
COMPANY BUSINESSES --------------------
2000 2000 2001 2002 2002 2003
-------- ---------- -------- -------- -------- --------
Net Sales:
Energy $ 733.6 $ 544.9 $ 521.8 $ 516.0 $ 389.0 $ 413.5
Industrial & specialty 796.7 602.0 537.6 499.4 383.1 395.1
Communications 631.8 631.8 592.0 438.5 330.4 324.5
-------- -------- -------- -------- -------- --------
$2,162.1 $1,778.7 $1,651.4 $1,453.9 $1,102.5 $1,133.1
======== ======== ======== ======== ======== ========
Operating Income:
Energy $ (24.4) $ 40.0 $ 35.3 $ 36.9 $ 28.7 $ 29.4
Industrial & specialty 29.7 30.6 24.3 9.7 6.7 7.8
Communications 59.8 59.8 48.5 2.5 7.5 5.3
-------- -------- -------- -------- -------- --------
65.1 130.4 108.1 49.1 42.9 42.5
23
PRO FORMA NINE MONTHS ENDED
TOTAL ONGOING SEPTEMBER 30,
COMPANY BUSINESSES --------------------
2000 2000 2001 2002 2002 2003
-------- ---------- -------- -------- -------- --------
Corporate and other operating items (31.0) -- (3.8) (33.4) (28.7) (1.7)
-------- -------- -------- -------- -------- --------
$ 34.1 $ 130.4 $ 104.3 $ 15.7 $ 14.2 $ 40.8
======== ======== ======== ======== ======== ========
Energy Market
The energy market consists of low-, medium- and high-voltage power
distribution and power transmission products for overhead and buried
applications. The global market for power cables experienced a slight increase
in sales in 2002 of 2% to $14.6 billion from $14.3 billion in 2001. Growth in
this market will be largely dependent on investment policy of electric utilities
and infrastructure improvement. We believe that the increase in electricity
consumption in North America has outpaced the rate of utility investment in
power cables. As a result, we believe the average age of power transmission
cables has increased, the current electric transmission infrastructure needs to
be upgraded and the transmission grid is near capacity. In addition, the 2003
power outages in the U.S., Canada and Europe emphasize the need for upgrading
the power transmission infrastructure used by electric utilities that may, over
time, cause an increase in demand for our products.
The net sales in North America decreased as a result of lower sales
volume. We anticipate that sales volume for North American customers should
improve over time as utility customers address capital projects that were
previously deferred, including enhancements to the power transmission and
distribution grid. In the first half of 2003, projects were not released as
quickly as expected which management believes is partially due to pending energy
legislation in the United States which would provide future regulatory relief
and allow North American utility companies to earn an adequate rate of return on
their investment in upgrading the transmission grid infrastructure. In addition,
certain other proposed legislation in the United States, if passed, will permit
accelerated depreciation on transmission grids, certain tax credits and bonus
depreciation on new equipment which could create an increased demand for our
products.
In addition, a majority of our North America energy market customers
have entered into written agreements with us for the purchase of wire and cable
products. These agreements typically have 2-4 year terms and provide metal
adjustments to selling prices to reflect fluctuations in the price of copper and
aluminum. Historically, approximately 70% of our North America energy business
is contracted for prior to the start of each year.
We believe that we are the largest participant in North America in the
energy wire and cable market and the third largest participant in this market in
each of Europe and Oceania. We believe that we have approximately 29%, 6% and 8%
market shares in the energy markets in North America, Europe and Oceania. Sales
of energy products accounted for approximately 36% of our net sales in 2002.
Our utility cables business is the leader in the supply of energy
cables to the North America electric utility industry. The business manufactures
low- and medium-voltage aluminum and copper cable, bare overhead aluminum
conductor and high-voltage transmission cable. Bare transmission cables are
utilized by the utilities in the transmission grid to provide electric power
from the power generating stations to the distribution sub-stations.
Medium-voltage energy cables are utilized in the primary distribution
infrastructure to bring the power from the distribution sub-stations to the
transformers. Low-voltage energy cables are utilized in the secondary
distribution infrastructure to take the power from the transformers to the
end-user's meter.
Our North American utility cables business has strategic alliances in
the United States and Canada with a number of major customers and is
strengthening its position through these agreements. This business utilizes a
network of direct sales and authorized distributors to supply low- and
medium-voltage and bare overhead cable products. This market is represented by
approximately 3,500 utility companies.
Our European utility cables business is headquartered in Barcelona,
Spain and is a strong regional wire and cable manufacturer in Europe behind
Pirelli and Nexans. The business utilizes its broad product offering and its low
cost manufacturing platform to gain market share as evidenced by its recent
award of business with utilities in
24
France, Italy and the United Kingdom. The business has also benefited from its
competitors ongoing withdrawal of medium-voltage cable manufacturing capacity
from the European market and from the trend in Europe to install power cables
underground, which requires more highly engineered cables.
Industrial & Specialty Market
The industrial & specialty market consists of wire and cable products
for use in a wide variety of capital goods and consumer uses. The principal
product categories in this market are portable cord, industrial cables and
automotive products.
The global market for industrial & specialty cable products has many
niche markets and is difficult to quantify. Sales have declined as the result of
the substantial decline in industrial construction spending from mid-1990 peak
levels and in electric and wire cable spending from peaks in 1997. Growth in the
industrial & specialty markets is responsive to general growth in the economy
and will be largely dependent upon new industrial construction, investment in
capital equipment and vehicle after-market maintenance spending.
We believe that we are the largest participant in this highly
fragmented segment in North America and Oceania and the third largest in Europe.
We believe that we have a top three market share in most of the segments in
which we compete, including power, cord, mining, industrial flex, specialty
control and instrumentation, and automotive aftermarket. Sales of products in
the market accounted for approximately 34% of our net sales in 2002.
The North America market for the industrial & specialty cable products
for which we compete was approximately $3.0 billion in 2002.
Many industrial and commercial environments require cables with
exterior armor and/or jacketing materials that can endure exposure to chemicals,
extreme temperatures and outside elements. We offer products that are
specifically designed for these applications.
Portable Cord and Specialty Cables. We manufacture and sell a wide
variety of rubber and plastic insulated portable cord products for power and
control applications serving industrial, mining, entertainment, OEM, farming and
other markets. Portable cord products are used for the distribution of
electrical power, but are designed and constructed to be used in dynamic and
severe environmental conditions where a flexible but durable power supply is
required. Portable cord products include both standard commercial cord and cord
products designed to customer specifications. Portable rubber-jacketed power
cord, our largest selling cord product line, is typically manufactured without a
connection device at either end and is sold in standard and customer-specified
lengths. Portable cord is also sold to OEMs for use as power cords on their
products and in other applications, in which case the cord is made to the OEMs'
specifications. We also manufacture portable cord for use with moveable heavy
equipment and machinery. Our portable cord products are sold primarily through
electrical distributors and electrical retailers to industrial customers, OEMs,
contractors and consumers.
Our portable cords are used in the installation of new industrial
equipment and the maintenance of existing equipment, and to supply electrical
power at temporary venues such as festivals, sporting events, concerts and
construction sites. We expect demand for portable cord to be influenced by
general economic activity.
Our industrial & specialty products sold under the "Brand Rex" name
include low-voltage and data transmission cables, rail and mass transit cables,
shipboard cables, off-shore cables, other industrial cables and cables for
low-smoke, zero-halogen systems. Primary uses for these products include various
applications within power generating stations, marine, oil and gas,
transit/locomotive, OEMs, machine builders, medical imaging, shipboard,
aerospace industries, space flight and aircraft markets. Shipboard cables sold
by us hold a leading position with the U.S. Navy. Our "Polyrad XT" marine wire
and cable products also provide superior properties and performance levels that
are necessary for heavy-duty industrial applications to both onshore and
offshore platforms, ships and oil rigs.
Industrial cable products include medium and low voltage power, control
and instrumentation cable, armored power cable, flexible control cables, festoon
cables, robotic cables and industrial data communications cables. These products
have various applications in generating stations and substations, process
control, mining, material handling, machine tool and robotics markets.
25
Automotive Products. Our principal automotive products are ignition
wire sets and booster cables for sale to the automotive aftermarket. Booster
cable sales are affected by the severity of weather conditions and related
promotional activity by retailers. As a result, a majority of booster cable
sales occur between September and January.
We sell our automotive ignition wire sets and booster cables primarily
to automotive parts retailers and distributors, hardware and home center retail
chains and hardware distributors. Our automotive products are also sold on a
private label basis to retailers and other automotive parts manufacturers.
Communications Market
The communications market consists of:
- outside voice and data products--wire and cable products for
voice, data and video transmission applications;
- data communication products--high-bandwith twisted copper and
fiber optic cables and multiconductor cables for customer
premises, local area networks and telephone company central
offices;
- electronics--specialty products for use in machinery and
instrumentation interconnection, audio, computer, security and
other applications; and
- OEM products--harnesses and assemblies for telecommunication,
industrial and medical equipment manufacturers.
Sales of communications wire and cable products in the global market
were $18.1 billion in 2002, a decline of 32% from the 2001 market of $26.7
billion. This sales decline is the result of a significant decline in historic
spending levels for outside plant telecommunications cables and switching and
local area network cables, particularly for fiber optic cables (which has seen
as much as a 50% decline from 1990s average spending). Growth in this market
will be largely dependent upon capital spending by the region bell operating
companies, or RBOCs, on maintenance, repair and expansion of their
infrastructure and the level of information technology spending on network
infrastructure. We believe this decline has reached its bottom and sales for
communications wire and cable products will increase over time because current
levels of spending by our communications wire and cable customers are
insufficient to maintain their network infrastructures over time as surplus
field inventories have been liquidated by the RBOCs. For example, capital
spending by our four largest RBOC customers in 2003 is estimated to be between
12% - 17% of their net sales, a substantial decline from 21% - 47% of their net
sales in the 2000 and 2001 period. This reduction in capital spending by these
RBOCs has resulted in a 50% reduction in their spending for exchange cables
compared to 1990s averages.
We believe that we are the third largest participant in the North
America and Oceania communications market for copper wire and cable products. We
believe that we have approximately 17% and 18% market shares in the
communications market for copper wire and cable products in North America and
Oceania, respectively.
Outside Voice and Data Products. Our principal outside voice and data
products are outside plant telecommunications exchange cable and service wire.
Outside plant telecommunications exchange cable is short haul trunk, feeder or
distribution cable from a telephone company's central office to the subscriber
premises. It consists of multiple paired conductors (ranging from 2 pairs to
4,200 pairs) and various types of sheathing, water-proofing, foil wraps and
metal jacketing. Service wire is used to connect telephone subscriber premises
to curbside distribution cable. During 2000, we expanded our manufacturing
capacity of telecommunications cable through the acquisition of Telmag, S.A. de
C.V. Sales of these products accounted for approximately 21% of our net sales in
2002.
We sell our outside voice and data products primarily to
telecommunications system operators through our direct sales force under supply
contracts of varying lengths, and also to telecommunications distributors. The
agreements do not guarantee a minimum level of sales. Product prices are
generally subject to periodic adjustment based upon changes in the cost of
copper and other factors.
26
Data Communications Products. Our data communications products are
high-bandwidth twisted pair copper and fiber optic cable for the customer
premise, local area networks, central office and OEM telecommunications
equipment markets. Customer premise products are used for wiring at subscriber
premises, and include computer, riser rated and plenum rated wire and cable.
Riser cable runs between floors and plenum cable runs in air spaces, primarily
above ceilings in non-residential structures. Local area network cables run
between computers along horizontal raceways and in backbones between servers.
Central office products interconnect components within central office switching
systems and public branch exchanges. Sales of data communications products
accounted for approximately 8% of our net sales in 2002.
We sell data communications products primarily through distributors and
agents. The fiber optic cable sold by us is manufactured by a joint venture
company we formed during 2002. The joint venture manufactures all of our fiber
optic cable products.
The market for data communications products has been adversely effected
by a decrease in information technology spending. However, this decrease has
been partially offset by continued spending in this market on maintenance and
repair.
Electronics. Our electronics products include multi-conductor,
multi-pair, coaxial, hook-up, audio and microphone cables, speaker and
television lead wire, and high temperature and shielded electronic wire. Primary
uses for these products are various applications within the commercial,
industrial instrumentation and control, and residential markets. These markets
require a broad range of multi-conductor products for applications involving
programmable controllers, robotics, process control and computer integrated
manufacturing, sensors and test equipment, as well as cable for fire alarm,
smoke detection, sprinkler control, entertainment and security systems.
OEM Products. Assemblies are used in communications switching systems
and industrial control applications as well as medical equipment applications.
These assemblies are used in such products as data processing equipment;
telecommunications network switches, diagnostic imaging equipment, office
machines and industrial machinery. Our industrial instrumentation and control
products are sold primarily through distributors and agents.
GEOGRAPHIC SEGMENTS
Revenues for our North American business represented approximately 70%,
74% and 77% of our total consolidated net sales for the nine months ended
September 30, 2003 and for the years ended December 31, 2002 and 2001,
respectively. Net sales for our European business represented approximately 25%,
22% and 19% of our total consolidated net sales for the nine months ended
September 30, 2003 and for the years ended December 31, 2002 and 2001,
respectively. Net sales for our Oceania business represented approximately 5%,
4% and 4% of our total consolidated net sales for the nine months ended
September 30, 2003 and for the years ended December 31, 2002 and 2001,
respectively.
North America
Sales in the North American wire and cable market were approximately
$14.3 billion in 2002 or approximately 25% of the global market. Sales in the
North American market experienced a 20% decline in 2002 from $18.0 billion in
2001, representing the sharpest decline worldwide.
We believe that we are the largest participant in the North American
market. Other large competitors in this market are Southwire, Superior Telecom,
Belden and Avaya.
Europe
Sales in the European wire and cable market were approximately $14.4
billion in 2002 or approximately 25% of the global market. Sales in Europe
declined 12% in 2002 from $16.2 billion in 2001.
Our European business is headquartered in Barcelona, Spain, and has
three manufacturing facilities in the Barcelona area and a manufacturing
facility near Lisbon, Portugal, all of which are supported by centralized
marketing, sales and production planning. The main markets served are Spain,
Portugal, France, United Kingdom, Norway, Belgium and Brazil, with approximately
75% of sales generated in the European market and the remaining
27
25% representing export sales. Over 90% of net sales in Europe are derived from
energy and industrial and specialty cable sales.
We believe that we are one of many strong regional wire and cable
manufacturers in Europe.
Oceania
We believe that we are the third largest participant in the market in
Oceania, behind Pirelli and Olex.
Our Oceania business consists of a regional headquarters and
manufacturing facility in Christchurch, New Zealand, a joint venture
manufacturing facility in Fiji and sales offices in New Zealand and Australia.
The business offers a broad product range in the energy, communications and
electrical markets principally serving New Zealand, Australia, Fiji and the
Pacific Islands with certain products also sold into Asia.
COMPETITION
The markets for all of our products are highly competitive, and we
experience competition from several competitors within each market. We believe
that we have developed strong customer relations as a result of our ability to
supply customer needs across a broad range of products, our commitment to
quality control and continuous improvement, our continuing investment in
information technology, our emphasis on customer service, and our substantial
product and distribution resources.
