AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 20, 2004
REGISTRATION NO. 333-111436
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO
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, ESQ.
BRAD L. SHIFFMAN, ESQ.
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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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.
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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 FEBRUARY ___, 2004.
[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
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.
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 February 18, 2004, the closing sale price of our
common stock was $8.34 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 , 2004.
TABLE OF CONTENTS
PAGE
----
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
The Refinancing......................................................... 6
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...................................... 35
Material U.S. Federal Income Tax Consequences........................... 53
Selling Securityholders................................................. 58
Plan Of Distribution.................................................... 62
Legal Representation.................................................... 64
Experts................................................................. 64
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, 2003 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, as amended
by our Current Report on Form 8-K filed January 9, 2004.
- Our Current Report on Form 8-K dated December 12, 2003.
- Our Current Report on Form 8-K dated December 18, 2003.
- Our Current Report on Form 8-K dated January 28, 2004.
- 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. 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.
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%.
3
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."
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 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.
Material U.S. Federal Income
Tax Consequences............... For a discussion of material 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 "Material U.S. Federal Income Tax
Consequences."
THE REFINANCING
On November 24, 2003, we issued $103.5 million of the preferred stock. The
offering of the preferred stock was part of our comprehensive plan to improve
our capital structure and provide us with increased financial and operating
flexibility to execute our business plan by reducing leverage and extending debt
maturities. This plan consisted of the following transactions which we refer to
as the "refinancing transactions," which were consummated concurrently: (i) a
$240 million senior secured revolving credit facility, (ii) a private offering
of $285 million aggregate principal amount of 9.5% Senior Notes due 2010, (iii)
a private offering of the preferred stock and (iv) a public offering of
approximately $47.6 million of common stock (including the exercise of an
over-allotment option on December 2, 2003). We applied the net proceeds from
these refinancing transactions to repay all borrowings outstanding under our
then existing senior secured revolving credit facility, then existing senior
secured term loans and outstanding amounts under our then existing accounts
receivable asset-backed securitization facility and to pay related fees and
expenses.
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 AND IF THESE MARKETS DO NOT IMPROVE OR BECOME
WEAKER WE COULD SUFFER DECREASED SALES AND NET INCOME.
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 AND IF WE FAIL TO INVEST IN
PRODUCT DEVELOPMENT, PRODUCTIVITY IMPROVEMENTS AND CUSTOMER SERVICE AND SUPPORT
THE SALE OF OUR PRODUCTS COULD BE ADVERSELY AFFECTED.
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 our 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 NON-EXCLUSIVE
SALES OF OUR PRODUCTS AND THEY COULD CEASE PURCHASING OUR PRODUCTS AT ANY TIME.
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 into 2004 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
$347.8 million of debt outstanding, $62.8 million of which would have been
secured indebtedness and none of which would have been subordinated to our
senior notes, and had approximately $135 million of additional borrowing
available (which is calculated after giving effect to $38.4 million of letters
of credit outstanding) under our senior secured revolving credit facility. In
addition, subject to the
9
terms of the indenture governing our senior notes, we may also incur additional
indebtedness, including secured debt, in the future.
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
10
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.
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. 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 AND UNEXPECTED JUDGMENTS OR
SETTLEMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL RESULTS.
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 l,
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.
GROWTH THROUGH ACQUISITION HAS BEEN A SIGNIFICANT PART OF OUR STRATEGY AND 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. 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 any such acquisitions that are
completed. Integration of any such acquisitions may require substantial
management, financial and other
11
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.
12
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 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, which
will result in utilization of the NOL and negatively affect cash flows.
IF WE ARE REQUIRED TO CLASSIFY THE PREFERRED STOCK AS DEBT IN THE FUTURE, OUR
BALANCE SHEET WILL BE ADVERSELY AFFECTED.
