Edgar Filing: INTERNATIONAL WIRE GROUP INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended June 30, 2005

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from to

33-93970
(Commission File Number)

International Wire Group, Inc.
(Exact name of Registrant as specified in its charter)

Delaware 43-1705942
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

101 South Hanley Road
St. Louis, MO 63105
(314) 719-1000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES [ ] NO [X]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES [ ] NO [X]

APPLICABLE ONLY TO ISSUES INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

YES [X] NO [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 31, 2005, there
were 10,000,002 shares, par value $.01 per share, outstanding.

INTERNATIONAL WIRE GROUP, INC.

INDEX

PART I. - FINANCIAL INFORMATION..................................................................................1

Item 1. Financial Statements (Unaudited)...............................................................1

Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004..........................1

Consolidated Statements of Operations for the three and six months
ended June 30, 2005 and 2004...................................................................2

Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004..........3

Notes to Consolidated Financial Statements.....................................................4

Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations.........15

Item 3. Quantitative and Qualitative Disclosure About Market Risk.....................................26

Item 4. Controls and Procedures.......................................................................28

PART II. - OTHER INFORMATION....................................................................................28

Item 1. Legal Proceedings.............................................................................28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...................................28

Item 3. Defaults Upon Senior Securities...............................................................28

Item 4. Submission of Matters to a Vote of Security Holders...........................................28

Item 5. Other Information.............................................................................28

Item 6. Exhibits......................................................................................29

Signatures.............................................................................................30

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

JUNE 30, DECEMBER 31,
2005 2004
---------- ----------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

ASSETS
Current assets:
Cash and cash equivalents........................................... $ 8,316 $ 15,192
Accounts receivable, less allowance of $3,592 and $4,060............ 89,688 70,609
Inventories......................................................... 74,697 83,319
Prepaid expenses and other.......................................... 11,711 11,118
---------- ----------
Total current assets.............................................. 184,412 180,238
Property, plant and equipment, net..................................... 101,596 104,132
Goodwill............................................................... 71,359 71,359
Identifiable intangibles, net.......................................... 24,131 27,898
Deferred financing costs, net.......................................... 2,781 3,075
Restricted cash........................................................ 1,987 3,107
Other assets........................................................... 3,323 4,398
---------- ----------
Total assets...................................................... $ 389,589 $ 394,207
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term obligations......................... $ 755 $ 1,341
Accounts payable.................................................... 31,610 12,751
Accrued and other liabilities....................................... 14,096 23,374
Accrued payroll and payroll related items........................... 6,419 6,190
Customers' deposits................................................. 11,873 12,376
Accrued interest ................................................... 1,821 1,703
---------- ----------
Total current liabilities......................................... 66,574 57,735
Long-term obligations, less current maturities......................... 161,177 165,308
Other long-term liabilities............................................ 3,676 4,783
---------- ----------
Total liabilities................................................. 231,427 227,826
---------- ----------
Stockholders' equity:..................................................
Common stock, $.01 par value, 20,000,000 shares authorized, 10,000,002
issued and outstanding............................................ 100 100
Contributed capital................................................. 175,600 175,600
Accumulated (deficit)............................................... (16,911) (10,762)
Accumulated other comprehensive income/(loss)....................... (627) 1,443
---------- ----------
Total stockholders' equity........................................ 158,162 166,381
---------- ----------
Total liabilities and stockholders' equity........................ $ 389,589 $ 394,207
========== ===========

See accompanying notes to the consolidated financial statements.

INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
------------- ------------- ------------- -------------
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 2005 JUNE 30, 2004 JUNE 30, 2005 JUNE 30, 2004
------------- ------------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

Net sales.................................................... $ 159,077 $ 143,593 $ 313,088 $ 281,457
Operating expenses:
Cost of goods sold, exclusive of
depreciation expense shown below........................ 142,823 122,719 280,200 242,531
Selling, general and administrative expenses................. 11,410 8,652 20,657 17,380
Depreciation................................................. 2,675 4,977 5,365 10,003
Amortization................................................. 1,143 735 2,422 1,601
Reorganization expenses...................................... -- 5,561 -- 8,184
Impairment and plant closing charges......................... 2,598 182 2,653 412
Gain/(loss) on sale of property plant and equipment.......... 15 (32) 7 (38)
------------- ------------- ------------- -------------
Operating income/(loss)...................................... (1,587) 799 1,784 1,384
Other income/(expense):
Interest expense (excluding interest of $8,693
and $9,751 on liabilities subject to compromise for
the three and six months ended June 30, 2004)....... (3,728) (2,510) (7,016) (13,678)
Amortization of deferred financing costs................ (161) (1,547) (322) (4,696)
Other, net.............................................. 8 (79) (24) (121)
------------- ------------- ------------- -------------
Loss from continuing operations
before income tax provision............................. (5,468) (3,337) (5,578) (17,111)
Income tax provision......................................... 220 351 571 497
------------- ------------- ------------- -------------

Net loss..................................................... $ (5,688) $ (3,688) $ (6,149) $ (17,608)
============= ============= ============= =============
Basic and diluted net loss per share......................... $ (.57) $ (3,688) $ (.61) $ (17,608)
============= ============= ============= =============

Weighted average basic and diluted shares outstanding 10,000,002 1,000 10,000,002 1,000

See accompanying notes to the consolidated financial statements.

INTERNATIONAL WIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

SUCCESSOR PREDECESSOR
------------- -------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2005 JUNE 30, 2004
------------- -------------
(IN THOUSANDS)

CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES:
Net loss....................................................... $ (6,149) $ (17,608)
Adjustments to reconcile net loss to net cash
provided by/(used in) operating activities:
Depreciation................................................. 5,365 10,003
Amortization................................................. 2,422 1,601
Amortization of deferred financing costs..................... 322 4,696
Provision for doubtful accounts.............................. 190 182
(Gain)/loss on sale of property, plant and equipment......... (7) 38
Impairment of identifiable intangibles....................... 2,548 --
Change in assets and liabilities:
Accounts receivable........................................ (20,693) (23,491)
Inventories................................................ 7,858 (7,646)
Prepaid expenses and other assets.......................... (939) (6,076)
Accounts payable........................................... 19,419 3,315
Accrued and other liabilities.............................. (1,822) 8,536
Accrued payroll and payroll related items.................. 229 3,073
Customers' deposits........................................ (503) 1,128
Accrued interest........................................... 118 7,589
Other long-term liabilities................................ (855) 452
------------- -------------
Net cash provided by/(used in) continuing operations 7,503 (14,208)
Net cash used in discontinued operations..................... (379) (420)
------------- -------------
Net cash provided by/(used in) operating activities
before reorganization activities................... 7,124 (14,628)
CASH FLOWS USED IN REORGANIZATION ACTIVITIES...................... (6,588) (4,892)
------------- -------------
Net cash provided by/(used in) operating activities.. 536 (19,520)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures.............................................. (3,874) (5,248)
Proceeds from sale of property, plant and equipment............... 11 57
------------- -------------
Net cash used in investing activities................ (3,863) (5,191)
CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES:
Borrowings of long-term obligations........................ -- 91,905
Repayment of borrowings.................................... (4,717) (87,324)
Restricted cash............................................ 1,120 1,742
Financing fees............................................. (28) (2,538)
------------- -------------
Net cash provided by/(used in) financing activities.. (3,625) 3,785
Effects of exchange rate changes on cash and cash equivalents..... 76 197
------------- -------------
Net change in cash and cash equivalents.............. (6,876) (20,729)
Cash and cash equivalents at beginning of the period.............. 15,192 25,981
------------- -------------
Cash and cash equivalents at end of the period.................... $ 8,316 $ 5,252
============= =============

See accompanying notes to the consolidated financial statements.

INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)

1. BUSINESS ORGANIZATION AND BASIS OF PRESENTATION

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments that are,
in the opinion of management, necessary for a fair presentation of the
financial position and results of operations of International Wire
Group, Inc. (the "Company"). The results for the three and six months
ended June 30, 2005 and 2004 are not necessarily indicative of the
results that may be expected for a full fiscal year. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto as of December 31, 2004 and
2003 and for the periods from October 20 through December 31, 2004,
and January 1, 2004 through October 19, 2004 and for the years ended
December 31, 2003 and 2002. For further information, see the Company's
financial statements, including the accounting policies and notes
thereto, included in Amendment No. 4 to the Company's registration
statement on Form S-1 (File No. 333-120736) filed on August 2, 2005.

FRESH-START BASIS OF PRESENTATION

The accompanying consolidated financial statements have been presented
in accordance with the American Institute of Certified Public
Accountants' ("AICPA") Statement of Position ("SOP") 90-7, Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code, as
amended. As a result of adopting fresh-start reporting upon emerging
from Chapter 11 of the U.S. Bankruptcy Code on October 20, 2004,
International Wire Group, Inc.'s financial statements are not
comparable with those prepared for the periods before the plan of
reorganization was confirmed, including the historical financial
statements included herein. References to "Predecessor" refer to
International Wire Group, Inc. through October 19, 2004. References to
"Successor" refer to International Wire Group, Inc. on and after
October 20, 2004.

2. VOLUNTARY BANKRUPTCY FILING AND PLAN OF REORGANIZATION

On March 24, 2004, the Predecessor entered into a lock-up and voting
agreement with a majority in principal amount of the bondholders
including the members of an Ad Hoc Committee of Bondholders and its
then largest equity holder to effect a pre-negotiated plan of
reorganization. In order to consummate its reorganization, the
Predecessor and all of its domestic subsidiaries filed voluntary
petitions under Chapter 11 of the U.S. Bankruptcy Code in the
Bankruptcy Court in the Southern District of New York (the "Filing").
The cases were consolidated and were jointly administered under case
number 04-11991 (BRL). The Predecessor's non-U.S. subsidiaries were
not part of the filing. In addition, the Predecessor entered into a
debtor-in-possession financing agreement with Highbridge/Zwirn Special
Opportunities Fund, L.P. and a group of senior lenders. Such financing
agreement provided for $140,000 of debtor-in-possession financing
consisting of a $90,000 revolving loan and a $50,000 term loan. The
debtor-in-possession financing ("DIP") was used to repay $82,000 of
Senior Secured Notes plus accrued interest, premium and fees and
provided working capital during the reorganization process.

On October 20, 2004, the Predecessor's Second Amended and Restated
Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code
(the "Plan") was confirmed and the Company emerged. The Plan involved
the exchange of approximately $305,000 of principal amount plus
accrued interest of the Company's 11.75 percent and 14 percent Senior
Subordinated Notes for 96 percent of the Common Stock of the Successor
and $75,000 of new 10 percent Secured Senior Subordinated Notes to be
issued pursuant to the Plan. All of the outstanding common stock of
the Predecessor was converted into 4 percent of the Common Stock of
the Successor. All other liabilities were unimpaired and were paid
with interest, as applicable. In addition, the Company entered into an
agreement with a group of lenders for a $140,000 senior credit
facility, the proceeds of which were utilized to refinance the
Company's obligations under the DIP facility and provide funding for
working capital and other general corporate purposes.

Under Chapter 11, certain claims against the debtor in existence prior
to the filing of the petition for relief under federal bankruptcy laws
are stayed while the debtor continues business operations as a
debtor-in-possession. These claims are considered "liabilities subject
to compromise." The primary categories of liabilities subject to
compromise as of March 24, 2004 were the following:

Accrued interest..................................... $ 29,252
Senior subordinated notes, excluding
unamortized premium................................. 305,000
-------------

Total................................................ $ 334,252
=============

The Predecessor incurred reorganization expenses primarily related to
professional fees as follows:

January 1
Through
June 30,
2004
-------------
Consulting........................................... $ 2,335
Legal................................................ 2,691
Key Employee Retention Plan.......................... 2,873
Deferred financing fees.............................. 1,548
Premium on 11.75 percent Series B Senior
Subordinated Notes.................................. (2,673)
Other................................................ 1,410
-------------
$ 8,184
=============

3. FRESH-START REPORTING

In accordance with SOP 90-7, the Successor adopted fresh-start
reporting as the holders of the existing voting shares of the
Predecessor immediately prior to filing and confirmation of the Plan
received less than 50 percent of the voting shares of the emerging
entity, and its reorganization value immediately before the
confirmation of the Plan was less than the total of its allowed claims
and post-petition liabilities. For accounting purposes, the Plan was
consummated on October 20, 2004. In accordance with fresh-start
reporting, the Successor has adjusted its assets and liabilities to
their estimated fair value at October 20, 2004, with the excess of the
Successor's reorganization value over the fair value of its tangible
and identifiable intangible assets and liabilities reported as
goodwill in the consolidated balance sheet.

Reorganization value, as defined by SOP 90-7 is "the fair value of the
entity before considering liabilities and approximates the amount a
willing buyer would pay for the assets of the entity immediately after
the restructuring." At October 20, 2004, this value was derived by
adding the fair value of all liabilities (approximately $62,500) not
included in the calculation of the enterprise value (all liabilities
except funded long-term debt) and additional debt (approximately
$6,000) to the enterprise value (approximately $342,500) of the
Successor to arrive at the $411,000 reorganization value of the
reorganized entity. Once this value was determined, the Company
determined the fair value of tangible fixed assets and specifically
identifiable intangible assets. Once these valuations were completed,
the Company allocated the reorganization value to the fair value of
its assets. As stated above, the excess of the Successor's
reorganization value over the fair value of its tangible and
intangible assets has been recorded as goodwill in the amount of
approximately $71,400.

At October 20, 2004, the liabilities of the Successor consisted
primarily of post-petition current liabilities, outstanding
pre-petition claims, $96,581 under the Senior Revolving Credit and
Term Loan Facility and $75,000 of Senior Secured Subordinated Notes.
The Successor's consolidated balance sheet included no beginning
retained earnings/deficit, and accumulated depreciation and
amortization were reduced to $0 at October 20, 2004 in connection with
recording the property plant, and equipment and identifiable
intangibles at estimated fair value.

As required under SOP 90-7, the Company determined the fair market
value of its identifiable intangible assets at October 20, 2004. The
Company allocated $16,234 to customer contracts and relationships,
$14,200 to trade names and trademarks and $2,671 to leases. The total
effect of fresh start adjustments on identifiable intangible assets
from the Predecessor at October 19, 2004 to the Successor at October
20, 2004 was a net increase $30,124. See Note 7.

4. RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED

In November 2004 (revised in December 2004), the FASB issued SFAS No.
151, Inventory Costs -- an amendment of ARB No. 43, Chapter 4 to be
effective for inventory costs incurred during fiscal years beginning
after June 15, 2005, with early adoption permitted. SFAS No. 151
amends the guidance in Accounting Research Bulleting ("ARB") No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously
stated that ". . . under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling
costs may be so abnormal as to require treatment as current period
charges. . . ." SFAS No. 151 requires those items be recognized as
current period charges regardless of whether they meet the criterion
of "so abnormal." In addition, FAS No. 151 requires the allocation of
fixed production overheads to the costs of conversion be based on the
normal capacity of the production facilities. The Company does not
expect the adoption of SFAS No. 151 to have a material impact on its
financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment.
SFAS No. 123R establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for
goods or services. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123R requires that the fair
value of such equity instruments be recognized as an expense in the
historical financial statements as services are performed. Prior to
SFAS No. 123R, only certain pro forma disclosures of fair value were
required. The Company will adopt the provisions of SFAS No. 123R
effective the first quarter of fiscal year 2006, which begins on
January 1, 2006. The Company is currently assessing the impact of
adopting SFAS No. 123R.

In March 2005, the SEC issued Staff Accounting Bulletin ("SAB") No.
107, Share-Based Payment. This SAB provides views of the SEC staff
regarding the interaction between SFAS No. 123R and certain SEC rules
and regulations, and is intended to assist in the initial
implementation of SFAS No. 123R. The Company anticipates refining its
estimates of expected volatility and expected term as a result of the
guidance provided within SAB No. 107 and SFAS No. 123R.

In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47,
Accounting for Conditional Asset Retirement Obligations, which is an
interpretation of SFAS No. 143, Accounting for Asset Retirement
Obligations. This Interpretation clarifies terminology within SFAS No.
143 and requires an entity to recognize a liability for the fair value
of a conditional asset retirement obligation when incurred if the
liability's fair value can be reasonably estimated. This
Interpretation is effective for fiscal years ending after December 15,
2005. The Company does not expect adoption of this Interpretation to
have a material impact on its financial condition or results of
operations.

In December 2004, the FASB issued SFAS No. 153, Exchanges of
Nonmonetary Assets, an amendment to APB Opinion No. 29, to be for
nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The guidance in APB Opinion No. 29, Accounting
for Nonmonetary Transactions, is based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that Opinion, however, included
certain exceptions to that principle. SFAS No. 153 amends Opinion 29
to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance.
A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result
of the exchange. The Company does not expect the adoption of SFAS No.
153 to have a material impact on its financial position or results of
operations.

In December 2004, the FASB issued FASB staff position ("FSP") 109-1,
Application of FASB No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American
Jobs Creation Act of 2004. In addition, at the same time, the FASB
issued FSP No. 109-2, Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004. The American Jobs Creation Act, which includes
numerous provisions that may affect business practices and accounting
for income taxes, was signed in to law in October of 2004. The Company
is evaluating all newly issued guidance to make a determination what,
if any, effect these issuances may have on the Company.

In May 2005, the Financial Accounting Standards Board issued SFAS No.
154, Accounting Changes and Error Corrections, SFAS No. 154 replaces
Accounting Principles Board Opinion No. 20, Accounting Changes ("APB
No. 20") and SFAS No. 3 Reporting Accounting Changes in Interim
Financial Statements, SFAS No. 154 applies to all voluntary changes in
accounting principles and also applies to changes required by an
accounting pronouncement that my not include specific transition
provisions. SFAS No. 154 generally requires retrospective application
of a change in accounting principle to prior periods' financial
statements, or, in the event that such a retrospective application is
impracticable, application of the change in accounting principle to
the balances of assets, liabilities and, usually, retained earnings,
of the earliest period for which retrospective application is
practicable.

SFAS No. 154 preserves the guidance contained in APB No. 20 for
reporting the correction of an error in previously issued financial
statements and a change in accounting estimate, including the guidance
in APB No. 20 requiring justification of a change in accounting
principle on the basis of preferability. SFAS No. 154 is effective for
accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. The Company does not anticipate
that the adoption of SFAS No. 154 will have a material impact on the
Company's financial position or results of operations.

5. INVENTORIES

The composition of inventories is as follows:

June 30, December 31,
2005 2004
------------ ------------

Raw materials.................... $ 20,107 $ 21,922
Work-in process.................. 20,608 22,234
Finished goods................... 33,982 39,163
------------ ------------
Total inventories................ $ 74,697 $ 83,319
============ ============

Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out ("LIFO") method. Had
inventories been valued at the first-in, first-out ("FIFO") cost
method, inventories would have been $8,984 and $5,587 higher as of
June 30, 2005 and December 31, 2004, respectively.

6. STOCK OPTION PLANS

As allowed under SFAS No. 123, Accounting for Stock-Based
Compensation, the Company applies APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized as options are issued at exercise prices equal to the
estimated market value at date of grant. Had compensation cost for the

respective option plans been determined based upon the fair value at
the grant date for awards under these plans consistent with the
methodology prescribed under SFAS No. 123, the Predecessor's net loss
for the six months ended June 30, 2004, would approximate the
following:

PREDECESSOR
SIX MONTHS
ENDED
JUNE 30,
2004
----------
PRO FORMA NET LOSS:
Reported net loss.......................................... $ (17,608)
Less: Total stock-based employee compensation
expense determined under fair value based
methods for all awards, net of related tax
effects............................................. (102)
----------
Pro forma net loss......................................... $ (17,710)
==========

There were no option grants in the first and second quarters of 2005
or 2004. All prior options were cancelled upon emergence from
bankruptcy on October 20, 2004 in accordance with the Plan.

7. IMPAIRMENT AND PLANT CLOSING CHARGES

On June 29, 2005, Viasystems (see Note 12), which represented 19% and
18% of net sales for the insulated wire segment for the three and six
months ended June 30, 2005, respectively, notified the Company that
they were electing not to renew their insulated wire supply agreement
with the Company and that this agreement would terminate in accordance
with its terms on December 31, 2005. As a result, the Company
determined that certain long-lived identifiable intangibles were
impaired. These assets derive their values primarily from the
projected cash flows. Based on the termination of this agreement in
the second quarter, future cash flows were deemed to be negatively
affected and resulted in the decline in value of the segment's
identified intangibles. In conjunction therewith, the Company recorded
an impairment charge of $2,548 in the three months ended June 30,
2005.

Plant closing charges and cash payments for the six months ended June
30, 2005 and 2004 related to the closing of a plant in Kendallville,
Indiana in June 2003, the closing of a plant in El Paso, Texas in
March 2004, the closing of a second plant in Kendallville, Indiana in
April 2004, the closing of a plant in Beynost, France in March 2005,
and other previously closed plants. Plant closing charges for the six
months ended June 30, 2005 and 2004 were $105 and $412, respectively.