Although the primary competitive factors for our products vary somewhat
across the different product categories, the principal factors influencing
competition are generally breadth of product line, inventory availability and
delivery time, price, quality and customer service. Many of our products are
made to industry specifications and are therefore essentially functionally
interchangeable with those of competitors. However, we believe that significant
opportunities exist to differentiate all of our products on the basis of
quality, consistent availability, conformance to manufacturer's specifications
and customer service. Within some markets such as specialty and LAN cables,
conformance to manufacturer's specifications and technological superiority are
also important competitive factors. Brand recognition is also a primary
differentiating factor in the portable cord market and, to a lesser extent, in
our other product groups.
Our key competitors include other wire and cable manufacturers, such as
Pirelli, Southwire, Nexans, Okonite, Marmon and Alcan in energy products;
Leviton, Coleman Cable, Belden, Nexans, Pirelli, Marmon and Okonite for
instrumentation, power control and specialty cable products; American Insulated
Wire Corporation for cord products; Prestolite for automotive products; Superior
Telecom and Belden for outside voice & data products; and Belden, Nexans, Cable
Design Technologies, CommScope and Avaya for data communications products.
RAW MATERIALS
The principal raw material used by us in the manufacture of our wire
and cable products is copper. We purchase copper in either cathode, rod or wire
form from a number of major domestic and foreign producers, generally through
annual supply contracts. Copper is available from many sources, and we believe
that we are not dependent on any single supplier of copper. In 2002, our two
largest suppliers of copper each accounted for approximately 18% of our North
American copper purchases. For the nine months ended September 30, 2003, our two
largest suppliers of copper accounted for approximately 36% and 34% of our North
America copper purchases.
We have centralized our copper purchasing in North America to
capitalize on economies of scale and to facilitate the negotiation of favorable
purchase terms from suppliers. The cost of copper has been subject to
considerable volatility over the past several years. However, as a result of a
number of practices intended to match copper purchases with sales, our
profitability has generally not been significantly affected by changes in copper
prices. We generally pass changes in copper prices along to our customers,
although there are timing delays of varying lengths depending upon the type of
product, competitive conditions and particular customer arrangements. We do not
engage in speculative metals trading or other speculative activities, nor do we
engage in activities to hedge the underlying value of our copper inventory.
Other raw materials utilized by us include aluminum, nylon,
polyethylene resin and compounds and plasticizers, fluoropolymer compounds,
fiber and a variety of filling, binding and sheathing materials. For our North
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American operations, we produced approximately 64% and 59% of our bare wire
strand and PVC compound requirements for 2002 and 63% and 64% of our bare wire
strand and PVC compound requirements for the first nine months of 2003. We
believe that all of these materials are available in sufficient quantities
through purchases in the open market.
PATENTS AND TRADEMARKS
We believe that the success of our business depends more on the
technical competence, creativity and marketing abilities of our employees than
on any individual patent, trademark or copyright. Nevertheless, we have a policy
of seeking patents when appropriate on inventions concerning new products and
product improvements as part of our ongoing research, development and
manufacturing activities.
We own a number of U.S. and foreign patents and have patent
applications pending in the U.S. and abroad. We also own a number of U.S. and
foreign registered trademarks and have many applications for new registrations
pending.
Although in the aggregate these patents and trademarks are of
considerable importance to the manufacturing and marketing of many of our
products, we do not consider any single patent or trademark or group of patents
or trademarks to be material to our business as a whole. While we occasionally
obtain patent licenses from third parties, none are deemed to be material.
Trademarks which are considered to be generally important are General Cable(R),
Anaconda(R), BICC(R) and Carol(R), and our triad symbol. We believe that our
products bearing these trademarks have achieved significant brand recognition
within the industry.
We also rely on trade secret protection for our confidential and
proprietary information. We routinely enter into confidentiality agreements with
our employees. There can be no assurance, however, that others will not
independently obtain similar information and techniques or otherwise gain access
to our trade secrets or that we will be able to effectively protect our trade
secrets.
ENVIRONMENTAL MATTERS
We are subject to a variety of federal, state, local and foreign laws
and regulations covering the storage, handling, emission and discharge of
materials into the environment, including CERCLA, the Clean Water Act, the Clean
Air Act (including the 1990 amendments) and the Resource Conservation and
Recovery Act.
Our subsidiaries in the United States have been identified as
potentially responsible parties with respect to several sites designated for
cleanup under CERCLA or similar state laws, which impose liability for cleanup
of certain waste sites and for related natural resource damages without regard
to fault or the legality of waste generation or disposal. Persons liable for
such costs and damages generally include the site owner or operator and persons
that disposed or arranged for the disposal of hazardous substances found at
those sites. Although CERCLA imposes joint and several liability on all
potentially responsible parties, in application, the potentially responsible
parties typically allocate the investigation and cleanup costs based, among
other things, upon the volume of waste contributed by each potentially
responsible party.
Settlements can often be achieved through negotiations with the
appropriate environmental agency or the other potentially responsible parties.
Potentially responsible parties that contributed small amounts of waste
(typically less than 1% of the waste) are often given the opportunity to settle
as "de minimis" parties, resolving their liability for a particular site. We do
not own or operate any of the waste sites with respect to which we have been
named as a potentially responsible party by the government. Based on our review
and other factors, we believe that costs to us relating to environmental
clean-up at these sites will not have a material adverse effect on our results
of operations, cash flows or financial position.
In the transaction with Wassall PLC in 1994, American Premier
Underwriters, Inc. agreed to indemnify us against liabilities (including all
environmental liabilities) arising out of our or our predecessors' ownership or
operation of the Indiana Steel & Wire Company and Marathon Manufacturing
Holdings, Inc. businesses (which were divested), without limitation as to time
or amount. American Premier also agreed to indemnify us against 66 2/3% of all
other environmental liabilities arising out of our or our predecessors'
ownership or operation of other properties and assets in excess of $10 million
but not in excess of $33 million, which were identified during the
29
seven-year period ended June 2001. Indemnifiable environmental liabilities
through June 2001 were substantially below that threshold. In addition, we also
have claims against third parties with respect to some of these liabilities.
During 1999, we acquired the worldwide energy cable and cable systems
business of Balfour Beatty plc, previously known as BICC plc. As part of this
acquisition, the seller agreed to indemnify us against environmental liabilities
existing at the date of the closing of the purchase of the business. The
indemnity is for an eight-year period ending in 2007, while we operate the
businesses, subject to certain sharing of losses (with BICC plc covering 95% of
losses in the first three years, 80% in years four and five and 60% in the
remaining three years). The indemnity is also subject to the overall indemnity
limit of $150 million, which applies to all warranty and indemnity claims in the
transaction. In addition, BICC plc assumed responsibility for cleanup of certain
specific conditions at various sites operated by us and cleanup is mostly
complete at these sites. In the sale of the European businesses to Pirelli in
August 2000, we generally indemnified Pirelli against any environmental
liabilities on the same basis as BICC plc indemnified us in the earlier
acquisition. However, the indemnity we received from BICC plc relating to the
European businesses sold to Pirelli terminated upon the sale of those businesses
to Pirelli. In addition, we generally indemnified Pirelli against other claims
relating to the prior operation of the business. Pirelli has asserted claims
under this indemnification. We are continuing to investigate these claims and
believe that the reserves established at the time of the transaction are
adequate to cover any obligations we may have.
We have also agreed to indemnify Southwire Company against certain
environmental liabilities arising out of the operation of the business we sold
to Southwire prior to its sale in 2001, including remediation of our former site
in Watkinsville, Georgia.
While it is difficult to estimate future environmental liabilities
accurately, we do not currently anticipate any material adverse effect on our
results of operations, financial condition or cash flows as a result of
compliance with federal, state, local or foreign environmental laws or
regulations or cleanup costs of the sites discussed above. As of September 30,
2003, we had an accrued liability of approximately $5.2 million for various
environmental-related liabilities of which we are aware. However, there can be
no guarantee that discovery of previously unknown conditions, future changes in
environmental laws and requirements or their enforcement, or inability to
enforce environmental indemnification agreements will not result in material
costs in excess of our reserve.
PROPERTIES
Our principal properties are listed below. We believe that our
properties are generally well maintained and are adequate for our current level
of operations.
SQUARE USE/PRODUCT OWNED
LOCATION FEET LINE(S) OR LEASED
-------- ---- ----------- ---------
NORTH AMERICA
MANUFACTURING FACILITIES:
Marion, IN(1) 745,000 Industrial & Specialty Cables Owned
Marshall, TX 692,000 Aluminum Low-Voltage Energy Cables Owned
Willimantic, CT 686,000 Industrial & Specialty Cables Owned
Manchester, NH 550,000 Electronic Products Owned
Lawrenceburg, KY 383,000 Outside Voice and Data Products and Data Owned
Communications Products
Bonham, TX 364,000 Outside Voice and Data Products Owned
Lincoln, RI 350,000 Industrial & Specialty Cables and Automotive Owned
Products
Malvern, AR 338,000 Aluminum Medium-Voltage Energy Cables Owned
DuQuoin, IL 279,000 Medium-Voltage Energy Cables Owned
Tetla, Mexico 218,000 Outside Voice and Data Products Owned
Altoona, PA 193,000 Automotive Products Owned
Jackson, TN 182,000 Data Communications Cables Owned
South Hadley, MA(2) 150,000 Bare Wire Fabricating Owned
Taunton, MA(3) 131,000 Bare Wire Fabricating Leased
LaMalbaie, Canada 120,000 Low-and Medium-Voltage Energy Cables Owned
30
SQUARE USE/PRODUCT OWNED
LOCATION FEET LINE(S) OR LEASED
-------- ---- ----------- ---------
St. Jerome, Canada 110,000 Low-and Medium-Voltage Energy Cables Owned
DISTRIBUTION AND OTHER FACILITIES:
Lebanon, IN 198,000 Distribution Center Leased
Chino, CA 189,000 Distribution Center Leased
Highland Heights, KY 166,000 World Headquarters, Technology Center and Learning Owned
Center
Plano, TX 60,000 Rod Mill Owned
EUROPE AND OCEANIA
Barcelona, Spain(4) 1,080,000 Power Transmission and Distribution, Industrial & Owned
Specialty Cables
New Zealand(4) 314,000 Power Distribution, Industrial & Specialty and Owned
Communications Cables
Lisbon, Portugal 255,000 Power Distribution, Industrial & Specialty and
Communications Cables Owned
---------------
(1) We are in the process of significantly reducing operations at this
facility.
(2) We have initiated a feasibility study to determine whether to continue
operations at this facility or move the product lines to other
facilities.
(3) We are in the process of closing this facility.
(4) Certain locations represent a collection of facilities in the local
area.
LEGAL PROCEEDINGS
We are subject to numerous federal, state, local and foreign laws and
regulations relating to the storage, handling, emission and discharge of
materials into the environment, including CERCLA, the Clean Water Act, the Clean
Air Act (including the 1990 amendments) and the Resource Conservation and
Recovery Act.
Our subsidiaries have been identified as potentially responsible
parties with respect to several sites designated for cleanup under CERCLA or
similar state laws, which impose liability for cleanup of certain waste sites
and for related natural resource damages without regard to fault or the legality
of waste generation or disposal. We do not own or operate any of the waste sites
with respect to which we have been named as a potentially responsible party by
the government. Based on our review and other factors, management believes that
our costs relating to environmental clean-up at these sites will not have a
material adverse effect on our results of operations, cash flows or financial
position. As of December 31, 2002 and September 30, 2003, we had an accrued
liability of approximately $4.6 million and $5.2 million, respectively, for
various environmental-related liabilities of which we are aware.
American Premier Underwriters, Inc., in connection with the 1994
Wassall PLC transaction, agreed to indemnify us against liabilities (including
all environmental liabilities) arising out of our or our predecessors' ownership
or operation of the Indiana Steel & Wire Company and Marathon Manufacturing
Holdings, Inc. businesses (which were divested by the predecessor prior to the
1994 Wassall transaction), without limitation as to time or amount. American
Premier also agreed to indemnify us against 66 2/3% of all other environmental
liabilities arising out of our or our predecessors' ownership or operation of
other properties and assets in excess of $10 million but not in excess of $33
million, which were identified during the seven-year period ended June 2001.
Indemnifiable environmental liabilities through June 2001 were substantially
below that threshold. In addition, we also have claims against third parties
with respect to some of these liabilities. While it is difficult to estimate
future environmental liabilities accurately, we do not currently anticipate any
material adverse effect on our results of operations, financial condition or
cash flows as a result of compliance with federal, state, local or foreign
environmental laws or regulations or cleanup costs of the sites discussed above.
31
As part of the BICC plc acquisition, BICC agreed to indemnify us
against environmental liabilities existing at the date of the closing of the
purchase of the business. The indemnity is for an eight-year period ending in
2007 while we operate the businesses subject to certain sharing of losses (with
BICC plc covering 95% of losses in the first three years, 80% in years four and
five and 60% in the remaining three years). The indemnity is also subject to the
overall indemnity limit of $150 million, which applies to all warranty and
indemnity claims in the transaction. In addition, BICC plc assumed
responsibility for cleanup of certain specific conditions at several sites
operated by us and cleanup is mostly complete at those sites. In the sale of the
European businesses to Pirelli in August 2000, we generally indemnified Pirelli
against any environmental liabilities on the same basis as BICC plc indemnified
us in the earlier acquisition. However, the indemnity we received from BICC plc
related to the European businesses sold to Pirelli terminated upon the sale of
those businesses to Pirelli. At this time, there are no claims outstanding under
the general indemnity provided by BICC plc.
We have also agreed to indemnify Southwire Company against certain
environmental liabilities arising out of the operation of the business we sold
to Southwire prior to our sale.
There are approximately 15,000 pending non-maritime asbestos cases
involving our subsidiaries. The majority of these cases involve plaintiffs
alleging exposure to asbestos-containing shipboard cable manufactured by our
predecessors. In addition to our subsidiaries, numerous other wire and cable
manufacturers have been named as defendants in these cases. In addition, our
subsidiaries have been named, along with numerous other product manufacturers as
defendants in approximately 33,000 suits in which plaintiffs' alleged that they
suffered an asbestos-related injury while working in the maritime industry.
These cases are referred to as MARDOC cases and are currently managed under the
supervision of the U.S. District Court for the Eastern District of Pennsylvania.
On May 1, 1996, the District Court ordered that all pending MARDOC cases be
dismissed without prejudice for failure to plead sufficient facts. Under that
order of dismissal, all future MARDOC cases filed by the plaintiff's attorney
are required to be accompanied by a filing fee for each new complaint. These
cases can only be removed from the inactive docket if the plaintiff is able to
prove an asbestos-related injury, and show specific product identification as to
each defendant against whom the plaintiff chooses to proceed. Based upon our
experience to date, we do not believe that the outcome of the pending
non-maritime and/or MARDOC asbestos cases will have a material adverse effect on
our results of operation, cash flows or financial position. At September 30,
2003, we had an accrued liability of approximately $1.3 million for these
lawsuits. During 2002, costs of defense, judgments and settlements of asbestos
litigation (before contribution from insurers) was $0.1 million.