Upon issuance, the preferred stock will be classified as equity on our
balance sheet in accordance with Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity," or SFAS 150, since the preferred stock contains a
substantive conversion feature. Under SFAS 150, the preferred stock will remain
classified as equity until and unless it becomes certain that the conversion
feature will not be exercised by the holders. If it were to become certain that
the holders of the preferred stock will not exercise their conversion rights, we
would be required to reclassify the preferred stock as a liability in 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 both liability and equity
characteristics. As a result, we cannot assume that the preferred stock will
continue to be
13
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 credit
facility.
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.
14
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.
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.
15
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 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.
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
year ended December 31, 2002, we had net sales of $1.5 billion and a net loss of
$(24.0) 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 December 31,
2002 are summarized below:
[Pie Chart Omitted]
Products and Markets Percentage
-------------------- ----------
Energy 36%
Industrial & Specialty 34%
Communications 30%
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, Rubber and Plastic- Industrial Power and Industrial Consumers;
Control 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. As a result of the refinancing transactions, we further
reduced our outstanding aggregate indebtedness.
- 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 one of and the reduced operation at
another of our North American manufacturing facilities for our industrial &
specialty segment. We also have initiated a study at another one of our other
North American industrial & specialty manufacturing facilities 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:
20
- 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;
- 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.
21
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-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
22
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 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).
23
PRO FORMA
TOTAL ONGOING NINE MONTHS ENDED
COMPANY BUSINESSES SEPTEMBER 30,
--------- ---------- -----------------------
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
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.
24
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 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
25
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.
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
26
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.
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.
27
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 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
28
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 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
29
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 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
30
SQUARE USE/PRODUCT OWNED
LOCATION FEET LINE(S) OR LEASED
-------- ---- ------- ---------
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
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 Owned
Communications Cables
------------------------
(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.
31
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.
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.
We have been a defendant in asbestos litigation for approximately 15 years.
As of December 31, 2003, we were a defendant in approximately 48,000 lawsuits.
Approximately 33,000 of these lawsuits have been brought on behalf of plaintiffs
by a single admiralty law firm ("MARDOC") and seek unspecified damages.
Plaintiffs in the MARDOC cases generally allege that they formerly worked in the
maritime industry and sustained asbestos-related injuries from products that we
ceased manufacturing in the mid-1970's. The MARDOC cases are managed and
supervised by a federal judge in the United States District Court for the
Eastern District of Pennsylvania ("District Court") by reason of a transfer by
the judicial panel on Multidistrict Litigation ("MDL").
In the MARDOC cases in the MDL, the District Court in May 1996 dismissed
all pending cases filed without prejudice and placed them on an inactive
administrative docket. To reinstate a MARDOC case from the inactive docket,
plaintiffs' counsel must show that the plaintiff not only suffered from a
recognized asbestos-related injury, but also must produce specific product
identification evidence to proceed against an individual defendant. During 2002,
plaintiffs' counsel requested that the District Court allow discovery in
approximately 15 cases. Prior to this discovery, plaintiffs' counsel indicated
that they believed that product identification could be established as to many
of the approximately 100 defendants named in these MARDOC cases. To date, in
this discovery, we have not been identified as a manufacturer of
asbestos-containing products to which any of these plaintiffs were exposed.
We are also a defendant in approximately 15,000 cases brought in various
jurisdictions throughout the United States. About 5,000 of these cases have been
brought in federal court in Mississippi or other federal courts and then been
transferred to the MDL, but are on a different docket from the MARDOC cases. The
vast majority of cases on this MDL docket have been inactive for over four
years. Cases may only be removed from this MDL proceeding via a petition filed
by the plaintiff indicating that the matter is ready for trial and requesting it
be returned to the originating federal district court for trial. Petitions
usually only involve plaintiffs suffering from terminal diseases allegedly
caused by exposure to asbestos-containing products. To date, in cases which we
are a defendant, no plaintiff has requested return of any action to the
originating district court for trial.
With regard to the approximately 10,000 remaining cases, we have
aggressively defended these cases based upon either lack of product
identification as to General Cable manufactured asbestos-containing product
and/or lack
32
of exposure to asbestos dust from the use of a General Cable product. In the
last 10 years, we have had no cases proceed to verdict. In many of the cases, we
were dismissed as a defendant before trial for lack of product identification.