INSULATED
WIRE BARE WIRE
SIX MONTHS ENDED JUNE 30, 2005 CORPORATE PRODUCTS PRODUCTS CONSOLIDATED
-------------------------------------------------- ----------- ----------- ----------- -----------

Balance, beginning of period...................... $ -- $ -- $ 1,632 $ 1,632
----------- ----------- ----------- -----------
Charges to operations:
Facility shut-down costs........................ -- 105 -- 105
----------- ----------- ----------- -----------
Personnel and severance costs................... -- -- -- --
----------- ----------- ----------- -----------
105 -- 105
----------- ----------- ----------- -----------
Cash payments:
Facility shut-down costs........................ -- (105) -- (105)
----------- ----------- ----------- -----------
Personnel and severance costs................... -- -- (1,323) (1,323)
----------- ----------- ----------- -----------
-- (105) (1,323) (1,428)
----------- ----------- ----------- -----------
Balance, end of period............................ $ -- $ -- $ 309 $ 309
=========== =========== =========== ===========

INSULATED
WIRE BARE WIRE
SIX MONTHS ENDED JUNE 30, 2004 CORPORATE PRODUCTS PRODUCTS CONSOLIDATED
------------------------------------------------- ----------- ----------- ----------- -----------

Balance, beginning of period..................... $ 266 $ 41 $ -- $ 307
----------- ----------- ----------- -----------
Charges to operations:
Facility shut-down costs....................... -- 175 133 308
Personnel and severance costs.................. -- 104 -- 104
----------- ----------- ----------- -----------
-- 279 133 412
----------- ----------- ----------- -----------
Cash payments:
Facility shut-down costs....................... -- (216) (133) (349)
Personnel and severance costs.................. (225) (104) -- (329)
----------- ----------- ----------- -----------
(225) (320) (133) (678)
----------- ----------- ----------- -----------
Balance, end of period........................... $ 41 $ -- $ -- $ 41
=========== =========== =========== ===========

8. COMPREHENSIVE LOSS

Comprehensive loss is comprised of:

SUCCESSOR PREDECESSOR
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2005 2004
----------- -----------

Net loss........................................................ $ (6,149) $ (17,608)
Foreign currency translation adjustment, net of taxes of $0..... (2,070) (278)
----------- -----------
Total comprehensive loss.................................... $ (8,219) $ (17,886)
=========== ===========

9. LONG-TERM OBLIGATIONS

The composition of long-term obligations is as follows:

JUNE 30, DECEMBER 31,
2005 2004
------------ ------------

Senior Revolving Credit Facility................................ $ 56,177 $ 60,308
Senior Term Loan................................................ 30,000 30,000
10% Secured Senior Subordinated Notes........................... 75,000 75,000
Other........................................................... 755 1,341
------------ ------------
161,932 166,649
Less current maturities......................................... 755 1,341
------------ ------------
$ 161,177 $ 165,308
============ ============

SENIOR REVOLVING CREDIT FACILITY AND TERM LOAN

Concurrently with the consummation of the Predecessor's
reorganization, on October 20, 2004, the Successor and the domestic
subsidiaries entered into (1) a credit agreement among Congress
Financial Corporation (Central), as administrative agent, and the
several banks and financial institutions parties thereto, which
provides for a five-year senior revolving credit facility in an amount
of up to $110,000 (including, as a sub-facility of the revolving
credit facility, a $25,000 letter of credit facility), and (2) a
credit agreement among Silver Point Finance LLC, as administrative
agent, and the several banks and financial institutions parties
thereto, which provides for a $30,000 five-year senior term loan
facility. Initial proceeds from this facility were used to repay the
debtor-in-possession financing of $91,905, reorganization costs of
$1,263 and for working capital or other general corporate purposes.

The credit facility currently provides for a revolving credit facility
of up to $110,000 (with a letter of credit sub-facility of $25,000)
tied to a borrowing base, which is calculated by reference to, among
other things, eligible accounts receivable, eligible inventory and
eligible real property and equipment and a term loan in the amount of
$30,000. As of June 30, 2005, letters of credit in the amount of
$9,922 were outstanding and $56,177 was drawn under its revolving
credit facility. Availability under the credit facility was $39,210 as
of June 30, 2005.

The Company's domestic subsidiaries are the primary parties to the
credit facility. The Company has guaranteed its obligations under the
credit facility. The collateral for the senior credit facility
includes all or substantially all of the Company's and its domestic
subsidiaries assets, including 65 percent of the capital stock of, or
other equity interests in, the Company's foreign subsidiaries. The
term loans, and the liens and guarantees in respect thereof, are
junior to the revolving credit facility, and the liens and guarantees
in respect thereof.

The Company's credit facility requires the Company to observe
conditions, affirmative covenants and negative covenants (including
financial covenants), including the following financial covenants
tested only under certain circumstances, (1) minimum availability
under the revolving credit facility and (2) maximum total leverage. At
June 30, 2005, the Company is in compliance with the terms of the
credit facility.

The Company's revolving credit facility commitment expires on October
20, 2009. The term loan is required to be repaid in full at maturity
on October 20, 2009.

SECURED SENIOR SUBORDINATED NOTES

The 10 percent Secured Senior Subordinated Notes due 2011 ("Notes")
are: senior subordinated obligations of the Company; senior in right
of payment to any of future subordinated obligations; guaranteed by
the Company' domestic subsidiaries; and secured by a third-party lien
on all or substantially all of the Company's and its domestic
subsidiaries assets, including 65 percent of the capital stock of, or
other equity interests in, the Company's foreign subsidiaries. The
Company issued the Notes pursuant to the Plan on October 20, 2004 in
aggregate principal amount of $75,000. The Notes will mature on
October 15, 2011.

Interest on the Notes accrues at the rate of 10 percent per annum and
is payable semiannually in arrears on October 15 and April 15,
commencing on April 15, 2005. Interest on overdue principal accrues at
2 percent per annum in excess of the above rate and pay interest on
overdue installments of interest at such higher rate to the extent
lawful.

The indenture governing the Notes contains restrictive covenants
which, among other things, limit the Company's ability and some of its
subsidiaries to (subject to exceptions): incur additional debt; pay
dividends or distributions on, or redeem or repurchase capital stock;
restrict dividends or other payments; transfer or sell assets; engage
in transactions with affiliates; create certain liens; engage in
sale/leaseback transactions; impair the collateral for the Notes; make
investments; guarantee debt; consolidate, merge or transfer all or
substantially all of its assets and the assets of the Company's
subsidiaries; and engage in unrelated businesses.

10. INCOME TAXES

The American Jobs Creation Act of 2004 (the "Jobs Act"), enacted on
October 22, 2004, provides for a temporary 85% dividends received
deduction on certain foreign earnings repatriated during a one-year
period. The deduction would result in an approximate 5.25% federal tax
rate on the repatriated earnings. To qualify for the deduction, the
earnings must be reinvested in the United States pursuant to a
domestic reinvestment plan established by the Company's chief
executive officer and approved by the Company's board of directors.
Certain other criteria in the Jobs Act must also be satisfied.

The Company is in the process of evaluating the extent of its foreign
earnings that may be repatriated under the repatriation provisions of
the Jobs Act, whether it will repatriate any such earnings and if so,
the amount that will be repatriated. The amount of undistributed
foreign earnings was approximately $5,800 as of December 31, 2004.
Deferred U.S. income taxes and foreign withholding taxes are not
provided on the undistributed cumulative earnings of foreign
subsidiaries as such earnings are considered to be permanently
reinvested in those operations. The Company expects to determine the
amounts and sources of foreign earnings to be repatriated, if any,
during the third quarter of 2005.

The Company is not yet in a position to determine the impact of a
qualifying repatriation, should it choose to make one, on its income
tax expense for 2005. However, given the Company's overall U.S. net
operating loss position and full valuation allowance, any such impact
is not expected to be material.

11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company has two reportable segments: bare wire and insulated wire.
These segments are strategic business units organized around two
product categories that follow management's internal organization
structure.

The bare wire segment manufactures bare and tin-plated copper wire
products (or conductors) used to transmit digital, video and audio
signals or conduct electricity and sells to insulated wire
manufacturers and various industrial OEMs for use in computer and data
communications products, general industrial, energy, appliances,
automobiles and other applications.

The insulated wire segment manufactures and sells insulated wire
products (copper conductors insulated with plastic or other polymeric
compounds) to automotive and appliance manufacturers for use in the
assembly of wire harnesses that are installed in both automobiles and
appliances. The insulted wire segment also participates in several
niche businesses in the high temperature silicone and medical
equipment markets.