In January 1994, we entered into a settlement agreement with certain
principal primary insurers concerning liability for the costs of defense,
judgments and settlements, if any, in all of the asbestos litigation described
above. Subject to the terms and conditions of the settlement agreement, the
insurers are responsible for a substantial portion of the costs and expenses
incurred in the defense or resolution of this litigation. However, recently one
of the insurers participating in the settlement that was responsible for a
significant portion of the contribution under the settlement agreement entered
into insurance liquidation proceedings. As a result, the contribution of the
insurers has been reduced and we may ultimately have to bear a larger portion of
the costs relating to these lawsuits. Based on (1) the terms of the insurance
settlement agreement; (2) the relative costs and expenses incurred in the
disposition of past asbestos cases; (3) reserves established on our books which
are believed to be reasonable; and (4) defenses available to us in the
litigation, we believe that the resolution of the present asbestos litigation
will not have a material adverse effect on our financial results, cash flows or
financial position. However, we cannot assure you that any judgments or
settlements of the pending non-maritime and/or MARDOC asbestos cases or any
cases which may be filed in the future will not have a material adverse effect
on our financial results, cash flows or financial position. Liabilities incurred
in connection with asbestos litigation are not covered by the American Premier
indemnification.
We are also involved in various routine legal proceedings and
administrative actions. In the opinion of our management, these proceedings and
actions should not, individually or in the aggregate, have a material adverse
effect on the results of our operations, cash flows or financial position.
EMPLOYEES
At September 30, 2003, approximately 6,000 persons were employed by us,
and collective bargaining agreements covered approximately 3,900 employees at
various locations around the world. During the last five years, we have
experienced one strike in Oceania which was settled on satisfactory terms. There
have been no other
32
major strikes at any of our facilities during the last five years. In North
America, union contracts will expire at eight facilities in 2004. In Europe and
Oceania, labor agreements are generally negotiated on an annual or bi-annual
basis. We believe that our relationships with our employees are good.
33
DESCRIPTION OF THE PREFERRED STOCK
The following section is a summary of the material provisions of the
certificate of designations and does not restate the certificate of designations
in its entirety. We urge you to read the certificate of designations because it,
and not this description, defines your rights as holders of the Series A
redeemable convertible preferred stock offered by this prospectus. Copies of the
certificate of designations are available as set forth under "--Additional
Information" below.
As used in this description, references to "we," "us," "our" or
"General Cable" mean General Cable Corporation and do not include any current or
future subsidiary of General Cable Corporation.
GENERAL
Our certificate of incorporation authorizes the issuance of up to
25,000,000 shares of preferred stock without the approval of the holders of our
common stock, in one or more series, from time to time, with each such series to
have such designation, powers, preferences and rights as may be determined by
our board of directors. The Series A redeemable convertible preferred stock,
which we refer to in this description as the "convertible preferred stock,"
constitutes a series of these shares of preferred stock.
The convertible preferred stock constitutes a single series consisting
of 2,070,000 shares. The holders of the convertible preferred stock have no
preemptive rights. The convertible preferred stock were validly issued, fully
paid and nonassessable.
RANKING
The convertible preferred stock ranks, with respect to dividend rights
and rights upon liquidation, winding-up or dissolution:
- junior to all our existing and future liabilities, whether or
not for borrowed money;
- junior to "senior stock," which is each class or series of our
capital stock the terms of which expressly provide that such
class or series will rank senior to the convertible preferred
stock;
- on a parity with "parity stock," which is any other class or
series of our capital stock that has terms which expressly
provide that such class or series will rank on a parity with
the convertible preferred stock;
- senior to "junior stock," which is our common stock, and each
other class or series of our capital stock that has terms
which do not expressly provide that such class or series will
rank senior to or on a parity with the convertible preferred
stock; and
- effectively junior to all of our subsidiaries' (i) existing
and future liabilities and (ii) capital stock held by others.
Without the consent of the holders of at least two-thirds of the shares
of convertible preferred stock outstanding, we will not be entitled to issue
shares of or increase the authorized number of shares of any class or series of
capital stock that ranks senior to the convertible preferred stock with respect
to the payment of dividends and distributions upon liquidation, winding-up or
dissolution, including, without limitation, any class or series of capital
stock, other than parity stock or junior stock, that pays cumulative dividends.
Except as set forth in the preceding paragraph, we may, without the
consent of the holders of the shares of convertible preferred stock, authorize,
create (by way of reclassification or otherwise) or issue parity or junior stock
or any obligation or security convertible or exchangeable into, or evidencing a
right to purchase, shares of any class or series of parity or junior stock.
The terms "junior stock," "parity stock" and "senior stock" include
warrants, rights, calls or options exercisable for or convertible into that type
of stock.
34
DIVIDENDS
GENERAL
The holders of convertible preferred stock are entitled to receive
dividends at the rate of 5.75% per annum on the liquidation preference per share
of convertible preferred stock. The rights of the holders of convertible
preferred stock to receive dividend payments is subject to the rights of any
holders of senior stock and parity stock.
The dividend rate will increase under the circumstances described below
under "--Unpaid Dividends" and "--Registration Rights." All references to
dividends or to a dividend rate shall be deemed to reflect such increase if such
increase is applicable.
Holders of the convertible preferred stock will not have any right to
receive dividends that we may declare on our common stock. The right to receive
dividends declared on our common stock will be realized only after conversion of
such holder's shares of convertible preferred stock into shares of our common
stock.
DIVIDEND PAYMENT DATES
Dividends are payable in arrears on February 24, May 24, August 24 and
November 24 of each year, beginning on February 24, 2004. If any of those dates
is not a business day, then dividends will be payable on the next succeeding
business day. Dividends will accrue from the last dividend payment date or,
prior to the first dividend payment date, November 24, 2003. Dividends will be
payable to holders of record as they appear in our stock records at the close of
business on January 31, April 30, July 31 and October 31 of each year. Dividends
payable on the convertible preferred stock for any period other than a full
quarterly period will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
We are obligated to pay a dividend on the convertible preferred stock
only when, as and if our board of directors or an authorized committee of our
board of directors declares the dividend payable and we have assets that legally
can be used to pay the dividend.
FORM OF PAYMENT
Dividends are payable, at our option, in cash, in shares of our common
stock or any combination thereof. In order to pay dividends in shares of our
common stock, we must deliver to the transfer agent for the convertible
preferred stock a number of shares of our common stock that, when sold by the
transfer agent on the holders' behalf, will result in net cash proceeds to be
distributed to the holders of the convertible preferred stock in an amount equal
to the cash dividends otherwise payable. To pay dividends in this manner, we
must provide the transfer agent with a registration statement permitting the
immediate sale of the shares of common stock in the public market. We cannot
assure you that we will be able to timely file, cause to be declared effective
or keep effective any such registration statement. In addition, in order to pay
dividends in shares of our common stock, we may need to obtain the approval of
our stockholders under the rules of The New York Stock Exchange. We will use all
commercially reasonable efforts to obtain such approval not later than at the
annual meeting of our stockholders next occurring after the issue date. We
cannot assure you that we will be able to obtain such approval from our
stockholders.
Our credit facilities and the indenture governing our senior notes
limit our ability to pay cash dividends on shares of the convertible preferred
stock. See "Risk Factors--Risks Related to the Preferred Stock and our Common
Stock--Our ability to pay dividends on the preferred stock and our common stock
is limited." If we are unable to pay dividends in cash on a dividend payment
date because such payment is not then permitted by our credit facilities, the
indenture or any other agreement or would be contrary to applicable law or our
certificate of incorporation or by-laws, then we will use our reasonable best
efforts to file and cause to be declared effective the registration statement
required to permit us to pay dividends in shares of our common stock.
If we pay dividends in shares of our common stock by delivering them to
the transfer agent, those shares will be owned beneficially by the holders of
the convertible preferred stock upon delivery to the transfer agent, and the
35
transfer agent will hold those shares and the net cash proceeds from the sale of
those shares for the exclusive benefit of the holders.
DIVIDENDS CUMULATIVE
Dividends on the convertible preferred stock will be cumulative. This
means that if our board of directors or an authorized committee of our board of
directors fails to declare a dividend to be payable on a dividend payment date,
the dividend will accumulate on that dividend payment date until declared and
paid or will be forfeited upon conversion (except under the circumstances
described under "Conversion Rights--General").
UNPAID DIVIDENDS
If we do not pay dividends in full on the convertible preferred stock
on more than six dividend payment dates, whether or not consecutive, the per
annum dividend rate will be deemed to have increased by 2% on the date following
the sixth such dividend payment date. Once all accrued and unpaid or accumulated
dividends have been paid in full, the dividend rate will return to the rate in
effect before such increase. If, following any such payment in full, we again do
not pay dividends in full on any dividend payment date, the per annum dividend
rate will be deemed to have increased by 2% on the date following the last
dividend payment date through which all accrued and unpaid or accumulated
dividends have been paid in full and will return to the rate in effect before
such increase only after all accrued and unpaid or accumulated dividends through
the latest dividend payment date have been paid in full.
Except as set forth in the preceding paragraph, we are not obligated to
pay holders of the convertible preferred stock any interest or sum of money in
lieu of interest on any dividend not paid on a dividend payment date or any
other late payment. We are also not obligated to pay holders of the convertible
preferred stock any dividend in excess of the full dividends on the convertible
preferred stock that are payable as described above.
If our board of directors or an authorized committee of our board of
directors does not declare a dividend for any dividend payment date, the board
of directors or an authorized committee of our board of directors may declare
and pay the dividend on any subsequent date, whether or not a dividend payment
date. The persons entitled to receive the dividend in such case will be holders
of the convertible preferred stock as they appear on our stock register on a
date selected by the board of directors or an authorized committee of our board
of directors. That date must not (a) precede the date our board of directors or
an authorized committee of our board of directors declares the dividend payable
and (b) be more than 60 days prior to that dividend payment date.
PAYMENT RESTRICTIONS
If we do not pay a dividend on a dividend payment date, then, until all
accumulated dividends have been declared and paid or declared and set apart for
payment:
- we may not take any of the following actions with respect to any
of our junior stock:
- declare or pay any dividend or make any distribution of
assets on any junior stock, except that we may pay dividends
in shares of our junior stock and pay cash in lieu of
fractional shares in connection with any such dividend; or
- redeem, purchase or otherwise acquire any junior stock,
except that (i) we may redeem, repurchase or otherwise
acquire junior stock upon conversion or exchange of such
junior stock for other junior stock and pay cash in lieu of
fractional shares in connection with any such conversion or
exchange and (ii) we may make repurchases of our capital
stock deemed to occur upon the exercise of stock options if
such capital stock represents a portion of the exercise
price thereof and repurchases of capital stock deemed to
occur upon the withholding of a portion of the capital stock
issued, granted or awarded to one of our directors, officers
or employees to pay for the taxes payable by such director,
officer or employee upon such issuance, grant or award in
order to satisfy, in whole or in part, withholding tax
requirements in connection with the exercise of such
options, in accordance with the provisions of an
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option or rights plan or program of ours, in each case as in
effect on the date the convertible preferred stock is first
issued, or any other plan substantially similar thereto; and
- we may not take any of the following actions with respect to any
of our parity stock:
- declare or pay any dividend or make any distribution of
assets on any parity stock, except that we may pay dividends
on parity stock provided that the total funds available to
be paid be divided among the convertible preferred stock and
such parity stock on a pro rata basis in proportion to the
aggregate amount of dividends accrued and unpaid or
accumulated thereon; or
- we may not redeem, purchase or otherwise acquire any of our
parity stock, except that we may redeem, purchase or
otherwise acquire parity stock upon conversion or exchange
of such parity stock for our junior stock or other parity
stock and pay cash in lieu of fractional shares in
connection with any such conversion or exchange, so long as,
in the case of such other parity stock, (i) such other
parity stock contains terms and conditions (including,
without limitation, with respect to the payment of
dividends, dividend rates, liquidation preferences, voting
and representation rights, payment restrictions,
antidilution rights, change of control rights, covenants,
remedies and conversion and redemption rights) that are not
materially less favorable, taken as a whole, to us or to the
holders of our convertible preferred stock than those
contained in the parity stock that is converted into or
exchanged for such other parity stock, (ii) the aggregate
amount of the liquidation preference of such other parity
stock does not exceed the aggregate amount of the
liquidation preference, plus accrued and unpaid or
accumulated dividends, of the parity stock that is converted
into or exchanged for such other parity stock and (iii) the
aggregate number of shares of our common stock issuable upon
conversion, redemption or exchange of such other parity
stock does not exceed the aggregate number of shares of our
common stock issuable upon conversion, redemption or
exchange of the parity stock that is converted into or
exchanged for such other parity stock.
OPTIONAL REDEMPTION
We may not redeem any shares of convertible preferred stock at any time
before November 24, 2008. At any time or from time to time thereafter, we will
have the option to redeem all or any outstanding shares of convertible preferred
stock, out of funds legally available for such payment, upon not less than 30
nor more than 60 days' prior notice, in cash at the redemption prices specified
below, plus an amount in cash equal to all accrued and unpaid or accumulated
dividends from, and including, the immediately preceding dividend payment date
to, but excluding, the redemption date, during the 12-month period commencing on
November 24 of each of the years set forth below:
2008.............................................................. $51.43
2009.............................................................. $51.15
2010.............................................................. $50.86
2011.............................................................. $50.57
2012, until the date the day prior to mandatory redemption........ $50.28
In the event of a partial redemption of the convertible preferred stock,
the shares to be redeemed will be selected on a pro rata basis, except that we
may redeem all shares of convertible preferred stock held by any holder of fewer
than 10 shares (or all shares of convertible preferred stock owned by any holder
who would hold fewer than 10 shares as a result of such redemption), as
determined by us.
Our senior secured revolving credit facility prohibits us from redeeming
the convertible preferred stock at our option so long as that facility is
outstanding. The indenture for our senior notes limits our ability to redeem the
convertible preferred stock, and future debt agreements may also contain
restrictions or prohibitions.
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MANDATORY REDEMPTION
We will be obligated to redeem all outstanding shares of convertible
preferred stock on November 24, 2013, out of funds legally available for such
payment, at a redemption price equal to the liquidation preference thereof, plus
all accrued and unpaid or accumulated dividends.
FORM OF PAYMENT OF MANDATORY REDEMPTION PRICE.
We may, at our option, elect to pay the redemption price in cash or in
shares of our common stock at a discount of 5% from the market price of our
common stock (i.e., valued at 95% of the market price of our common stock), or
any combination thereof. We may pay such redemption price, whether in cash or in
shares of our common stock, only if we have funds legally available for such
payment and may pay such redemption price in shares of our common stock only if
such shares are eligible for immediate sale in the public market either (i) by
non-affiliates of ours absent a registration statement or (ii) pursuant to a
registration statement that has become effective.
We will be required to give notice to all holders and beneficial owners
as required by applicable law, on a date not less than ten (10) business days
prior to the redemption date stating among other things:
- whether we will pay the redemption price of the convertible
preferred stock in cash or shares of our common stock or any
combination thereof and specifying the percentages of each;
- if we elect to pay in shares of our common stock, the method
of calculating the market price of such common stock, as
described under "General Provisions Concerning the Mandatory
Redemption with Shares of Common Stock" below; and
- the procedures that must be followed in connection with the
redemption.
GENERAL PROVISIONS CONCERNING MANDATORY REDEMPTION WITH SHARES OF
COMMON STOCK.
We will notify the holders of the convertible preferred stock upon the
determination of the actual number of shares of our common stock deliverable
upon any redemption of the convertible preferred stock no later than 2 business
days prior to the redemption date.