Plaintiffs have asserted monetary damage claims in 81 cases as of the end
of 2003. In 65 of these cases, plaintiffs allege only damages in excess of some
dollar amount (about $77,000 per plaintiff); there are no claims for specific
dollar amounts requested as to any defendant. In 16 other cases pending in state
and federal district courts (outside the MDL), plaintiffs seek approximately $41
million in damages from each of about 110 defendants. In addition, in each of 10
of these 16 cases, there are claims of $43 million in punitive damages from all
of the defendants. However, almost all of the plaintiffs in these cases allege
non-malignant injuries.
Based on our experience in this litigation, the amounts pleaded in the
complaints are not typically meaningful as an indicator of our potential
liability. This is because (1) the amounts claimed usually bear no relation to
the level of plaintiff's injury, if any; (2) complaints nearly always assert
claims against multiple defendants (a typical complaint asserts claims against
some 110 different defendants); (3) damages alleged are not attributed to
individual defendants; (4) the defendants' share of liability may turn on the
law of joint and several liability; (5) the amount of fault to be allocated to
each defendant is different depending on each case; (6) many cases are filed
against us, even though the plaintiff did not use any of our products, and
ultimately are withdrawn or dismissed without any payment; (7) many cases are
brought on behalf of plaintiffs who have not suffered any medical injuries, and
ultimately are resolved without any payment to that plaintiff; and (8) with
regard to claims for punitive damages, potential liability generally is related
to the amount of potential exposure to asbestos from a defendant's products. Our
asbestos-containing products contained only a minimal amount of fully
encapsulated asbestos.
Further, as indicated above, we have more than 15 years of experience in
this litigation, and have, to date, resolved the claims of approximately 11,500
plaintiffs. The cumulative average settlement for these matters is less than
$180 per case. As of December 31, 2003, we had accrued on our balance sheet a
liability of $1.6 million for asbestos-related claims. This amount represents
our best estimate in order to cover resolution of future asbestos-related
claims.
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 has
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. Moreover, certain of the other
insurers may be financially unstable, and if 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.
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, since the
outcome of litigation is inherently uncertain, we cannot give absolute assurance
regarding the future resolution of the asbestos litigation. 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
33
years, we have experienced one strike in Oceania which was settled on
satisfactory terms. There have been no other 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.
34
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.
35
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
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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............................................................................ $51.4375
2009............................................................................ $51.1500
2010............................................................................ $50.8625
2011............................................................................ $50.5750
2012, until the date the day prior to mandatory redemption...................... $50.2875
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, 2004, 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. 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.
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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MATERIAL 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.
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.
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
53
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).
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
54
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 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
55
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.