Summarized financial information for the Company's reportable segments
is as follows:

INSULATED
BARE WIRE WIRE CORPORATE ELIMINATIONS TOTAL
------------ ------------- ------------ ------------- ------------

NET SALES
Successor-three months ended June 30, 2005............ $ 103,401 $ 56,816 $ -- $ (1,140) $ 159,077
Predecessor-three months ended June 30, 2004.......... 88,304 56,942 -- (1,653) 143,593
Successor-six months ended June 30, 2005.............. 200,701 114,799 -- (2,412) 313,088
Predecessor-six months ended June 30, 2004............ 167,902 117,217 -- (3,662) 281,457

OPERATING INCOME/(LOSS)
Successor-three months ended June 30, 2005............ 5,550 (4,168) (2,969) -- (1,587)
Predecessor-three months ended June 30, 2004.......... 7,105 (722) (5,584) -- 799
Successor-six months ended June 30, 2005.............. 11,479 (5,489) (4,206) -- 1,784
Predecessor-six months ended June 30, 2004............ 11,532 (1,785) (8,363) -- 1,384

GOODWILL
June 30, 2005......................................... 71,359 -- -- -- 71,359
December 31, 2004..................................... 71,359 -- -- -- 71,359

TOTAL ASSETS
June 30, 2005......................................... 269,597 108,018 12,947 (973) 389,589
December 31, 2004..................................... 268,879 105,939 20,936 (1,547) 394,207

The following table presents sales by period and by geographic region
based on the country in which the legal subsidiary is domiciled.

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
----------- ---------- ----------- ----------
2005 2004 2005 2004
----------- ---------- ----------- ----------

United States.............. $ 124,445 $ 109,773 $ 243,120 $ 214,346
Europe..................... 10,068 10,835 20,520 20,394
Mexico..................... 9,281 6,113 18,054 12,624
Philippines................ 15,283 16,872 31,394 34,093
----------- ---------- ----------- ----------
Total.................... $ 159,077 $ 143,593 $ 313,088 $ 281,457
=========== ========== =========== ==========

The following table presents property, plant and equipment, net by
geographic region based on the location of the asset:

June 30, December 31,
2005 2004
----------- -----------

United States..................................... $ 76,594 $ 78,294
Europe............................................ 8,480 9,479
Mexico............................................ 8,866 8,831
Philippines....................................... 7,656 7,528
----------- -----------
Total......................................... $ 101,596 $ 104,132
=========== ===========

12. RELATED PARTY TRANSACTIONS

In connection with the sale of the Company's former wire harness
business to Viasystems International, Inc. ("Viasystems") ("Wire
Harness Sale"), the Company entered into an agreement to supply
substantially all of their insulated wire requirements through
December 2003 (which has been extended to December 2005). At the time
of the sale, the Company and Viasystems were commonly controlled by
affiliates of Hicks, Muse, Tate & Furst Incorporated. In conjunction
of the Plan and as of October 20, 2004, affiliates of Hicks, Muse,
Tate & Furst Incorporated no longer control the Company. The Company
had sales to Viasystems of $10,669 and $10,835 for the three months
ended June 30, 2005 and 2004 and $20,556 and $21,518 for the six
months ended June 30, 2005 and 2004, respectively. The outstanding
trade receivables were $6,985 and $6,510 at June 30, 2005 and
December 31, 2004, respectively. Mr. Robert A. Hamwee is a director
of both the Company and Viasystems. On June 29, 2005, Viasystems
notified the Company that they were electing not to renew their
insulated wire supply agreement with the Company and that this
agreement would terminate in accordance with its terms on December
31, 2005. See Note 7.

In September 2002, the Company began selling a portion of its
production scrap to Prime Materials Recovery, Inc. ("Prime"). Prime
is a closely held company and its major shareholder, chairman and
director is President and Chief Operating Officer through May 31,
2005 and Chief Executive Officer as of June 1, 2005 of the Company.
In addition, the Vice President of Finance of the Company holds a
minority ownership interest and is a director. The Company had sales
to Prime of $2,514 and $3,371 for the three months ended June 30,
2005 and 2004 and $5,314 and $7,268 for the six months ended June 30,
2005 and 2004, respectively. The outstanding trade receivables were
$651 and $276 at June 30, 2005 and December 31, 2004, respectively.
Sales to Prime were made at terms comparable to those of other
companies in the industry.

13. LITIGATION

In February 2002, the Company initiated an action in the Circuit
Court of Cook County, Chancery Division (Case No. 02CH2470) located
in Chicago, Illinois, titled International Wire Group, Inc. v.
National Union Fire Insurance Company of Pittsburgh, Pennsylvania,
AIG Technical Services, Inc., Aon Corporation and Aon Risk Services
of Missouri, Ltd. (The "AIG Litigation"). The Company alleges in the
complaint in such action, among other things, that National Union is
obligated to defend and indemnify and otherwise provide insurance
coverage to the Company and the various original equipment
manufacturers for certain claims and damages related to certain water
inlet hoses supplied by and through the Company pursuant to two (2)
$25,000 excess insurance policies issued to the Company by National
Union. In July 2003, a ruling was rendered in this matter. The trial
court ruled in favor of the Company and ruled that National Union/AIG
is obligated to defend and indemnify and otherwise provide insurance
coverage to the Company and various original equipment manufacturers
for certain claims and damages related to certain water inlet hoses
supplied by and through the Company pursuant to the two (2) $25,000
excess insurance policies issued to the company by National Union.
National Union/AIG filed for an appeal of the decision.

In December 2003, the Company and the Predecessor's former parent
company reached an agreement with National Union, AIG Technical
Services, Aon Corporation and Aon Risk Services of Missouri to settle
pending matters in the AIG Litigation. Under the settlement
agreement, National Union agreed to provide full defense and
indemnity to the Company and certain original equipment manufacturers
for all claims for damages that have occurred between April 1, 2000
and March 31, 2002 related to certain water inlet hoses supplied by
and through the Company pursuant to the two (2) $25,000 excess
insurance policies issued to the Company by National Union. All other
aspects of the settlement are subject to the confidentiality
provisions of the settlement agreement.

In connection with the Wire Harness Sale, the Company agreed to
indemnify Viasystems for certain claims and litigation including any
claims related to the claims for water inlet hoses. The Company's
policy is to record the probable and reasonably estimable loss
related to the product liability claims. Over time, the level of
claims, insurance coverage and settlements has varied. Accordingly,
the Company has revised its estimated liability outstanding, or
balance sheet reserve, based on actual claims reported and costs
incurred and its estimate of claims and cost incurred but not
reported. The Company has reached global settlements with various
claimants related to such claims which are also considered in
determining the balance sheet reserve. There are no recoveries from
third parties considered in determining the balance sheet reserve.
The following table summarizes the number of uninsured claims
received, resolved and pending as of and for the periods ended June
30, 2005, December 31, 2004 and October 19, 2004 (in thousands except
number of claims):

VALUE OF
NO. OF ALLEGED
CLAIMS DAMAGES
----------- -----------

As of December 31, 2003 (Predecessor)..................................... 1,693 $ 15,725
For the period January 1, 2004 through October 19, 2004 (Predecessor):
New uninsured claims.................................................... 523 5,896
Resolved uninsured claims............................................... (1,870) (18,181)
----------- -----------
As of October 19, 2004 (Predecessor)...................................... 346 3,440
For the period October 20, 2004 through December 31, 2004 (Successor):
New uninsured claims.................................................... 42 516
Resolved uninsured claims............................................... (--) (--)
----------- -----------
As of December 31, 2004 (Successor)....................................... 388 3,956
For the six months ended June 30, 2005 (Successor):
New uninsured claims.................................................... 1,176 11,316
Resolved uninsured claims............................................... (957) (9,368)
----------- -----------
As of June 30, 2005 (Successor)........................................... 607 $ 5,904
=========== ===========

For the periods prior to April 1, 2002, the Company's product
liability coverage is in excess of the insured claims outstanding. As
of June 30, 2005 and December 31, 2004, the total of such claims was
less than $2,000 with an estimated liability related to these claims
of less than $500. As of June 30, 2005 and December 31, 2004, the
Company had $75,000 of remaining insurance coverage under its excess
umbrella policies for each of the insured years prior to April 1,
2002.