Our right to redeem convertible preferred stock with shares of common
stock is subject to our satisfying various conditions, including:
- the listing of such shares of common stock on the principal
United States securities exchange on which our common stock is
then listed or, if not so listed, on The Nasdaq National
Market;
- the registration of the common stock under the Securities Act
and the Exchange Act, if required; and
- any necessary qualification or registration under applicable
state securities law or the availability of an exemption from
such qualification and registration.
If such conditions are not satisfied with respect to a holder prior to
the close of business on any redemption date, we will be required to pay the
redemption price of such holder's shares of convertible preferred stock entirely
in cash. We may not change the form or components or percentages of components
of consideration to be paid for the shares of convertible preferred stock once
we have given any notice that we are required to give to holders of the
convertible preferred stock, except as described in the first sentence of this
paragraph.
The "market price" of our common stock means the average of the sale
prices of our common stock for the five trading day period ending on the third
business day prior to the redemption date (if the third business day prior to
the redemption date is a trading day or, if not, then on the last trading day
prior to the third business day), appropriately adjusted to take into account
the occurrence, during the period commencing on the first of the trading days
during the five trading day period and ending on the redemption date, of any
event that would result in an adjustment to the conversion price of the
convertible preferred stock, as described below under "- Adjustments to the
Conversion Price."
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The sale price of our common stock on any trading day means the closing
sale price per share (or if no closing sale price is reported, the average of
the bid and ask prices or, if more than one in either case, the average of the
average bid and the average asked prices) on that trading day as reported in
composite transactions for the principal U.S. securities exchange on which our
common stock is traded or, if our common stock is not listed on a U.S. national
or regional securities exchange, as reported by The Nasdaq National Market.
A trading day means each day on which the securities exchange or
quotation system that is used to determine the sale price is open for trading or
quotation.
Because the market price of our common stock is determined prior to the
redemption date, holders of the convertible preferred stock bear the market risk
with respect to the value of our common stock to be received from the date the
market price is determined to the redemption date. We may pay the redemption
price or any portion of the redemption price in shares of our common stock only
if the information necessary to calculate the market price is publicly
available.
GENERAL PROVISIONS CONCERNING THE REDEMPTION OF CONVERTIBLE PREFERRED
STOCK
Payment of the redemption price for shares of convertible preferred
stock is conditioned upon book-entry transfer of the convertible preferred stock
or physical delivery of certificates representing the convertible preferred
stock, together with necessary endorsements, to the transfer agent at any time
after delivery of the redemption notice. Payment of the redemption price for the
convertible preferred stock will be made promptly following the later of the
redemption date and the time of book-entry transfer of or physical delivery of
the convertible preferred stock.
If DTC and the transfer agent hold money or securities sufficient to
pay the redemption price of convertible preferred stock on the redemption date
for shares delivered for redemption in accordance with the terms of the
certificate of designations, then the dividends will cease to accrue. At such
time, all rights as a holder of shares of convertible preferred stock shall
terminate, other than the right to receive the redemption price upon delivery of
certificates representing the convertible preferred stock.
LIQUIDATION PREFERENCE
Upon our voluntary or involuntary liquidation, dissolution or
winding-up, each holder of shares of convertible preferred stock will be
entitled to payment, out of our assets legally available for distribution, of an
amount equal to the liquidation preference per share of convertible preferred
stock held by that holder, plus an amount equal to all accrued and unpaid and
accumulated dividends on those shares to but excluding the date of liquidation,
dissolution or winding-up, before any distribution is made on any junior stock,
including our common stock. After payment in full of the liquidation preference
and the amount equal to all accrued and unpaid and accumulated dividends to
which holders of shares of convertible preferred stock are entitled, the holders
will not be entitled to any further participation in any distribution of our
assets. If, upon our voluntary or involuntary liquidation, dissolution or
winding-up, the amounts payable with respect to shares of convertible preferred
stock and all other parity stock are not paid in full, the holders of shares of
convertible preferred stock and the holders of the parity stock will share
equally and ratably in any distribution of our assets in proportion to the full
liquidation preference and the amount equal to all accrued and unpaid and
accumulated dividends to which each such holder is entitled.
Neither the voluntary sale, conveyance, exchange or transfer, for cash,
shares of stock, securities or other consideration, of all or substantially all
of our property or assets nor our consolidation, merger or amalgamation with or
into any other entity or the consolidation, merger or amalgamation of any other
entity with or into us will be deemed to be our voluntary or involuntary
liquidation, dissolution or winding-up.
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CONVERSION RIGHTS
GENERAL
Each share of convertible preferred stock will be convertible at any
time at the option of the holder, unless previously redeemed or repurchased,
into fully paid and nonassessable shares of our common stock at an initial
conversion price of $10.004 per share, adjusted as provided under "--Adjustments
to the Conversion Price." The number of shares of common stock deliverable upon
conversion of a share of convertible preferred stock, commonly referred to as
the "conversion rate," will initially be 4.998, which represents the liquidation
preference divided by the initial conversion price. The conversion rate will be
adjusted as a result of any adjustment to the conversion price.
A holder of shares of convertible preferred stock may convert any or
all of those shares by surrendering to us at our principal office or at the
office of the transfer agent, as may be designated by our board of directors,
the certificate or certificates for those shares of convertible preferred stock
accompanied by a written notice stating that the holder elects to convert all or
a specified whole number of those shares in accordance with the provisions of
the certificate of designations and specifying the name or names in which the
holder wishes the certificate or certificates for shares of common stock to be
issued. In case the notice specifies a name or names other than that of the
holder, the notice must be accompanied by payment of all transfer taxes payable
upon the issuance of shares of common stock in that name or names. Other than
those taxes, we will pay any documentary, stamp or similar issue or transfer
taxes that may be payable in respect of any issuance or delivery of shares of
common stock upon conversion of shares of the convertible preferred stock. As
promptly as practicable after the surrender of that certificate or certificates
and the receipt of the notice relating to the conversion and payment of all
required transfer taxes, if any, or the demonstration to our satisfaction that
those taxes have been paid, we will deliver or cause to be delivered (a)
certificates representing the number of validly issued, fully paid and
nonassessable full shares of our common stock to which the holder, or the
holder's transferee, of shares of convertible preferred stock being converted
will be entitled and (b) if less than the full number of shares of convertible
preferred stock evidenced by the surrendered certificate or certificates is
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by the surrendered certificate or certificates less
the number of shares being converted. This conversion will be deemed to have
been made at the close of business on the date of giving the notice and of
surrendering the certificate or certificates representing the shares of
convertible preferred stock to be converted so that the rights of the holder
thereof as to the shares being converted will cease except for the right to
receive shares of common stock and accrued and unpaid dividends with respect to
the shares of convertible preferred stock being converted, and the person
entitled to receive the shares of common stock will be treated for all purposes
as having become the record holder of those shares of common stock at that time.
If a holder of shares of the convertible preferred stock exercises
conversion rights, upon delivery of the shares for conversion, those shares will
cease to accrue dividends as of the end of the day immediately preceding the
date of conversion. Except as set forth in the last sentence of this paragraph,
holders of shares of convertible preferred stock who convert their shares into
common stock will not be entitled to, nor will the conversion price or
conversion rate be adjusted for, any accrued and unpaid or accumulated
dividends. As a result of the foregoing, shares of convertible preferred stock
surrendered for conversion during the period between the close of business on
any dividend record date and the opening of business on the corresponding
dividend payment date must be accompanied by payment of an amount equal to the
dividend declared and payable on such shares on such dividend payment date.
Notwithstanding the foregoing, a holder of shares of convertible preferred stock
whose shares are converted after we have given a notice of redemption will
continue to be entitled to receive all accrued and unpaid and accumulated
dividends, and those dividends will be payable by us as and when, those
dividends are paid to any holders or, if none, on the date which would have been
the next succeeding dividend payment date had there been any holders or at a
later time when we believe we have adequate available capital under applicable
law to make such a payment.
In case any shares of convertible preferred stock are to be redeemed,
the right to convert those shares of convertible preferred stock will terminate
at the close of business on the business day immediately preceding the date
fixed for redemption unless we default in the payment of the redemption price of
those shares.
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We will at all times reserve and keep available, free from preemptive
rights, for issuance upon the conversion of shares of convertible preferred
stock a number of our authorized but unissued shares of common stock that will
from time to time be sufficient to permit the conversion of all outstanding
shares of convertible preferred stock. Before the delivery of any securities
that we will be obligated to deliver upon conversion of the convertible
preferred stock, we will comply with all applicable federal and state laws and
regulations which require action to be taken by us. All shares of common stock
delivered upon conversion of the convertible preferred stock will upon delivery
be duly and validly issued and fully paid and nonassessable, free of all liens
and charges and not subject to any preemptive rights.
CONVERSION AT OUR OPTION UNDER CERTAIN CIRCUMSTANCES
If fewer than 103,500 shares of convertible preferred stock remain
outstanding, we may, at any time on or after November 24, 2008, at our option,
cause all, but not less than all, of such convertible preferred stock to be
automatically converted into that number of shares of common stock equal to the
liquidation preference thereof plus all accrued and unpaid or accumulated
dividends divided by the lesser of (i) the conversion price and (ii) the market
price of our common stock. We will notify each of the holders of the convertible
preferred stock by mail of such a conversion pursuant to this paragraph. Such
notice shall specify the date of such conversion pursuant to this paragraph,
which will not be less than 30 days nor more than 60 days after the date of such
notice.
ADJUSTMENTS TO THE CONVERSION PRICE
The conversion price is subject to adjustment from time to time as
follows:
(1) Stock splits and combinations. In case we, at any time or from
time to time after the issuance date of the shares of convertible
preferred stock:
- subdivide or split the outstanding shares of our
common stock;
- combine or reclassify the outstanding shares of our
common stock into a smaller number of shares; or
- issue by reclassification of the shares of our common
stock any shares of our capital stock,
then, and in each such case, the conversion price in effect immediately
prior to that event or the record date therefor, whichever is earlier,
will be adjusted so that the holder of any shares of convertible
preferred stock thereafter surrendered for conversion will be entitled
to receive the number of shares of our common stock or of our other
securities which the holder would have owned or have been entitled to
receive after the occurrence of any of the events described above had
those shares of convertible preferred stock been surrendered for
conversion immediately before the occurrence of that event or the
record date therefor, whichever is earlier.
(2) Stock dividends in common stock. In case we, at any time or
from time to time after the issuance date of the convertible preferred
stock, pay a dividend or make a distribution in shares of our common
stock to all of the holders of our common stock other than dividends or
distributions of shares of common stock or other securities with
respect to which adjustments are provided in paragraph (1) above, the
conversion price will be adjusted by multiplying:
- the conversion price immediately prior to the record
date fixed for determination of stockholders entitled
to receive the dividend or distribution by
- a fraction, the numerator of which will be the number
of shares of common stock outstanding at the close of
business on that record date and the denominator of
which will be the sum of that number of shares and
the total number of shares issued in that dividend or
distribution.
(3) Issuance of rights or warrants. In case we issue to all
holders of our common stock rights or warrants entitling those holders
to subscribe for or purchase our common stock at a price per share less
than the current market price, the conversion price in effect
immediately before the close of business on the
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record date fixed for determination of stockholders entitled to receive
those rights or warrants will be decreased by multiplying:
- the conversion price by
- a fraction, the numerator of which is the sum of the
number of shares of our common stock outstanding at
the close of business on that record date and the
number of shares of common stock that the aggregate
offering price of the total number of shares of our
common stock offered for subscription or purchase
would purchase at the current market price and the
denominator of which is the sum of the number of
shares of common stock outstanding at the close of
business on that record date and the number of
additional shares of our common stock so offered for
subscription or purchase.
For purposes of this paragraph (3), the issuance of rights or warrants
to subscribe for or purchase securities convertible into shares of our
common stock will be deemed to be the issuance of rights or warrants to
purchase shares of our common stock issuable upon conversion of those
securities at an aggregate offering price equal to the sum of the
aggregate offering price of those securities and the minimum aggregate
amount, if any, payable upon exercise or conversion of those securities
into shares of our common stock. This adjustment will be made
successively whenever any such event occurs. The conversion rate will
be adjusted back to the extent the rights are not subscribed for or
purchased prior to their expiration or warrants are not exercised prior
to their expiration. For purposes of this paragraph, the "current
market price" of our common stock means the average of the closing sale
prices of our common stock for the five consecutive trading days
selected by our board of directors beginning not more than 10 trading
days before, and ending not later than the date immediately preceding,
the record date for the relevant event.
(4) Distribution of indebtedness, securities or assets. In case we
distribute to all holders of our common stock, whether by dividend or
in a merger, amalgamation or consolidation or otherwise, evidences of
indebtedness, shares of capital stock of any class or series, other
securities, cash or assets (other than common stock, rights or warrants
referred to in paragraph (3) above, a dividend or distribution payable
exclusively in cash, shares of capital stock or similar equity
interests in the case of a spin-off, as described in the next
succeeding paragraph, and other than as a result of a fundamental
change described in paragraph below), the conversion price in effect
immediately before the close of business on the record date fixed for
determination of stockholders entitled to receive that distribution
will be decreased by multiplying:
- the conversion price by
- a fraction, the numerator of which is the current
market price of our common stock and the denominator
of which is the current market price of our common
stock plus the fair market value, as determined by
our board of directors, whose determination in good
faith will be, conclusive, of the portion of those
evidences of indebtedness, shares of capital stock,
other securities, cash and assets so distributed
applicable to one share of common stock.
This adjustment will be made successively whenever any such event
occurs. For purposes of this paragraph, "current market price" of our
common stock means the average of the closing sale prices of our common
stock for the first 10 trading days from, and including, the first day
that the common stock trades after such distribution has occurred.
In respect of a dividend or other distribution of shares of capital
stock of any class or series, or similar equity interests, of or
relating to a subsidiary or other business unit, which we refer to as a
spin-off, the conversion price in effect immediately before the close
of business on the record date fixed for determination of stockholders
entitled to receive that distribution will be decreased by multiplying:
- the conversion price by
- a fraction, the numerator of which is the current
market price of our common stock and the denominator
of which is the current market price of our common
stock plus the fair
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market value, determined as described below, of the
portion of those shares of capital stock or similar
equity interests so distributed applicable to one
share of common stock.
The adjustment to the conversion price under the preceding paragraph
will occur at the earlier of:
- the tenth trading day from, and including, the
completion date of the spin-off and
- the date of the completion of the initial public
offering of the securities being distributed in the
spin-off, if that initial public offering is effected
simultaneously with the spin-off.
For purposes of this section, "initial public offering" means the first
time securities of the same class or type as the securities being
distributed in the spin-off are bona fide offered to the public for
cash. In the event of a spin-off that is not effected simultaneously
with an initial public offering of the securities being distributed in
the spin-off, the fair market value of the securities to be distributed
to holders of our common stock means the average of the closing sale
prices of those securities over the first 10 trading days after the
completion date of the spin-off. Also, for purposes of a spin-off, the
current market price of our common stock means the average of the
closing sale prices of our common stock over the first 10 trading days
after the completion date of the spin-off.
If, however, an initial public offering of the securities being
distributed in the spin-off is to be effected simultaneously with the
spin-off, the fair market value of the securities being distributed in
the spin-off means the initial public offering price, while the current
market price of our common stock means the closing sale price of our
common stock on the trading day on which the initial public offering
price of the securities being distributed in the spin-off is
determined.