56
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.
57
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 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; and
- 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.
58
SHARES OF SHARES OF SHARES OF COMMON
PREFERRED COMMON STOCK OWNED PRIOR
SELLING SECURITYHOLDER STOCK(1) STOCK(2) TO THIS OFFERING
--------------------------------------------------------------------------------------------------------------------
Aftra Health Fund(5) 4,100 20,491 Nil
Allstate Insurance Company(3) 25,000 124,950 Nil
American AAdvantage Funds(6) 1,300 6,497 Nil
Arkansas Teachers Retirement(7) 34,155 170,706 Nil
Astrazeneca Holdings Pension(9) 3,850 19,242 Nil
Aventis Pension Master Trust(6) 1,400 6,997 Nil
Baptist Health of South Florida(7) 4,720 23,590 Nil
BNP Paribas Arbitage 77,500 387,345 Nil
Boilermaker-Blacksmith Pension Trust(6) 7,700 38,484 Nil
BP Amoco PLC Master Trust(12) 16,916 84,546 Nil
CALAMOS(R) Convertible Portfolio - CALAMOS Advisors
Trust(6) 1,000 4,998 Nil
CALAMOS(R) Global Convertible Fund - CALAMOS Investment
Trust(6) 4,200 20,991 Nil
The California Wellness Foundation(6) 2,250 11,245 Nil
CEMEX Pension Plan(6) 720 3,598 Nil
Context Convertible Arbitrage Fund, LP(8) 22,500 112,455 Nil
Delaware PERS(9) 12,225 61,100 Nil
Delta Pilots Disability and Survivorship Trust(6) 2,150 10,745 Nil
Dorinco Reinsurance Company(6) 4,300 21,491 Nil
The Dow Chemical Company Employees' Retirement Plan(6) 13,880 69,372 Nil
Engineers Joint Pension Fund(7) 3,165 15,818 Nil
The Fondren Foundation(6) 800 3,998 Nil
Froley Revy Investment Convertible Security Fund(9) 1,075 5,372 Nil
Grace Brothers, Ltd.(4)(10) 10,000 49,980 Nil
Grace Convertible Arbitrage Fund, Ltd.(3)(10) 60,000 299,880 Nil
Hotel Union & Hotel Industry of Hawaii Pension Plan(12) 2,912 14,554 Nil
ICI American Holdings Trust(9) 2,825 14,119 Nil
Institutional Benchmarks Master Fund Ltd.(12) 17,710 88,514 Nil
Jefferies & Company Inc.(4)(12) 59 294 Nil
KD Convertible Arbitrage LP(3)(11) 39,500 197,421 Nil
KD Convertible Arbitrage Master Fund(3)(11) 13,000 64,974 Nil
Knoxville Utilities Board Retirement System(6) 725 3,623 Nil
LYXOR/Silverado Fund Ltd. 21,775 108,831 Nil
59
SHARES OF SHARES OF SHARES OF COMMON
PREFERRED COMMON STOCK OWNED PRIOR
SELLING SECURITYHOLDER STOCK(1) STOCK(2) TO THIS OFFERING
--------------------------------------------------------------------------------------------------------------------
Macomb County Employees' Retirement System(6) 1,650 8,246 Nil
McMahan Securities Co. L.P.(4) 72,500 362,355 Nil
Newport Alternative Income Fund 11,700 58,476 Nil
Nicholas Applegate Capital Management U.S. Convertible
Mutual Fund(7) 5,750 28,738 Nil
Nuveen Preferred and Convertible Income
Fund JPC(9) 46,475 232,282 Nil
Nuveen Preferred and Convertible Fund JQC(9) 60,775 303,753 Nil
Prudential Insurance Co. of America(9) 300 1,499 Nil
San Diego City Retirement(7) 6,855 34,261 Nil
San Diego County Convertible(7) 14,490 72,421 Nil
SCI Endowment Care Common Trust Fund - First Union(6) 200 999 Nil
SCI Endowment Care Common Trust Fund - National
Fiduciary Services(6) 875 4,373 Nil
SCI Endowment Care Common Trust Fund - Suntrust(6) 450 2,249 Nil
Silverado Arbitrage Trading, Ltd.(13) 10,725 53,603 Nil
Silvercreek II Limited 29,000 144,942 Nil
Silvercreek Limited Partnership 59,300 296,381 Nil
Sphinx Convertible Arbitrage Fund SPC(12) 6,724 33,606 Nil
SSI Blended Market Neutral L.P.(12) 7,760 38,784 Nil
SSI Hedged Convertible Market Neutral L.P. (12) 12,635 63,149 Nil
State of Oregon - Equity(9) 38,450 192,173 Nil
Syngenta AG(9) 2,125 10,620 Nil
Union Carbide Retirement Account(6) 6,300 31,487 Nil
United Food and Commercial Workers Local 1262 and
Employers Pension Fund(6) 3,400 16,993 Nil
Univar USA Inc. Retirement Plan(6) 1,700 8,496 Nil
Viacom Inc. Pension Plan Master Trust(12) 284 1,419 Nil
Wachovia Bank National Association(14) 113,750 568,522 Nil
Wachovia Capital Markets LLC(4)(14) 3,000 14,994 Nil
Wake Forest University(7) 3,480 17,393 Nil
Wyoming State Treasurer(7) 7,385 36,910 Nil
Unknown(15) 1,128,550 5,640,493 N/A
--------------------------------------------------------------------------------------------------------------------
TOTALS 2,070,000 10,345,860 N/A
--------------------------------------------------------------------------------------------------------------------
60
(1) In each case, none of these securities were held prior to this offering.