For the periods ended June 30, 2005, December 31, 2004 and October
19, 2004 the aggregate settlement costs, cost of administering and
litigation and average cost per resolved claim were as follows:

SUCCESSOR SUCCESSOR PREDECESSOR
------------------- -------------------- -------------------
FOR THE SIX OCTOBER 20, 2004 JANUARY 1, 2004
MONTHS ENDED THROUGH THROUGH
JUNE 30, 2005 DECEMBER 31, 2004 OCTOBER 19, 2004
------------------- -------------------- -------------------

Aggregate settlement costs.................. $ 339 $ -- $ 3,294
Cost of administering and litigating........ $ 14 $ 5 $ 392
Average cost per resolved claim............. $ -- $ -- $ 1

The Company had a reserve of $1,935 and $2,293 as of June 30, 2005
and December 31, 2004, respectively, related to the estimated future
payments to be made to the claimants in the settlement of the
remaining incurred claims and claims incurred but not reported. The
majority of payments are expected to be made over approximately the
next three years. Due to the uncertainties associated with these
product claims, such as greater than expected amount of unreported
claims and amounts to be paid under reached global settlements, the
future costs of final settlement of these claims may differ from the
liability currently accrued. However, in the Company's opinion, the
impact of final settlement of these claims on future operations,
financial position and cash flows should not be material.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the unaudited
consolidated financial statements and the notes thereto included in this Form
10-Q.

The Company has made forward-looking statements in this Form 10-Q that are based
on management's beliefs and assumptions and on information currently available
to management. Forward-looking statements include the information concerning the
Company's possible or assumed future results of operations, business strategies,
financing plans, competitive position, potential growth opportunities, the
effects of competition, outlook, objectives, plans, intentions and goals. For
those statements, the Company claims the protection of the safe harbor for
forward-looking statements provided for by Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements include all
statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words "believes," "expects," "may,"
"will," "should," "seeks," "pro forma," "anticipates," "intends," "plans,"
"estimates," or the negative of any thereof or other variations thereof or
comparable terminology, or by discussions of strategy or intentions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual
results may differ materially from those expressed in these forward-looking
statements. Undue reliance should not be placed on any forward-looking
statements. The Company does not have any intention or obligation to update
forward-looking statements after it files this Form 10-Q.

Many important factors could cause the Company's results to differ materially
from those expressed in forward-looking statements. These factors include, but
are not limited to, fluctuations in the Company's operating results and customer
orders, unexpected decreases in demand or increases in inventory levels, changes
in the price of copper, copper premiums and compound costs, the Company's
competitive environment, the Company's reliance on its largest customers, risks
associated with the Company's international operations, the status of the
insulated wire division (including, but not limited to, the risk that the
Company will be unable to renew insulated wire division customer contracts as
they expire at the end of 2005 and at the beginning of 2006) and other factors.
For additional information regarding risk factors, see the disclosures provided
in "Risk Factors" set forth in Amendment No. 4 to the Company's registration
statement on Form S-1 (File No. 333-120736) filed on August 2, 2005.

OVERVIEW

We, together with our subsidiaries, manufacture and market wire products,
including bare and tin-plated copper wire and insulated copper wire products,
for other wire suppliers and original equipment manufacturers or "OEMs". Our
products include a broad spectrum of copper wire configurations and gauges with
a variety of electrical and conductive characteristics and are utilized by a
wide variety of customers primarily in the appliance, automotive, electronics
and data communications and general industrial/energy industries. We manufacture
and distribute our products at 19 facilities located in the United States,
Mexico, France, Italy and the Philippines. We operate our business in the
following segments:

o Bare Wire Products. Our bare and tin-plated copper wire products
(or conductors) are used to transmit digital, video and audio
signals or conduct electricity and are sold to a diverse customer
base of over 1,000 insulated wire manufacturers and various
industrial OEMs for use in computer and data communications
products, general industrial, energy, appliances, automobiles and
other applications.

o Insulated Wire Products. Our insulated wire products (copper
conductors insulated with plastic or other polymeric compounds)
are primarily manufactured for the automotive and appliance
end-user markets. Our insulated wire products are used in the
assembly of wire harnesses that are installed in both automobiles
and appliances. A wire harness is comprised of an assembly of
wires with connectors and terminals that transmit electricity
between two or more end points. We also participate in niche
businesses, including high temperature silicone and medical
equipment markets.

Demand for our products is directly related to two primary factors:

o demand for the end products in which our products are
incorporated; and

o our ability to compete with other suppliers in the industries we
serve.

Important indicators of demand for all of our products include a number of
general economic factors such as gross domestic product, interest rates and
consumer confidence. In specific industries, management also monitors the
following factors:

o Automobiles - industry production statistics, which are
influenced by labor relations issues, regulatory requirements and
trade agreements. From January 1, 2005 to June 30, 2005,
automotive industry production volumes were down 3.1% compared to
the same period for 2004.

o Appliances - industry shipment statistics for items such as
refrigerators, freezers, washers, dryers, ranges and dishwashers.
These statistics are impacted by replacement rates for existing
appliances, housing starts, existing home sales and mortgage
refinancing rates. From January 1, 2005 to June 30, 2005,
industry shipments are up 0.2% compared to the same period for
2004.

o Electronics/data communications and industrial/energy - While the
end user applications are very diverse, some of the contributing
factors of demand in the markets include technology spending and
major industrial and/or infrastructure projects, including
build-out of computer networks, mining development, oil
exploration and production projects, mass transit and general
commercial and industrial real estate development.

We compete with other suppliers of wire products on the basis of price, quality,
delivery and the ability to provide a sufficient array of products to meet most
of our customers needs. We believe our state of the art production equipment
permits us to provide a high quality product while also permitting us to more
efficiently manufacture our products, which assists in our ability to provide
more competitively priced products. Also, we invest in engineering, research and
development so that we can continue to provide our customers with the array of
products and features they demand. Finally, we have located our production
facilities near many of our customers' manufacturing facilities which allows us
to meet our customers' delivery demands, including assisting with inventory
management for just-in-time production techniques. Also, we believe there may be
excess industry-wide capacity in North America following the general
recessionary conditions that started in 2001.

A portion of our revenues is derived from processing customer-owned ("tolled")
copper. The value of tolled copper is excluded from both our sales and costs of
sales, as title to these materials and the related risks of ownership do not
pass to us.