(5) Fundamental changes. For purposes of this paragraph (5), the
term fundamental change means any transaction or event, including any
merger, consolidation, sale of assets, tender or exchange offer,
reclassification, compulsory share exchange or liquidation, in which
all or substantially all outstanding shares of our common stock are
converted into or exchanged for stock, other securities, cash or
assets. If a fundamental change occurs, the holder of each share of the
convertible preferred stock outstanding immediately before that
fundamental change occurred that remains outstanding after the
fundamental change will have the right upon any subsequent conversion
to receive, out of funds legally available, to the extent required by
applicable law, the kind and amount of stock, other securities, cash
and assets that the holder would have received if that share had been
converted immediately prior to the fundamental change.
(6) Self-tender. In case we or any of our subsidiaries engages in
a tender or exchange offer for all or any portion of our common stock
that will expire, and such tender or exchange offer, as amended upon
the expiration thereof, will require the payment to stockholders of
consideration per share of our common stock having a fair market value,
as determined by the board of directors, whose determination in good
faith will be conclusive, that, as of the last time tenders or
exchanges may be made pursuant to such tender or exchange offer, as
such time may be amended (the "expiration time"), exceeds the closing
sale price per share of common stock as of the trading day next
succeeding the expiration time, the conversion price shall be decreased
so that it will equal the price determined by multiplying the
conversion price in effect immediately prior to the expiration time by
a fraction, the numerator of which will be the number of shares of
common stock outstanding, including any tendered or exchanged shares,
at the expiration time multiplied by the closing sale price per share
of our common stock as of the trading day next succeeding the
expiration time and the denominator of which will be the sum of:
- the fair market value, determined as described above,
of the aggregate consideration payable to
stockholders based on the acceptance, up to any
maximum specified in the terms of the tender or
exchange offer, of all shares of common stock validly
tendered or exchanged and not withdrawn as of the
expiration time, the shares of common stock deemed so
accepted, up to any such maximum, being referred to
as the purchased shares; and
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- the product of the number of shares of common stock
outstanding, less any purchased shares, at the
expiration time and the closing sale price per share
of common stock as of the trading day next succeeding
the expiration time;
such decrease to become effective as of the opening of business on the
trading day next succeeding the expiration time. In the event that we
are obligated to purchase shares of common stock pursuant to any such
tender or exchange offer, but we are permanently prevented by
applicable law from effecting any such purchases or all such purchases
are rescinded, the conversion price will again be adjusted to be the
conversion price that would then be in effect if such tender or
exchange offer had not been made.
(7) Cash dividend or distribution. In case we pay a dividend or
make a distribution in cash on our common stock, the conversion price
in effect immediately before the close of business on the day that the
common stock trades ex-distribution will be adjusted upon conversion by
multiplying:
- the conversion price by
- a fraction, the numerator of which will be the
current market price of our common stock and the
denominator of which is the current market price of
our common stock plus the amount per share of such
dividend or distribution.
For the purpose of this paragraph, the "current market price" of our
common stock means the average of the closing sale prices of our common
stock for the period of five consecutive trading days after the common
stock trades ex-distribution.
Notwithstanding the foregoing, we will not be required to give effect
to any adjustment in the conversion price unless and until the net effect of one
or more adjustments, each of which will be carried forward until counted toward
adjustment, will have resulted in a change of the conversion price by at least
1%, and when the cumulative net effect of more than one adjustment so determined
will be to change the conversion price by at least 1%, that change in the
conversion price will be given effect.
In the event that, at any time as a result of the provisions of this
section, the holders of shares of the convertible preferred stock upon
subsequent conversion become entitled to receive any shares of our capital stock
other than common stock, the number of those other shares so receivable upon
conversion of shares of the convertible preferred stock will thereafter be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained in this section.
There will be no adjustment to the conversion price in the case of the
issuance of any shares of our stock in a merger, reorganization, acquisition,
reclassification, recapitalization or other similar transaction except as
provided in this section.
We may, from time to time, reduce the conversion price by any amount
for any period of time if the period is at least 20 days or any longer period
required by law and if the reduction is irrevocable during the period, but the
conversion price may not be less than the par value of our common stock. In any
case in which this section requires that an adjustment as a result of any event
become effective from and after a record date, we may elect to defer until after
the occurrence of that event (a) issuing to the holder of any shares of the
convertible preferred stock converted after that record date and before the
occurrence of that event the additional shares of common stock issuable upon
that conversion over and above the shares issuable on the basis of the
conversion price in effect immediately before adjustment and (b) paying to that
holder any amount in cash in lieu of a fractional share of common stock.
We will be required, as soon as practicable following the occurrence of
an event that requires or permits an adjustment in the conversion price, to
provide written notice to the holders of shares of convertible preferred stock
of the occurrence of that event. We will also be required to deliver a statement
setting forth in reasonable detail the method by which the adjustment to the
conversion price was determined and setting forth the revised conversion price.
No fractional shares of common stock will be issued upon conversion of
the convertible preferred stock. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of convertible preferred shares of
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any holder which are converted upon conversion at our option or any conversion
at the option of holders, that holder will be entitled to receive an amount in
cash equal to the same fraction of the closing price of shares of our common
stock determined as of the second trading day immediately preceding the
effective date of conversion.
Our board of directors will have the power to resolve any ambiguity or,
subject to applicable law, correct any error in this section, and its action in
so doing will be final and conclusive.
VOTING RIGHTS
Holders of the convertible preferred stock are not entitled to any
voting rights except as required by law and as set forth below.
So long as any shares of convertible preferred stock remain
outstanding, we shall not, without the consent of the holders of at least
two-thirds of the shares of convertible preferred stock outstanding at the time:
- issue shares of or increase the authorized number of shares of
any senior stock; or
- amend our certificate of incorporation or the resolutions
contained in the certificate of designations, whether by
merger, consolidation or otherwise, if the amendment would
alter or change any power, preference or special right of the
outstanding convertible preferred stock in any manner
materially adverse to the interests of the holders thereof.
Notwithstanding the foregoing, any increase in the authorized number of
shares of common stock or convertible preferred stock or the authorization and
issuance of junior stock or other parity stock, including those with voting or
redemption rights that are different than the voting or redemption rights of the
convertible preferred stock shall not be deemed to be an amendment that alters
or changes such powers, preferences or special rights in any manner materially
adverse to the interests of the holders of the convertible preferred stock.
Any increase, decrease or change in the par value of any class or
series of capital stock, including the convertible preferred stock, will not be
deemed to be an amendment that alters or changes the powers, preferences and
special rights of the shares of convertible preferred stock in any manner
materially adverse to the interests of the holders of the convertible preferred
stock.
If and whenever six full quarterly dividends, whether or not
consecutive, payable on the convertible preferred stock are not paid, the number
of directors constituting our board of directors will be increased by two and
the holders of the convertible preferred stock, voting together as a single
class, will be entitled to elect those additional directors. In the event of
such a non-payment, any holder of the convertible preferred stock may request
that we call a special meeting of the holders of convertible preferred stock for
the purpose of electing the additional directors and we must call such meeting
within 20 days of request. If we fail to call such a meeting upon request, then
any holder of convertible preferred stock can call such a meeting. If all
accumulated dividends on the convertible preferred stock have been paid in full
and dividends for the current quarterly dividend period have been paid, the
holders of our convertible preferred stock will no longer have the right to vote
on directors and the term of office of each director so elected will terminate
and the number of our directors will, without further action, be reduced by two.
In any case where the holders of our convertible preferred stock are
entitled to vote, each holder of our convertible preferred stock will be
entitled to one vote for each share of convertible preferred stock.
CHANGE OF CONTROL PUT
For purposes of this section, "change of control" of our company means
the occurrence of any of the following:
(1)any "person" or "group" (as such terms are used, in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have beneficial ownership of all shares that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of voting stock representing 50% or more of the total voting power of
all of our outstanding voting stock; or
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(2) we consolidate with, or merge with or into, another person (other
than a wholly owned subsidiary) or we and/or one or more of our
subsidiaries sell, assign, convey, transfer, lease or otherwise dispose
of all or substantially all of our assets (determined on a consolidated
basis) to any person (other than to ourselves or a wholly owned
subsidiary), other than any such transaction where immediately after
such transaction the person or persons that "beneficially owned" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act) immediately
prior to such transaction, directly or indirectly, voting stock
representing a majority of the total voting power of all our
outstanding voting stock "beneficially own or owns" (as so determined),
directly or indirectly, voting stock representing a majority of the
total voting power of the outstanding voting stock of the surviving or
transferee person; or
(3) during any consecutive two year period, the Continuing Directors
(as hereinafter defined) cease for any reason to constitute a majority
of our board of directors; or
(4) we or our stockholders adopt a plan of liquidation or dissolution.
"Continuing Directors" means, as of any date of determination, any member of our
board of directors who was (1) a member of such board of directors on the date
of original issuance of the convertible preferred stock or (2) nominated for
election or elected to such board of directors with the approval of a majority
of the Continuing Directors who were members of such board at the time of such
nomination or election.
If we undergo a change of control, each holder of shares of convertible
preferred stock that remain outstanding after the change of control will have
the right to require us to purchase, out of legally available funds, any
outstanding shares of the holder's convertible preferred stock at a purchase
price per share equal to 100% of the liquidation preference of those shares,
plus all accrued and unpaid and accumulated dividends, if any, to the date of
purchase. This right of holders will be subject to our obligation to repay or
repurchase any indebtedness or convertible preferred stock required in
connection with a change of control and to any contractual restrictions then
contained in our indebtedness. Our secured credit facilities prohibit us from
paying, and the indenture governing our senior notes restricts our ability to
pay, the purchase price of the convertible preferred stock in cash. When we have
satisfied these obligations, we will so purchase all shares tendered upon a
change of control.
The purchase price is payable, at our option, in cash or in shares of
our common stock at a discount of 5% from the market price of our common stock
(i.e., valued at 95% of the market price of our common stock), or any
combination thereof. If we pay for shares of the convertible preferred stock in
common stock, no fractional shares of common stock will be issued; instead, we
will round the applicable number of shares up to the nearest whole number of
shares. We may pay such purchase price, whether in cash or in shares of our
common stock, only if we have funds legally available for such payment and may
pay such purchase price in shares of our common stock only if such shares are
eligible for immediate sale in the public market either (i) by non-affiliates of
ours absent a registration statement or (ii) pursuant to a registration
statement that has become effective.
The "market price" of our common stock means the average of the sale
prices of our common stock for the five trading day period ending on the third
business day prior to the redemption date (if the third business day prior to
the redemption date is a trading day or, if not, then on the last trading day
prior to the third business day), appropriately adjusted to take into account
the occurrence, during the period commencing on the first of the trading days
during the five trading day period and ending on the redemption date, of any
event that would result in an adjustment to the conversion price of the
convertible preferred stock, as described under "--Adjustments to the Conversion
Price."
Holders of the convertible preferred stock will not have the foregoing
put right if:
- the sale price per share of our common stock for any five
trading days within the period of 10 consecutive trading days
ending immediately after the later of the change of control or
the public announcement thereof (in the case of a change of
control under paragraph (1) above) or the period of 10
consecutive trading days ending immediately before the change
of control (in the case of a change of control under paragraph
(2), (3) or (4) above) shall equal or exceed 105% of the
conversion price of the convertible preferred stock
immediately after the later of the change of control and the
public announcement thereof, or
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- 100% of the consideration in the change of control transaction
consists of shares of capital stock traded on a U.S. national
securities exchange or quoted on The Nasdaq National Market,
and as a result of the transaction, the convertible preferred
stock becomes convertible solely into this capital stock.
For purposes of the above paragraphs:
- the term "capital stock" of any person means any and all
shares, interests, participations or other equivalents however
designated of corporate stock or other equity participations,
including partnership interests, whether general or limited,
of such person and any rights (other than debt securities
convertible or exchangeable into an equity interest), warrants
or options to acquire an equity interest in such person; and
- the term "voting stock" of any person means capital stock of
such person which ordinarily has voting power for the election
of directors, or persons performing similar functions, of such
person, whether at all times or only for so long as no senior
class of securities has such voting power by reason of any
contingency.
Within 30 days following any change of control, we will mail a notice
by first class mail to each holder's registered address describing the
transaction or transactions that constitute the change of control and offering
to purchase that holder's convertible preferred stock on the date specified in
that notice, which date will be no earlier than 30 days and no later than 60
days from the date the notice is mailed. Such notice will, among other things,
state:
- whether we will pay the purchase price of the convertible
preferred stock in cash or shares;
- if we elect to pay any portion of the purchase price in common
stock, the amount of such portion and the method of
calculating the number of shares of common stock; and
- the instructions determined by us, consistent with this
section, that a holder must follow in order to have its
convertible preferred stock purchased.
Because the valuation of our common stock is determined prior to, the
purchase date, holders bear the market risk with respect to the value of the
common stock to be received from the date such market price is determined to the
purchase date. Upon determination of the actual number of shares of common stock
to be issued for each share of the convertible preferred stock in accordance
with the foregoing provisions, we will promptly notify the holders of this
information and will issue a press release and publish such information on our
website.
We intend to comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent those
laws and regulations are applicable, in connection with the purchase of
convertible preferred stock as a result of a change of control. To the extent
that the provisions of any securities laws or regulations conflict with any of
the provisions of this section, we will comply with the applicable securities
laws and regulations and will be deemed not to have breached our obligations
under this section.
On the date scheduled for payment of the shares of convertible
preferred stock, we will, to the extent lawful:
- purchase all shares of convertible preferred stock properly
tendered;
- deposit with (i) DTC, with respect to shares held by DTC or
the agent, or (ii) the transfer agent, with respect to shares
held in certificated form, as applicable, an amount equal to
the purchase price of the shares of convertible preferred
stock so tendered; and
- deliver or cause to be delivered to DTC or the transfer agent
shares of convertible preferred stock so accepted together
with an officers' certificate stating the aggregate
liquidation preference of the shares of convertible preferred
stock being purchased by us.
DTC or the transfer agent, as applicable, will promptly mail or deliver
to each holder of shares of convertible preferred stock so tendered the
applicable payment for those shares of convertible preferred stock, and the
transfer agent will promptly countersign and mail or deliver, or cause to be
transferred by book-entry, to each holder new shares of convertible preferred
stock equal in liquidation preference to any unpurchased portion of the shares
of
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convertible preferred stock surrendered, if any. We will publicly announce the
results of our offer on or as soon as practicable after the purchase date for
the purchase of shares of convertible preferred stock in connection with a
change of control of our company.
We will not be required to purchase any shares of convertible preferred
stock upon the occurrence of a change of control if a third party makes an offer
to purchase the convertible preferred stock in the manner, at the price, at the
times and otherwise in compliance with the requirements described in this
section and purchases all shares of convertible preferred stock validly tendered
and not withdrawn.
LEGAL AVAILABILITY OF ASSETS
Under Delaware law, we may pay dividends on or redeem or repurchase the
convertible preferred stock, whether in cash, in shares of our common stock or
in a combination thereof, only if we have legally available assets in an amount
at least equal to the amount of the relevant payment.
Legally available assets means the amount of surplus. If there is no
surplus, legally available assets also means, in the case of a dividend, the
amount of our net profits for the fiscal year in which the payment occurs and/or
the preceding fiscal year. Our surplus is the amount by which our total assets
exceed the sum of:
- our total liabilities, including our contingent liabilities;
and
- the amount of our capital.
When the need to make a determination of legally available assets
arises, the amount of our total assets and liabilities and the amount of our
capital will be determined by our board of directors in accordance with Delaware
law.