(2) 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.
(3) Such selling securityholder is an affiliate of a broker-dealer. We have
received assurances that such selling securityholder acquired the
securities in the ordinary course of business and, at the time of its
purchase of the securities, such selling securityholder had no agreements
or understandings, directly or indirectly, with any person to distribute
the securities.
(4) Such selling securityholder is a broker-dealer, and is deemed to be,
under interpretations of the Securities and Exchange Commission, an
"underwriter" within the meaning of the Securities Act.
(5) The selling securityholder has advised us that the natural person having
voting and dispositive power over the securities is Don Morgan.
(6) The selling securityholder has advised us that the natural person having
voting and dispositive power over the securities is Nick Calamos.
(7) The selling securityholder has advised us that the natural person having
voting and dispositive power over the securities is Horacio Valeiras.
(8) The selling securityholder has advised us that the natural person having
voting and dispositive power over the securities is Michael Rosen.
(9) The selling securityholder has advised us that the natural person having
voting and dispositive power over the securities is Anne Houlihan.
(10) The selling securityholder has advised us that the natural persons having
voting and dispositive power over the securities are Michael Brailove and
Brad Whitmore.
(11) The selling securityholder has advised us that the natural person having
voting and dispositive power over the securities is Jeff Fachler.
(12) The selling securityholder has advised us that the natural persons having
voting and dispositive power over the securities are John Gottfurcht, Amy
Jo Gottfurcht and George Douglas.
(13) The selling securityholder has advised us that the natural persons having
voting and dispositive power over the securities are Jeffrey Cohen and
John Siebel.
(14) The selling securityholder has advised us that the natural persons having
voting and dispositive power over the securities are Eric Grant and Eric
Payton.
(15) The name "Unknown" represents the remaining selling securityholders from
whom we have not received a completed questionnaire. We are unable to
provide the names of these securityholders because the preferred stock
held by these securityholders are currently evidenced by a global
preferred stock certificate which has been deposited with DTC and
registered in the name of Cede & Co. as DTC's nominee. Information about
these remaining selling securityholders will be provided in
post-effective amendments to the registration statement of which this
prospectus forms a part.
61
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 means other than pursuant to the
registration statement or this prospectus.
The selling securityholders 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 may be
deemed to be underwriters, the selling securityholders 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 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 or, to 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.
62
Upon being notified by a selling securityholder 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, 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 and any broker, dealer, agent
or underwriter regarding the sale by any selling securityholder 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 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 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 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. 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.
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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)
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
24.1* Powers of Attorney
-------------------
* Previously filed
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
(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;
II-2
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 Amendment No. 2 to
the registration statement (No. 333-111426) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Highland Heights, State
of Kentucky, on this 20th day of February 2004.
GENERAL CABLE CORPORATION
(Registrant)
By: /s/Robert J. Siverd
-----------------------------------
Robert J. Siverd
Executive Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the registration statement (No. 333-111426) has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Director, President and Chief Executive Officer February 20, 2004
-------------------------------- (Principal Executive Officer)
Gregory B. Kenny
* Executive Vice President, Chief Financial Officer February 20, 2004
-------------------------------- and Treasurer (Principal Financial and Accounting
Christopher F. Virgulak Officer)
/s/Robert J. Siverd Executive Vice President, General Counsel and February 20, 2004
-------------------------------- Secretary
Robert J. Siverd
* Director February 20, 2004
--------------------------------
Jeffrey Noddle
* Director February 20, 2004
--------------------------------
John E. Welsh, III
* Director February 20, 2004
--------------------------------
Robert L. Smialek
* Director February 20, 2004
--------------------------------
Gregory E. Lawton
* By: /s/Robert J. Siverd
-------------------------------
Robert J. Siverd
Attorney-in-Fact
II-4