Our expenses in producing these products fall into three main categories - raw
materials, including copper and insulating material (PVC and XPLE compounds),
labor and to a lesser extent utilities. Copper is the primary raw material
incorporated in all of our products. As a world traded commodity, copper prices
have historically been subject to fluctuations. Copper prices are affected by a
number of factors, including worldwide demand, mining and transportation
capacity and political instability. Copper supply is generally affected by the
number and capacity of the mines that produce copper. For instance, production
problems at a single major mine can impact worldwide supply and prices. Copper
prices have increased from 2003 levels as a result of a combination of higher
demand in China, a weak U.S. dollar, an Indonesian mine disaster and stockpiling
by Chilean producers. The average price of copper based upon The New York
Mercantile Exchange, Inc. ("COMEX") increased to $1.53 per pound for the three
months ended June 30, 2005 from $1.23 per pound for the three months ended June
30, 2004. We attempt, where possible, to minimize the impact of these
fluctuations on our profitability through pass-through arrangements with our
customers, which are based on similar variations of monthly copper price
formulas. However, a severe increase in the price of copper can have a negative
impact on our liquidity. Currently, a $0.10 per pound fluctuation in the price
of copper will have a $4.7 million impact on our working capital. Additionally,
the formulas for our insulated wire customers do not include adjustments for the
fluctuations in the premiums charged to convert copper cathode to copper rod and
deliver it to the required location. We believe that higher premiums may
continue and that we may be unable to pass-through these costs to our customers
for the foreseeable future. For the year ended December 31, 2004, the premium to
convert copper cathode to copper rod increased by 16.0%. Beginning January 1,
2005, the premium to convert copper cathode to copper rod increased by another
19.9%.

Other major raw materials we consume include PVC and XPLE compounds. The prices
of these items are generally affected by world oil prices and world-wide supply
and demand and have increased significantly in 2004. World oil prices are
impacted by a number of factors, including seasonal fluctuations, political
instability and meterological events. For the year ended December 31, 2004, the
price of a barrel of oil increased 34.4%. Correspondingly, from January 1, 2004
to January 1, 2005, the price of PVC compounds, XPLE compounds and silicone
compounds increased 24.6%, 21.4% and 19.3%, respectively. The prices of PVC
compounds have increased an additional 5.7% from January 1, 2005 to June 30,
2005. Our contracts with customers for insulated wire do not include adjustments
for fluctuations in the price of oil, PVC compounds, XPLE compounds or silicone
compounds. We believe that higher compound costs may continue and that we may be
unable to pass-through these costs to our customers for the foreseeable future.

Our labor and utility expenses are directly tied to our level of production.
While the number of employees we use in our operations has fluctuated with sales
volume, our cost per employee continues to rise with increases in wages and the
costs of providing medical coverage, worker's compensation and other fringe
benefits to employees. The cost of providing medical coverage is impacted by
continued inflation in medical products and services. Utility rates vary by
season and the prices for coal, natural gas and other similar commodities which
are used in the generation of power. We attempt to manage our utility rates
through usage agreements which affect our power usage during peak usage hours.

INSULATED WIRE DIVISION

Over the last several years, the Company's insulated wire division operating
results have been adversely impacted by industry wide overcapacity and increased
material costs that, with the exception of copper price increases, cannot be
passed through to customers under most of our current customer contracts. On
November 19, 2004, we announced that we were considering strategic alternatives
for our insulated wire division and had retained Rothschild Inc. as our
financial advisor to assist in that process. As part of that process, we
solicited expressions of interest for the acquisition of the insulated wire
division from third parties, but no acceptable proposals were received. We are
no longer actively pursuing that alternative, but are continuing to actively
evaluate the business, which may include rationalization of division capacity,
downsizing, transferring certain facilities to our bare wire division, shutting
down unprofitable facilities, the sale of certain facilities, a wind down of
some or all of the division, a combination of the above, or other alternatives
affecting all or part of the insulated wire division.

For the insulated wire division, many of our customer contracts expire at the
end of 2005 or at the beginning of 2006. As these contracts come up for renewal,
we will attempt to increase our prices, negotiate pass-through arrangements for
the cost of compounds used in the manufacturing process and the premiums charged
to convert copper cathode to copper rod.

In this regard, on June 29, 2005, Viasystems, which represented $41.4 million,
or 19%, of our pro forma insulated wire net sales for the year ended December
31, 2004 and $10.7 million, or 18%, of our insulated wire net sales for the six
months ended June 30, 2005, notified us that they were electing not to renew our
insulated wire supply agreement and that this agreement would terminate in
accordance with its terms on December 31, 2005. In addition, Yazaki Corp. and
its affiliates ("Yazaki") represented $76.1 million, or 35%, of our pro forma
insulated wire net sales for the year ended December 31, 2004 and $43.2 million,
or 38%, of our insulated wire net sales for the six months ended June 30, 2005.
The majority of these sales, but not all, are under contracts that expire on
December 31, 2005. In July 2005, Yazaki began the process of soliciting bids
from us and our competitors. As of September 13, 2005, we have not been notified
whether or not our contracts with Yazaki will be renewed.

Because of excess industry-wide capacity in the insulated wire segment and
related pricing pressures, we may be unable to enter into new agreements with
our customers, or if we do, we may be unable to enter into agreements at
favorable volumes and prices. In the event Yazaki does not renew its contract or
if we are unable to obtain acceptable replacement volume, we would be required
to, and believe we are prepared to, downsize our business through a combination
of cost reductions, closing certain plants and selling selected assets.

CHANGE IN CHIEF EXECUTIVE OFFICER

Effective as of June 1, 2005, Rodney D. Kent replaced Joseph M. Fiamingo as our
chief executive officer.

RESULTS OF OPERATIONS

As is more fully discussed in Note 3 - Fresh-Start Reporting of the Notes to our
Consolidated Financial Statements, we adopted fresh-start reporting pursuant to
the guidance provided by the American Institute of Certified Pubic Accountant's
Statement of Position 90-7, Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code ("SOP 90-7"). For financial reporting purposes, the
effective date of the reorganization was October 20, 2004 and our results of
operations and cash flows have been separated as pre-October 20 and post-October
20, 2004 due to a change in basis of accounting in the underlying assets and
liabilities. We refer to our results prior to October 20, 2004 as a result for
the Predecessor Company, and we refer to our results after October 20, 2004 as
results for the Successor Company.

For the reasons describe in Note 3 to our Consolidated Financial Statements and
due to other non-recurring adjustments, the Predecessor Company's financial
statements for the periods prior to our emergence from bankruptcy may not be
comparable to the Company's subsequent financial statements, and our results of
operations prior to emergence from bankruptcy, including the period from January
1 through October 19, 2004, are not indicative of future results. Readers
should, therefore, review this material with caution and not rely on the
information concerning the Predecessor Company as being indicative of our future
results or providing an accurate comparison of financial performance.