As of September 30, 2003, after giving effect to our refinancing
transactions of November 24, 2003, the amount of our surplus would have been
$199.6 million.
REGISTRATION RIGHTS
On November 24, 2003, we entered into a registration rights agreement
with the initial purchasers of the convertible preferred stock. Under the
registration rights agreement, we agreed to use our reasonable best efforts to:
- file, on or before February 22, 2004, a shelf registration
statement with the SEC on the appropriate form under the
Securities Act to cover resales of the shares of convertible
preferred stock and of common stock issued upon conversion of
the shares of convertible preferred stock;
- cause that registration statement to be declared effective,
subject to some exceptions, on or before May 22, 2004; and
- subject to certain "black-out" periods not to exceed 90 days
in the aggregate in any consecutive 365-day period, use our
reasonable best efforts to cause that registration statement
to remain effective, subject to some exceptions, until the
earlier of:
- November 24, 2005 and
- the date on which all shares of convertible preferred
stock or common stock covered by that registration
statement have been sold under that registration
statement.
We filed the registration statement of which this prospectus forms a
part, which was declared effective on December , 2003, however we cannot
assure you that we will be able to keep effective the registration statement for
the required period.
Holders of shares of convertible preferred stock registrable under the
registration rights agreement are required to deliver certain information to be
used in connection with the shelf registration statement within the time periods
indicated in the registration rights agreement in order to have their shares of
convertible preferred stock or common
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stock into which the shares of convertible preferred stock may be converted
included in the shelf registration statement.
The certificate of designations for the convertible preferred stock
provides that if the shelf registration statement ceases to be effective or
usable in connection with resales of shares of convertible preferred stock and
common stock during the periods specified in the registration rights agreement
--we will refer to that event as a registration default--then we will pay to
each holder of shares of convertible preferred stock registrable under the
registration rights agreement, with respect to the first 90-day period
immediately following the occurrence of a registration default, additional
dividends on the convertible preferred stock computed by increasing the
applicable dividend rate for the relevant period by 0.25% per year, which we
will refer to as additional dividends. The applicable dividend rate will
increase by an additional 0.25% per year with respect to any subsequent 90-day
period, but in no event will the additional dividend rate exceed 1.00% per year
in the aggregate regardless of the number of registration defaults, until all
registration defaults have been cured. If, after the cure of all registration
defaults then in effect, there is a subsequent registration default, the
additional dividend rate for that subsequent registration default will initially
be 0.25%, regardless of the additional dividend rate in effect with respect to
any prior registration default at the time of the cure of that registration
default and will increase as set forth in the preceding sentence. An amount
equal to all accrued additional dividends will be payable to the holders
entitled to those dividends, in the manner provided for the payment or accretion
of dividends in the certificate of designations.
This is a summary of some important provisions of the registration
rights agreement. This summary is not complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
registration rights agreement. You may request a copy of the registration rights
agreement by contacting us at our principal executive offices.
TRANSFER AGENT
The transfer agent, registrar, dividend disbursing agent and redemption
agent for our shares of convertible preferred stock is Mellon Investor Services,
LLC. Mellon Investor Services, LLC is also the transfer agent and registrar for
our common stock.
BOOK-ENTRY, DELIVERY AND FORM
The shares of convertible preferred stock were issued in the form of
global certificates held in book-entry form. DTC or its nominee will be the sole
registered holder of the convertible preferred stock. Owners of beneficial
interests in the convertible preferred stock represented by the global
securities will hold their interests pursuant to the procedures and practices of
DTC. As a result, beneficial interests in any such securities will be shown on,
and transfers will be effected only through, records maintained by DTC and its
direct and indirect participants and any such interest may not be exchanged for
certificated securities, except in limited circumstances. Owners of beneficial
interests must exercise any rights in respect of their interests, including any
right to convert or require repurchase of their interests in the convertible
preferred stock, in accordance with the procedures and practices of DTC.
Beneficial owners will not be holders and will not be entitled to any rights
provided to the holders of the convertible preferred stock under the global
securities or the certificate of designations. Our company and any of our agents
may treat DTC as the sole holder and registered owner of the global securities.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
facilitates the settlement of transactions among its participants through
electronic computerized book-entry changes in participants' accounts,
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, including the underwriters,
banks, trust companies, clearing corporations and other organizations, some of
whom and/or their representatives own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. The rules applicable to the depositary and its
participants are on file with the SEC.
The depositary is the only registered holder of the shares of
convertible preferred stock.
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Shares of convertible preferred stock that are issued as described
below under "--Certificated Convertible Preferred Stock" will be issued in
definitive form. Upon the transfer of convertible preferred stock in definitive
form, such convertible preferred stock will, unless the global securities have
previously been exchanged for convertible preferred stock in definitive form, be
exchanged for an interest in the, global securities representing the liquidation
preference of convertible preferred stock being transferred.
Investors who purchased convertible preferred stock in offshore
transactions in reliance on Regulation S under the Securities Act may hold their
interests in the global certificate directly through Euroclear Bank S.A./N.V.,
as operator of the Euroclear System, or Euroclear, and Clearstream Banking,
societe anonyme, or Clearstream, if they are participants in such systems, or
indirectly through organizations that are participants in such systems.
Euroclear and Clearstream will hold interests in the global certificate on
behalf of their participants through their respective depositories, which in
turn will hold such interests in the global certificate in the depositories'
names on the books of the depositary.
Transfers between participants in Euroclear and Clearstream will be
effected in the ordinary way in accordance with their respective rules and
operating procedures. If a holder requires physical delivery of a definitive
certificate for any reason, including to sell certificates to persons in
jurisdictions that require such delivery of such certificates or to pledge such
certificates, such holder must transfer its interest in the global certificate
in accordance with the normal procedures of the depositary and the procedures
set forth in the certificate of designations.
Cross-market transfers between the depositary, on the one hand, and
directly or indirectly through Euroclear or Clearstream participants, on the
other, will be effected in the depositary in accordance with the depositary
rules on behalf of Euroclear or Clearstream, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (Brussels time). Euroclear or Clearstream, as
the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the global
certificate in the depositary, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to the
depositary. Euroclear participants and Clearstream participants may not deliver
instructions directly to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in the global certificate from
a depositary participant will be credited during the securities settlement
processing day (which must be a business day for Euroclear or Clearstream, as
the case may be) immediately following the depositary settlement date, and such
credit or any interests in the global certificate settled during such processing
day will be reported to the relevant Euroclear or Clearstream participant on
such day. Cash received in Euroclear or Clearstream as a result of sales of
interests in the global certificate by or through a Euroclear or Clearstream
participant to a depositary participant will be received with value on the
depositary settlement date, but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day following settlement in the
depositary.
A beneficial owner of book-entry shares of convertible preferred stock
represented by a global certificate may exchange the shares for definitive,
certificated shares of convertible preferred stock only if the conditions for
such an exchange, as described under "--Certificated Convertible Preferred
Stock," are met.
In this prospectus, references to actions taken by holders of shares of
convertible preferred stock will mean actions taken by the depositary upon
instructions from its participants, and references to payments and notices of
redemption to holders of shares of convertible preferred stock will mean
payments and notices of redemption to the depositary as the registered holder of
the shares of convertible preferred stock for distribution to participants in
accordance with the depositary's procedures.
In order to ensure that the depositary's nominee will timely exercise a
right conferred by the convertible preferred stock, the beneficial owner of that
convertible preferred stock must instruct the broker or other direct or indirect
participant through which it holds an interest in that convertible preferred
stock to notify the depositary of its desire to exercise that right. Different
firms have different deadlines for accepting instructions from their customers.
Each beneficial owner should consult the broker or other direct or indirect
participant through which it
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holds an interest in the convertible preferred stock in order to ascertain the
deadline for ensuring that timely notice will be delivered to the depositary.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the book-entry securities or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests.
The depositary may discontinue providing its services as securities
depositary at any time by giving reasonable notice. Under those circumstances,
in the event that a successor securities depositary is not appointed, share
certificates are required to be printed and delivered. Additionally, we may
decide to discontinue use of the system of book-entry transfers through the
depositary or any successor depositary with respect to the shares of convertible
preferred stock. In that event, certificates for the shares will be printed and
delivered.
The information in this section concerning the depositary and the
depositary's book-entry system has been obtained from sources that we believe to
be reliable, but we do not take responsibility for the accuracy of that
information.
CERTIFICATED CONVERTIBLE PREFERRED STOCK
The convertible preferred stock represented by the global securities is
exchangeable for certificated convertible preferred stock in definitive form of
like tenor to such convertible preferred stock if:
- the depositary notifies us that it is unwilling or unable to
continue as depositary for the global securities or if at any
time the depositary ceases to be a clearing agency registered
under the Exchange Act and, in either case, a successor
depositary is not appointed by us within 90 days after the
date of such notice; or
- we in our sole discretion at any time determine to discontinue
use of the system of book-entry transfer through DTC (or any
successor depositary).
Any convertible preferred stock that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated convertible preferred stock
issuable in authorized denominations and registered in such names as the
depositary shall direct. Subject to the foregoing, the global securities are not
exchangeable, except for global securities of the same aggregate liquidation
preferences to be registered in the name of the depositary or its nominee. In
addition, such certificates will bear the legend contained in the certificate of
designations for the convertible preferred stock (unless we determine otherwise
in accordance with applicable law) subject, with respect to such convertible
preferred stock, to the provisions of such legend.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the
certificate of designations without charge from us. Requests for such documents
should be addressed in writing or by telephone to the Corporate Secretary,
General Cable Corporation, 4 Tesseneer Drive, Highland Heights, Kentucky 41076,
telephone (859) 572-8000.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion summarizes the material U.S. federal income
tax consequences of the ownership of the preferred stock. The discussion is
included for general information only and may not be applicable depending upon
the holder's particular situation.
This summary is based upon the provisions of the Internal Revenue Code
of 1986, as amended, which we refer to as the Code, the final, temporary and
proposed Treasury Regulations promulgated thereunder, and administrative
pronouncements and rulings and judicial decisions, as they currently exist as of
the date of this prospectus, all of which are subject to change (possibly with
retroactive effect) or different interpretations.
This summary does not purport to address all aspects of U.S. federal
income taxation that may be relevant to an investor's decision to purchase the
preferred stock, nor, except as expressly provided below, any tax consequences
arising under other federal tax laws (e.g. estate and gift tax) or under the
laws of any state, local or foreign jurisdiction. This summary is not intended
to be applicable to special categories of investors, such as dealers in
securities, banks, insurance companies, real estate investment trusts, regulated
investment companies, tax-exempt organizations, U.S. expatriates, persons that
hold the preferred stock as part of a straddle or conversion transaction,
partnerships or other pass-through entities that purchase, own or dispose of our
preferred stock, and holders subject to the alternative minimum tax.
You are urged to consult your tax advisor as to the particular tax
consequences of the purchasing, owning and disposing of our preferred stock,
including the application and effect of U.S. federal, state, local and foreign
tax laws.
TAX CONSIDERATIONS FOR U.S. HOLDERS
U.S. Holders
As used herein, the term "U.S. holder" means a holder of preferred
stock or common stock received upon conversion of or in redemption of preferred
stock (as the case may be) that for U.S. federal income tax purposes is any of
the following:
- An individual who is a citizen or resident of the U.S.;
- A corporation or other entity treated as a corporation created
or organized in or under the laws of the U.S. or of any
political subdivision thereof or therein;
- An estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
- A trust that either is subject to the supervision of a court
within the U.S. and which has one or more U.S. persons with
authority to control all substantial decisions, or has a valid
election in effect under applicable U.S. Treasury Regulations
to be treated as a U.S. person.
Distributions
The amount of any distribution with respect to our preferred stock or
common stock will generally be treated as a dividend, taxable as ordinary income
to the U.S. holder, to the extent of our current or accumulated earnings and
profits as determined under U.S. federal income tax principles. Distributions in
excess of our current and accumulated earnings and profits are applied against
and reduce the U.S. holder's tax basis in the preferred stock or common stock,
as the case may be. Amounts in excess of the U.S. holder's tax basis are treated
as capital gain. For the tax years 2003 through 2008, non-corporate U.S. holders
generally should qualify for a maximum tax rate of 15% with respect to dividend
income provided the U.S. holder satisfies holding period and other applicable
requirements.
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If we pay dividends by delivering shares of our common stock to the
transfer agent to be sold automatically on the U.S. holder's behalf, we intend
to treat such U.S. holder as receiving a dividend equal to the net cash proceeds
received (which will equal the cash dividend otherwise payable). This position
is not free from doubt and the Internal Revenue Service may treat such U.S.
holder as (i) receiving a dividend equal to the fair market value of the common
stock on the date received by the transfer agent (generally, the average of the
high and low trading prices on the delivery date) and (ii) recognizing
short-term capital gain loss equal to the difference between the amount of the
net cash proceeds received and the U.S. holder's adjusted tax basis in our
common stock disposed (which, for this purpose, will equal the fair market value
of our common stock on the date received by the transfer agent).
The tax treatment of dividends with respect to the preferred stock that
accrue but are not paid is not free from doubt. Under certain circumstances, a
U.S. holder of preferred stock is required to take accrued dividends into
account as constructive distributions at the time they accrue, rather than at
the time they are paid. We intend to take the position that any accrued
dividends on the preferred stock need not be treated as received by the U.S.
holder until such accrued dividends are actually paid to such U.S. holder, and
we will report to the Internal Revenue Service on that basis.
Generally, a dividend distribution to a corporate U.S. holder will
qualify for a 70% dividends-received deduction if the U.S. holder owns less than
20% of the voting power or value of our stock. However, section 246(c) of the
Code disallows the dividends-received deduction in its entirety if the U.S.
holder does not satisfy the applicable minimum holding period required for the
stock for a period immediately before or immediately after such holder becomes
entitled to receive each dividend on the stock. The length of time that a
corporate U.S. holder is deemed to have held the stock for these purposes is
reduced for periods during which the U.S. holder's risk of loss with respect to
the stock is diminished by reason of the existence of certain options, contracts
to sell, short sales or other similar transactions. Section 246A of the Code
reduces the amount of the dividends-received deduction for a corporate U.S.
holder that has incurred indebtedness directly attributable to its investment in
the preferred stock.
Under certain circumstances, section 1059(a) of the Code requires a
corporation that receives an "extraordinary dividend" to reduce its stock basis
by the non-taxed portion of such dividend and to recognize gain immediately to
the extent the required reduction exceeds such stock basis. Generally, quarterly
dividends that are not in arrears and that are paid to an original holder of the
shares of preferred stock do not constitute extraordinary dividends under
section 1059(c) of the Code. However, an "extraordinary dividend" would include
any amount treated as a dividend with respect to a redemption that is not pro
rata to all stockholders (or meets certain other requirements), without regard
to either the relative amount of the dividend or the U.S. holder's holding
period for the preferred stock.
Future adjustments (other than certain anti-dilution adjustments), if
any, to the conversion rate of preferred stock may result in constructive
distributions taxable as dividends to the U.S. holders of preferred stock to the
extent of current and accumulated earnings and profits (as described above).
Sale, Exchange or Other Disposition
Subject to the discussion below regarding the treatment of certain
redemptions and the possible application of section 302, a U.S. holder of
preferred stock or common stock will generally recognize gain or loss on the
sale, exchange or other taxable disposition of preferred stock or common stock
in an amount equal to the difference between the proceeds of such sale, exchange
or other disposition (not including (a) redemption proceeds attributable to any
accrued and unpaid dividends declared prior to the redemption and (b) in the
case of any U.S. holder who sells after the record date and before the
ex-dividend date, sale proceeds attributable to any accrued and unpaid dividends
declared prior to the sale, which, in either case, will be taxable as dividend
income to the U.S. holder if such amounts were not previously included as
income) and such holder's tax basis in such stock (generally the purchase price
paid by the U.S. holder). This gain or loss will be long-term gain or loss if
the U.S. holder's holding period for the preferred stock or common stock is more
than one year. The deductibility of losses may be limited. Non-corporate U.S.
holders generally should qualify for a maximum tax rate of 15% with respect to
long-term capital gain (20% for tax years after 2008).
53
If preferred stock is redeemed partly or entirely for common stock at a
time when there are dividends arrearages with respect to the preferred stock,
the U.S. holder of the redeemed preferred stock will be treated as having
received a distribution with respect to such preferred stock (taxable as
described above) equal to the lesser of: (a) the excess, if any, of the fair
market value of the common stock received over the issue price of the redeemed
preferred stock (adjusted by any accrued dividends that, notwithstanding our
view, are required to be taken into income prior to payment) and (b) the amount
of the dividend arrearages to the extent not previously taken into income.
If preferred stock is redeemed partly or entirely for common stock
(whether or not there are dividend arrearages), a U.S. holder may not recognize
loss, if any, but will be required to recognize gain, if any, equal to the
lesser of (a) the excess of the cash received plus the fair market value of the
common stock received (excluding the fair market value of any portion of such
common stock taxable as a distribution (as described in the preceding
paragraph)) over the U.S. holder's tax basis in the redeemed preferred stock and
(b) the amount of any cash received. Any such gain generally will be taxed in
the same manner as gain from any other taxable sale or exchange (as described
above). In such event, (a) a U.S. holder's tax basis in any common stock
received (other than as a distribution) will equal the holder's tax basis in the
redeemed preferred stock, increased by any gain recognized by such U.S. holder
and decreased by the amount of any cash received in the redemption and (b) a
U.S. holder's holding period in any common stock received (other than as a
distribution) will include the holding period of the redeemed preferred stock.
Under section 302 of the Code, special rules may recharacterize as a
dividend the proceeds of a redemption of preferred stock or common stock if the
redemption is treated as economically equivalent to a dividend. Such a
recharacterization is most likely to result where a U.S. holder has a
significant percentage ownership in us (taking into account certain ownership
attribution rules) and the redemption does not result in a meaningful reduction
in such percentage interest. U.S. holders should consult their own advisors
regarding the possible application of section 302 to them.
Conversion of the Preferred Stock
A U.S. holder of preferred stock will generally not recognize gain or
loss upon the conversion of preferred stock (other than in respect of any
fractional shares) if the U.S. holder receives no cash upon conversion (other
than in respect of any fractional shares). A converting U.S. holder that
receives cash in respect of accrued and unpaid dividends that have not been
declared generally will be taxable in the same manner as a U.S. holder whose
preferred shares are redeemed partly for cash and partly for common shares (as
discussed above).
The receipt of cash or common stock in respect of accrued and unpaid
dividends that have been declared would be treated as a distribution as
described above. Similarly, although not free from doubt, the receipt of common
stock in respect of accrued and unpaid dividends that have not been declared may
also be treated as a distribution.
A U.S. holder who receives cash in lieu of a fractional share will be
treated as having received the fractional share and having exchanged it for cash
in a transaction, subject to section 302 of the Code (typically resulting in
capital gain or loss measured by the difference between the cash received and
the U.S. holder's basis in the fractional share unless such redemption is
economically equivalent to a dividend).
If a U.S. holder converts solely for common stock and cash in lieu of
any fractional shares, such U.S. holder's tax basis in the common stock, other
than shares of common stock taxed as a distribution, will generally be equal to
the tax basis of the preferred stock exchanged therefor (exclusive of any basis
allocable to a, fractional share interest). The holding period for common stock
received upon the conversion (other than as a distribution) will generally
include the holding period of the preferred stock exchanged therefor.
Backup Withholding and Information Reporting
Information reporting requirements generally will apply to certain U.S.
holders with respect to dividends paid on, or, under certain circumstances, the
proceeds of a sale, exchange or other disposition of, preferred stock or common.
stock. Under the Code and applicable Treasury Regulations, a U.S. holder of
preferred stock or common
54
stock may be subject to backup withholding at a 28% rate with respect to
dividends paid on, or the proceeds of a sale, exchange or disposition of,
preferred stock or common stock unless such holder (a) is a corporation or comes
within certain other exempt categories and, when required demonstrates this fact
in the manner required, or (b) within a reasonable period of time, provides a
correct taxpayer identification number, certifies that it is not subject to
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. The amount of any backup withholding from a payment to
a U.S. holder will be allowed as a credit against the U.S. holder's U S. federal
income tax liability (and may entitle the U.S. holder to a refund) provided that
the required information is furnished to the Internal Revenue Service.
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
Non-U.S. Holders
As used herein, the term Non-U.S. holder means a holder of preferred
stock or common stock received upon conversion of or in redemption of preferred
stock (as the case may be) that, for U.S. federal income tax purposes, is a
nonresident alien or a corporation, trust or estate that is not a U.S. holder.
Distributions
Distributions that are dividends as described above generally will be
subject to withholding of U.S. Federal income tax at a 30% rate (or at such
lower rate that an applicable income tax treaty may specify). However, dividends
that are effectively connected with a Non-U.S. holder's conduct of a trade or
business in the U.S. are generally subject to U.S. federal income tax on a net
income basis at regular graduated income tax rates (unless an applicable income
tax treaty provides otherwise), but are not generally subject to the 30%
withholding tax if the Non-U.S. holder files an IRS Form W-8ECI (or successor
form) with the withholding agent. In addition, if a Non-U.S. holder receiving
effectively connected dividends is a foreign corporation, such Non-U.S. holder
may also be subject to the branch profits tax equal to 30% of its "effectively
connected earnings and profits" as defined in the Code unless such Non-U.S.
holder qualifies for a lower rate or an exemption under an applicable income tax
treaty.
A Non-U.S. holder that claims the benefit of an income tax treaty rate
generally will be required to satisfy applicable certification and other
requirements, including filing an IRS Form W-8BEN (or successor form) with the
withholding agent. In addition, a Non-U.S. holder that claims the benefit of an
income tax treaty rate may be required, in certain instances, to obtain a U.S.
taxpayer identification number.
Payments made through certain foreign intermediaries may be subject to
additional rules.
Sale, Exchange or Other Disposition
A Non-U.S. holder generally will not be subject to U.S. federal income
tax or withholding tax on the sale, exchange or other taxable disposition of
preferred stock or common stock (except to the extent such transaction is
recharacterized as a dividend, as described above) unless:
(1) the gain is effectively connected with a U.S. trade or business of
the Non-U.S. holder;
(2) the Non-U.S. holder is an individual who is present in the U.S. for
183 or more days in the taxable year, of the disposition and meets other
requirements; or
(3) we are or have been a "United States real property holding
corporation" (a "USRPHC") for U.S. federal income tax purposes at any time
during the shorter of the five-year period ending on the date of the sale or
other disposition and the Non-U.S. holder's holding period (the shorter period
hereinafter referred to as the "lookback period"); provided that if our
preferred stock or common stock is regularly traded on an established securities
market, this rule generally will not cause any gain on the regularly traded
class of stock to be taxable unless the Non-U.S. holder owned more than 5% of
such stock at some time during the lookback period. We do not believe that we
currently are a USRPHC and do not currently expect to become one in the future.
However, we could become a USRPHC as a result of future changes in assets or
operations.
55
If a Non-U.S. holder falls under clause (1) above, such holder will be
taxed on the net gain derived from a disposition under regular graduated U.S.
Federal income tax rates (unless an applicable income tax treaty provides
otherwise), and if such holder is a corporation, may also be subject to the
branch profits tax equal to 30% of its "effectively connected earnings and
profits" as defined in the Code (unless an applicable income tax treaty provides
otherwise).
If a Non-U.S. holder falls under clause (2) above, such holder may be
subject to a flat 30% tax on the gain derived from the disposition.
If a Non-U.S. Holder falls under clause (3) above, such holder
generally will be taxed in the same manner described in clause (1) above except
that the branch profits tax will not apply.
Conversion of the Preferred Stock
Generally, no U.S. federal income tax or withholding tax will be
imposed upon the conversion of preferred stock by a Non-U.S. holder (except to
the extent that such transaction is characterized as a dividend, as described
above). However, the receipt of cash in lieu of fractional shares may be subject
to tax or withholding requirements.
U.S. Federal Estate Tax
Preferred stock or common stock that is owned or treated as owned by an
individual who is a Non-U.S. holder at the time of death will be included in the
individual's gross estate for U.S. federal estate tax purposes and may be
subject to U.S. federal estate tax, unless an applicable estate tax treaty
provides otherwise.
Information Reporting and Backup Withholding
A Non-U.S. holder of preferred stock or common, stock that fails to
certify its Non-U.S. holder status under applicable U.S. Treasury Regulations or
otherwise fails to establish an exemption under applicable U.S. Treasury
Regulations may be subject to information reporting and backup withholding at a
rate of 28% on payments of dividends and the proceeds from the sale, exchange or
other disposition of preferred stock or common stock.
Any amounts withheld under the backup withholding rules will be
refunded or credited against the Non-U.S. holder's U.S. federal income tax
liability, if any, if the Non-U.S. holder provides the required information to
the Internal Revenue Service.
56
SELLING SECURITYHOLDERS
We originally issued the preferred stock on November 24, 2003 in a
private placement to UBS Securities LLC and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, whom we refer to as the initial purchasers. The initial
purchasers then resold the preferred stock in transactions not requiring
registration under the Securities Act or applicable state securities laws to
persons the initial purchasers reasonably believed to be "qualified
institutional buyers", as defined in Rule 144A under the Securities Act, in
compliance with Rule 144A.
This prospectus, in part, relates to:
- resales of preferred stock; and
- sales of common stock issued upon conversion of preferred
stock,
by the selling securityholders as described below under "Plan of Distribution."
The registration statement of which this prospectus forms a part has been filed
with the SEC pursuant to the registration rights granted in connection with the
original issue of the preferred stock to afford the holders of the preferred
stock the opportunity to sell their securities in public transactions rather
than pursuant to exemptions from the registration and prospectus delivery
requirements of the Securities Act. In order to take advantage of that
opportunity, a holder of the preferred stock must provide information about
itself and the securities it is selling as required under the Securities Act.
The selling securityholders listed below and the beneficial owners of
the preferred stock and their transferees, pledgees, donees or other successors,
if not identified in this prospectus then so identified in supplements to this
prospectus as required, are the selling securityholders under this prospectus.
The following table sets forth information, as of a recent practicable date
prior to the effectiveness of the registration statement of which this
prospectus forms a part, with respect to the selling securityholders named below
and the respective:
- number of shares of preferred stock owned by each selling
securityholder;
- number of shares of common stock issuable upon conversion of
the preferred stock owned by each selling securityholder,
that may be offered pursuant to this prospectus together with the number of
shares of common stock owned by each selling securityholder prior to this
offering. This information was supplied to us by the selling securityholders
named in the table and may change from time to time. Because the selling
securityholders may offer all or some portion of these securities pursuant to
this prospectus, and because we are not currently aware of any agreements,
arrangements or understandings with respect to the sale of these securities, we
cannot predict the number of shares or principal amount of the securities that
will be held by the selling securityholders upon termination of this offering.
In addition, some of the selling securityholders may have sold, transferred or
otherwise disposed of all or a portion of their securities since the date on
which they provided the information about themselves and the securities they
were selling in transactions exempt from the registration requirements of the
Securities Act. See "Plan of Distribution," below.
Unless otherwise disclosed in the footnotes to the table below, no
selling securityholder has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates.
Each selling securityholder listed in the table below may, under this
prospectus, from time to time offer and sell the number of shares of preferred
stock listed in the table below opposite its name and/or the number of shares of
common stock into which its shares of preferred stock may be converted. Prior to
any use of this prospectus in connection with an offering of these securities by
a beneficial owner not listed as a selling securityholder below or its
transferee, pledgee, donee or other successor, this prospectus will be
supplemented to set forth the name and information with respect to that person.
57
SHARES OF COMMON
SHARES OF SHARES OF STOCK OWNED PRIOR
SELLING SECURITYHOLDER (1) PREFERRED STOCK (2) COMMON STOCK (3) TO THIS OFFERING
------------------------------------------------ ------------------- ---------------- -----------------
Allstate Insurance Company 25,000 124,950 Nil
American AAdvantage Funds 1,300 6,497 Nil
Arkansas Teachers Retirement 33,805 168,957 Nil
Astrazeneca Holdings Pension 560 2,798 Nil
Aventis Pension Master Trust 1,400 6,997 Nil
Baptist Health of South Florida 4,720 23,590 Nil
Boilermaker-Blacksmith Pension Trust 7,700 38,484 Nil
CALAMOS(R) Convertible Portfolio -
CALAMOS Advisors Trust 1,000 4,998 Nil
CALAMOS(R) Global Convertible Fund -
CALAMOS Investment Trust 4,200 20,991 Nil
CEMEX Pension Plan 720 3,598 Nil
Context Convertible Arbitrage Fund, LP 22,500 112,455 Nil
Delaware PERS 1,790 9,846 Nil
Delta Pilots Disability and Survivorship Trust 2,150 10,745 Nil
Dorinco Reinsurance Company 4,300 21,491 Nil
Engineers Joint Pension Fund 3,165 15,818 Nil
Froley Revy Investment Convertible Security Fund 150 749 Nil
ICI American Holdings Trust 400 1,999 Nil
KD Convertible Arbitrage LP 52,500 262,395 Nil
Knoxville Utilities Board Retirement System 725 3,623 Nil
Macomb County Employees' Retirement System 1,650 8,246 Nil
McMahan Securities Co. L.P. 25,000 124,950 Nil
Newport Alternative Income Fund 3,000 14,994 Nil
Nicolas Applegate Capital Management
Convertible Mutual Fund 5,750 28,738 Nil
Nuveen Preferred and Convertible Income 6,930 34,636 Nil
Fund JPC
Nuveen Preferred and Convertible Fund JQC 9,180 45,881 Nil
Prudential Insurance Co. of America 100 499 Nil
San Diego City Retirement 6,855 34,261 Nil
San Diego County Convertible 14,490 72,421 Nil
SCI Endowment Care Common Trust Fund - First
Union 200 999 Nil
58
SHARES OF COMMON
SHARES OF SHARES OF STOCK OWNED PRIOR
SELLING SECURITYHOLDER (1) PREFERRED STOCK (2) COMMON STOCK (3) TO THIS OFFERING
------------------------------------------------ ------------------- ---------------- -----------------
SCI Endowment Care Common Trust Fund - National
Fiduciary Services 875 4,373 Nil
SCI Endowment Care Common Trust Fund - Suntrust 450 2,249 Nil
Silvercreek II Limited 9,000 44,982 Nil
Silvercreek Limited Partnership 18,000 89,964 Nil
State of Oregon - Equity 5,590 27,938 Nil
Syngenta AG 300 1,499 Nil
The California Wellness Foundation 2,250 11,245 Nil
The Dow Chemical Company Employees' Retirement
Plan 13,880 69,372 Nil
The Fondren Foundation 800 3,998 Nil
Union Carbide Retirement Account 6,300 31,487 Nil
United Food and Commercial Workers Local 1262
and Employers Pension Fund 3,400 16,993 Nil
Univar USA Inc. Retirement Plan 1,700 8,496 Nil
Wachovia Capital Markets LLC 3,000 14,994 Nil
Wake Forest University 3,830 19,142 Nil
Wyoming State Treasurer 7,385 36,910 Nil
---------------
(1) Information about other selling securityholders may be provided in
prospectus supplements or post-effective amendments.
(2) In each case, none of these securities were held prior to this
offering.
(3) Based on the shares of common stock originally issuable upon conversion
of the preferred stock with fractions rounded down to the nearest whole
share. The number of shares of common stock so issuable is subject to
increase as a result of antidilution adjustments. No fractional shares
of common stock will be issued upon conversion of the preferred stock.
Instead of issuing fractional shares, the holder will be entitled to
receive an amount in cash equal to the same fraction of the closing
price of shares of our common stock delivered as of the second trading
day immediately preceding the effective date of conversion. See
"Description of the Preferred Stock--Conversion Rights," above.
This prospectus also relates to sales by the transfer agent for the
preferred stock, on behalf of the holders of the preferred stock, of common
stock issued to the transfer agent in connection with the payment of dividends
on the preferred stock as described below under "Plan of Distribution" and
covered by this prospectus. Shares of our common stock delivered to the transfer
agent for this purpose will be owned beneficially by the holders of the
preferred stock upon delivery to the transfer agent, and the transfer agent will
hold those shares and the net cash proceeds from the sale of those shares for
the exclusive benefit of the holders. Because we do not know the number of
shares of our common stock, if any, which will be delivered to the transfer
agent, and because the holders of the preferred stock may change from time to
time, we cannot predict the number of shares of our common stock held by the
holders of the preferred stock prior to this offering, to be offered or to be
held by the holders of the preferred
59
stock upon termination of this offering nor can we predict whether any holder of
the preferred stock has, or within the past three years has had, any position,
office or other material relationship with us or any predecessors or affiliates.
60
PLAN OF DISTRIBUTION
The selling securityholders may from time to time directly sell their
preferred stock and common stock issued upon conversion of their preferred stock
directly to purchasers. Alternatively, the selling securityholders may from time
to time offer these securities through underwriters, brokers, dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from the selling securityholders and/or the purchasers of these
securities for whom they may act as agent.
We cannot assure you that any selling securityholder will sell any or
all of its securities under this prospectus or that any selling securityholder
will not transfer, devise or gift its securities by other means not described in
this prospectus.
In addition, the transfer agent for the preferred stock may from time
to time sell, on behalf of the holders of the preferred stock, common stock,
issued to the transfer agent and covered by this prospectus, for cash to pay
dividends on the preferred stock. We have entered into a Stock Transfer Agency
Agreement dated February 1, 2003, and a Preferred Stock Transfer Agency
Agreement, dated November 24, 2003, both with Mellon Investor Services, LLC,
which we refer to as the transfer agent, pursuant to which Mellon Investor
Services acts as the transfer agent for our common stock and our preferred
stock, respectively. Pursuant to the Preferred Stock Transfer Agency Agreement,
the transfer agent has agreed to procedures concerning the sale of shares of our
common stock that may be delivered to it by us for these purposes.
Pursuant to these procedures, if we desire to pay all or any part of a
dividend on the preferred stock with shares of our common stock, prior to the
applicable payment date, we will deliver to the transfer agent a number of
shares of our common stock, which when sold by the transfer agent, will result
in net cash proceeds sufficient (together with any cash payments made by us to
the transfer agent for these purposes) to permit the transfer agent to pay the
applicable payment in cash to the holders of the preferred stock, together with
instructions for the transfer agent to effect the sales in accordance with the
Preferred Stock Transfer Agency Agreement and indicating the applicable payment
date, the aggregate payment to be made on that date and any specific
instructions regarding the manner of sale of the shares of common stock which
may include restrictions with respect to the sale including maximum and minimum
sale prices, limit instructions, sale scheduling, sale blackout periods,
commissions and brokerage fees. Shares of our common stock delivered to the
transfer agent for these purposes will be owned beneficially by the holders of
the preferred stock upon delivery to the transfer agent, and the transfer agent
will hold those shares and the net cash proceeds from the sale of those shares
for the exclusive benefit of the holders.
The transfer agent will conduct sales of the shares of our common stock
so delivered, in accordance with the terms of the Preferred Stock Transfer
Agency Agreement and our instructions. Subject to our instructions, sales may be
effected on any United States national or regional securities exchange or market
on which our common stock is listed or admitted for trading and the transfer
agent may engage brokers or other agents, which may be affiliated with the
transfer agent and which may receive customary compensation in the form of fees
or commissions, to effect sales. In effecting the sales, the transfer agent will
act as agent for the holders of the preferred stock. See "Description of the
Preferred Stock--Dividends," above.
The selling securityholders, the transfer agent and any brokers,
dealers or agents who participate in the distribution of the securities covered
by this prospectus may be deemed to be "underwriters," and any profits on the
sale of the securities by them and any discounts, commissions or concessions
received by any brokers, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. To the extent the selling
securityholders or the transfer agent may be deemed to be underwriters, the
selling securityholders or the transfer agent may be subject to some statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. If the
selling securityholders or the transfer agent are deemed to be underwriters,
they will be subject to the prospectus delivery requirements of the Securities
Act, which may include delivery through the facilities of The New York Stock
Exchange pursuant to Rule 153 under the Securities Act.
The securities offered hereby may be sold from time to time by, as
applicable, the selling securityholders and, subject to the terms of the
Preferred Stock Transfer Agency Agreement and our instructions, the transfer
agent or, to
61
the extent permitted, by pledgees, donees, transferees or other successors in
interest including by disposal from time to time in one or more transactions
through any one or more of the following, as appropriate:
- a block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- purchases by a broker or dealer as principal and resale by
that broker or dealer for its account;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- an exchange distribution in accordance with the rules of that
exchange or transactions in the over-the-counter market;
- in transactions otherwise than in the over-the-counter market;
- through the writing of put or call options on the securities;
- short sales of the securities and sales to cover the short
sales;
- the pledge of the securities as security for any loan or
obligation, including pledges to brokers or dealers who may,
from time to time, themselves effect distributions of the
securities or interest therein;
- the distribution of the securities by any selling
securityholder to its partners, members or securityholders;
- sales through underwriters or dealers who may receive
compensation in the form of underwriting discounts,
concessions or commissions from the selling shareholders or
successors in interest or from the purchasers of the shares
for whom they may act as agent; and
- a combination of any of the above.
In addition, the securities covered by this prospectus may be sold in
private transactions or under Rule 144 rather than under this prospectus.
Sales may be made at prices and at terms then prevailing or at prices
related to the then current market price or at negotiated prices and terms. In
effecting sales, brokers or dealers may arrange for other brokers or dealers to
participate.
Upon being notified by a selling securityholder or the transfer agent
that any material arrangement has been entered into with an underwriter, broker,
dealer or agent regarding the sale of securities covered by this prospectus, a
revised prospectus or prospectus supplement, if required, will be distributed
which will set forth the aggregate amount and type of securities being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, any discounts, commissions and other items constituting
compensation from the selling securityholders or the transfer agent, and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
The prospectus supplement and, if necessary, a post-effective amendment
to the registration statement of which this prospectus forms a part, will be
filed with the SEC to reflect the disclosure of additional information with
respect to the distribution of the securities.
To our knowledge, there are currently no agreements, arrangements or
understandings between any selling securityholders, the transfer agent, and any
broker, dealer, agent or underwriter regarding the sale by any selling
securityholder or the transfer agent of shares of common stock or preferred
stock covered by this prospectus. Under the securities laws of some states, the
securities may be sold only through registered or licensed brokers or dealers.
The selling securityholders, the transfer agent, and any other person
participating in the distribution will be subject to applicable provisions of
the Exchange Act, including, without limitation, Regulation M, which may limit
the timing of purchases and sales of any of the securities by the selling
securityholders, the transfer agent, and any other person. Furthermore, under
Regulation M, any person engaged in the distribution of the securities may not
simultaneously engage in market-making activities with respect to the particular
securities being distributed for particular periods prior to the commencement of
the distribution. All of the foregoing may affect the marketability
62
of these securities and the ability of any person or entity to engage in
market-making activities with respect to the securities.
Under the terms of the registration rights agreement, holders of
securities covered by this prospectus, on the one hand, and we, on the other
hand, have agreed to indemnify each other against certain liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution in connection with those liabilities. Under the terms of our
agreements with the transfer agent referenced above, we have agreed to indemnify
the transfer agent against certain liabilities arising in connection with the
services rendered by it under the agreements.
Under the terms of the registration rights agreement, we have also
agreed to pay substantially all of the expenses in connection with the
registration of the preferred stock and common stock issued upon conversion of
the preferred stock other than underwriting discounts, if any, and commissions
and transfer taxes, if any, relating to the sale or disposition by the selling
securityholders of their securities covered by this prospectus.
There is no public trading market for the shares of preferred stock and
we do not intend to apply for listing of the shares of preferred stock on any
national securities exchange or for quotation of the shares on any automated
inter-dealer quotation system. No assurance can be given as to the liquidity of
the trading market for the shares of preferred stock or that an active public
market for those shares will develop. If an active market for the shares of
preferred stock does not develop, the market price and liquidity of those shares
may be adversely affected. If the shares of preferred stock are traded, they may
trade at a discount from their initial offering price, depending on the market
for similar securities, our performance and other factors.
In connection with the original private placement of the preferred
stock with the initial purchasers, we and our executive officers and directors
agreed that, without the prior written consent of the initial purchasers, and
subject to certain permitted exceptions, we and they would not, prior to
February 16, 2004, offer, pledge, sell, hedge, contract to sell, purchase or
sell any option or contract to purchase, or contract to sell, or otherwise
transfer or dispose of any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock or enter into any other
arrangement or other transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the common stock.
LEGAL REPRESENTATION
The validity of the securities will be passed upon for us by Blank Rome
LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference from our Current Report on Form 8-K dated November 4, 2003 as of
December 31, 2002 and 2001 and for the three years in the period ended December
31, 2002 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report which is incorporated herein by reference (which report
expresses an unqualified opinion and includes an explanatory paragraph referring
to a change in our accounting for certain inventories), and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, other than
underwriting discounts and commissions (all of which are estimated other than
the SEC registration fee), to be incurred by the Registrant in connection with
the distribution of the securities registered under this registration statement.
ESTIMATED AMOUNTS
-----------------
SEC 1933 Act registration fee $ 14,716
Legal fees $ 75,000
Accountant's fees $ 10,000
Printing expenses $ 10,000
Miscellaneous $ 10,000
--------
TOTAL $119,716
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the authority conferred by Section 102 of the Delaware
General Corporation Law, as amended ("DGCL"), Article VII of the registrant's
amended and restated certificate of incorporation contains provisions which
eliminate personal liability of members of the registrant's board of directors
for violations of their fiduciary duty of care. Neither the DGCL nor our amended
and restated certificate of incorporation, however, limits the liability of a
director for breaching his duty of loyalty, failing to act in good faith,
engaging in intentional misconduct or knowingly violating a law, paying a
dividend or approving a stock repurchase under circumstances where such payment
or repurchase is not permitted under the DGCL, or obtaining an improper personal
benefit. Article VII of the registrant's amended and restated certificate of
incorporation, also provides that if the DGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, the
liability of the registrant's directors shall be eliminated or limited to the
fullest extent permitted by the DGCL, as so amended.
In accordance with Section 145 of the DGCL, which provides for the
indemnification of directors, officers and employees under certain
circumstances, Article XIV of the registrant's amended and restated bylaws
provides that the registrant is obligated to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than an action by or in the right of
the registrant in which such person has been adjudged liable to the registrant)
by reason of the fact that he is or was a director, officer or employee of the
registrant, or is or was a director, officer or employee of the registrant
serving at the request of the registrant as a director, officer, employee or
agent or another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of any action,
suit or proceeding by or in the right of the registrant in which a claim, issue
or matter as to which such person shall have been adjudged to be liable to the
registrant, such person shall be indemnified only to the extent that the Court
of Chancery of the State of Delaware or the court in which such action or suit
was brought has determined that such person is fairly and reasonably entitled to
indemnify for such expenses which such court shall deem proper.
The registrant currently maintains an insurance policy that provides
coverage pursuant to which the registrant will be reimbursed for amounts it may
be required or permitted by law to pay to indemnify directors and officers.
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ITEM 16. EXHIBITS.
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Registration Statement
on Form S-1 (File No. 333-22961) of the Company filed with the
Securities and Exchange Commission on March 7, 1997, as amended (the
"Initial S-1"))
3.2 Amended and Restated By-Laws of the Company (incorporated by reference
to Exhibit 3.2 to the Initial S-1)
4.1 Certificate of Designations filed with the Secretary of State of
Delaware on November 21, 2003, setting forth the powers, preferences
and rights, and the qualifications, limitations and restrictions of the
Company's 5.75% Series A redeemable convertible preferred stock
(incorporated by reference to Exhibit 4.1 to the Current Report on Form
8-K dated December 12, 2003)
4.2 Registration Rights Agreement, dated as of November 24, 2003, among the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS
Securities LLC, as initial purchasers (incorporated by reference to
Exhibit 4.3 to the Current Report on Form 8-K dated December 12, 2003)
4.3 Preferred Stock Transfer Agency Agreement, dated as of November 24,
2003, between the Company and Mellon Investor Services LLC, as transfer
agent
5.1 Opinion of Blank Rome LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Independent Auditors' Consent
23.2 Consent of Blank Rome LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
--------------
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in the volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
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(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim of indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Highland Heights, State of Kentucky, on this 22nd day
of December 2003.
GENERAL CABLE CORPORATION
(Registrant)
By: /s/Robert J. Siverd
-------------------------------
Robert J. Siverd
Executive Vice President,
General Counsel and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert J. Siverd and Christopher F.
Virgulak, and each of them with power to act alone, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments, including pre-effective and
post-effective amendments, to this Registration Statement, and any additional
registration statement to be filed pursuant to Rule 462(b) under the Securities
Act of 1933, and to file the same, with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he or she might or could do in person hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof in
connection with effecting the filing of the Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/Gregory B. Kenny Director, President and Chief Executive Officer December 22, 2003
------------------------------------ (Principal Executive Officer)
Gregory B. Kenny
/s/Christopher F. Virgulak Executive Vice President, Chief Financial Officer December 22, 2003
------------------------------------- and Treasurer (Principal Financial Officer)
Christopher F. Virgulak
/s/Robert J. Siverd Executive Vice President, General Counsel and December 22, 2003
------------------------------------ Secretary
Robert J. Siverd
/s/Jeffrey Noddle Director December 22, 2003
------------------------------------
Jeffrey Noddle
/s/John E. Welsh, III Director December 22, 2003
------------------------------------
John E. Welsh, III
/s/Robert L. Smialek Director December 22, 2003
------------------------------------
Robert L. Smialek
/s/Gregory E. Lawton Director December 22, 2003
------------------------------------
Gregory E. Lawton
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