The following table sets forth certain statement of operations data in millions
of dollars and percentage of net sales for the periods indicated:

Net sales............................... $159.1 100.0% $143.6 100.0% $313.1 100.0% $281.5 100.0%
Operating expenses:
Cost of goods sold, exclusive of
depreciation expense shown below....... 142.8 89.8 122.7 85.4 280.2 89.5 242.5 86.2
Selling, general and administrative
expenses............................... 11.4 7.2 8.7 6.1 20.7 6.6 17.4 6.2
Depreciation and amortization........... 3.9 2.5 5.7 4.0 7.8 2.5 11.6 4.2
Reorganization expenses................. 0.0 0.0 5.6 3.9 0.0 0.0 8.2 2.9
Impairment and plant closing charges.... 2.6 1.6 0.1 0.0 2.6 0.8 0.4 0.0
Gain on sale of property, plant and
equipment.............................. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- ------- -------
Operating income/(loss)................. (1.6) (1.1) 0.8 0.6 1.8 0.6 1.4 0.5
Other income/(expense):
Interest expense (excluding interest of
$8.7 and $9.8 on liabilities subject to
compromise for the three and six months
ended June 30, 2004.................... (3.7) (2.3) (2.5) (1.8) (7.0) (2.3) (13.7) (4.9)
Amortization of deferred financing
costs................................. (0.2) (0.1) (1.5) (1.0) (0.3) (0.1) (4.7) (1.7)
Other, net............................. 0.0 0.0 (0.1) (0.1) (0.0) (0.0) (0.1) (0.0)
------- ------- ------- ------- ------- ------- ------- -------
Loss from continuing operations before
income tax provision................... (5.5) (3.5) (3.3) (2.3) (5.5) (1.8) (17.1) (6.1)
Income tax provision.................... 0.2 0.1 0.4 0.3 0.6 0.1 0.5 0.2
------- ------- ------- ------- ------- ------- ------- -------
Net loss................................ $ (5.7) (3.6%) $ (3.7) (2.6%) $ (6.1) (1.9%) $(17.6) (6.3%)
======= ======= ======= ======= ======= ======= ======= =======

We have two reportable segments: bare wire and insulated wire. The following
table sets forth net sales and operating income / (loss) for the periods
presented in millions of dollars and percentages of totals:

Net sales..............................
Bare Wire............................. $103.4 65% $88.3 61% $200.7 64% $167.9 60%
Insulated Wire........................ 56.8 36 56.9 40 114.8 37 117.2 41
Elimination........................... (1.1) (1) (1.6) (1) (2.4) (1) (3.6) (1)
------- ------- ------- ------- ------- ------- ------- -------
Total............................... $159.1 100% $143.6 100% $313.1 100% $281.5 100%
======= ======= ======= ======= ======= ======= ======= =======

Operating income/(loss)
Bare Wire............................. $ 5.6 400% $ 7.1 111% $ 11.5 192% $ 11.5 117%
Insulated Wire........................ (4.2) (300) (0.7) (11) (5.5) (92) (1.7) (17)
------- ------- ------- ------- ------- ------- ------- -------
Subtotal............................ 1.4 100% 6.4 100% 6.0 100% 9.8 100%
======= ======= ======= =======
Corporate............................. (3.0) (5.6) (4.2) (8.4)
------- ------- ------- -------

Total............................... ($1.6) $ 0.8 $ 1.8 $ 1.4
======= ======= ======= =======

Three Months Ended June 30, 2005 versus Three Months Ended June 30, 2004

Net sales were $159.1 million and $143.6 million for the three months ended June
2005 and 2004, respectively. Sales for the three months ended June 30, 2005 were
$15.5 million, or 10.8%, above comparable 2004 levels as a result of a $18.3
million increase in the average cost and selling price of copper, a $5.1 million
impact from a lower proportion of customers' tolled copper in the 2005 period
compared to the 2004 period and a $0.9 million increase in sales to
industrial/energy customers. These factors were partially offset by a $8.5
million decrease in volume with automotive, appliance and electronics/data
communications customers and a $0.3 million reduction due to lower automotive
customer pricing. The average price of copper based upon COMEX increased to
$1.53 per pound for the three months ended June 30, 2005 from $1.23 per pound
for the three months ended June 30, 2004.

Bare wire segment net sales for the three months ended June 30, 2005 were $103.4
million, or an increase of $15.1 million or 17.1%, from sales of $88.3 million
for the comparable 2004 period. This increase was primarily the result of the
previously mentioned increase in the average cost and selling price of copper of
$11.8 million, $5.1 million from the impact of a lower proportion of customers'
tolled copper in the 2005 period compared to the 2004 period and higher volume
to customers supplying the industrial/energy market of $0.9 million. These
factors were partially offset by lower volume to customers supplying the
electronics/data communication, automotive and appliance markets of $2.7
million. Of the total pounds processed for the three months ended June 30, 2005
and 2004 respectively, 39.6% and 49.5% were from customers' tolled cooper.

Insulated wire segment net sales for the three months ended June 30, 2005 were
$56.8 million compared to $56.9 million in the three months ended June 30, 2004,
for a decrease of $0.1 million, or 0.2%. Lower sales resulted from reduced
automotive and appliance volume of $6.3 million together with lower automotive
customer pricing of $0.3 million. Lower automotive volume was primarily due to
reduced industry-wide production rates year-over-year and customers' inventory
adjustments. Industry-wide automotive production was down 3.0% for the three
months ended June 30, 2005 compared to the three months ended June 30, 2004.
Appliance sales decreased to our customers supplying the appliance market in
both the U.S. and Mexico. These factors were substantially offset by the
previously mentioned higher average cost and selling price of copper of $6.5
million.

Cost of goods sold as a percentage of sales increased to 89.8% for the three
months ended June 30, 2005 from 85.4% for the same period in 2004. The increase
of 4.4 percentage points was primarily due to the increase in the average cost
and selling price of copper of 1.3 percentage points; the impact of a lower
proportion of customers' tolled copper in the 2005 period compared to the 2004
period of 0.4 percentage points; higher insulating compound material costs of
1.3 percentage points; increased copper rod premium for insulated wire products
of 0.3 percentage points; 0.8 percentage points from higher costs in the
European operations; 0.2 percentage points from lower customer pricing; and 0.1
percentage points from product mix and other cost changes.

Selling, general and administrative expenses were $11.4 million for the three
months ended June 30, 2005, compared to $8.7 million for the same period in
2004. Included in the 2005 period were $0.8 million of expense under the
Insulated Wired Division and the bankruptcy retention plans and other costs
associated with the process of seeking strategic alternatives for the Insulated
Wire Division, a $1.4 million charge for payments to be made to our former Chief
Executive Officer under his employment agreement, $0.7 million for expenses
related to our S-1 registration statement and $0.2 million for costs associated
with Sarbanes-Oxley compliance. Excluding these amounts, selling general and
administrative expense decreased $0.4 million in the 2005 period from the 2004
period. This decrease was the result of lower accruals for personnel related
costs, volume related shipping and freight costs and bad debt provision
partially offset by higher professional fees. Excluding the previously mentioned
amounts in 2005, selling, general and administrative expenses, as a percent of
net sales, decreased from 6.1% for the three months ended June 30, 2004 to 5.2%
for the three months ended June 30, 2005, primarily from the effect of higher
copper costs and selling prices and a lower proportion of customers' tolled
copper in 2005.

Depreciation and amortization was $3.9 million for the three months ended June
30, 2005, compared to $5.7 million for the same period in 2004. The decrease of
$1.8 million was primarily due to lower depreciation on property, plant and
equipment as the result of the adoption of "fresh start" reporting under SOP
90-7 as the carrying values were adjusted to fair market values as of October
20, 2004. This reduction was partially offset by increased amortization of
identifiable intangibles.

Reorganization expenses relating to the Chapter 11 bankruptcy filing and the
related process preceding the bankruptcy filing were $0.0 million for the three
months ended June 30, 2005, compared to $5.6 million for the same period in
2004.

Impairment and plant closing charges for the three months ended June 30, 2005
were $2.6 million and $0.1 million in the three months ended June 30, 2004.
Included in the 2005 period was a $2.5 million impairment of identifiable
intangible assets related to the insulated wire segment. On June 29, 2005,
Viasystems, which represented 19% of net sales for the insulated wire segment
for the three months ended June 30, 2005, notified us that they were electing
not to renew their insulated wire supply agreement and that this agreement would
terminate pursuant to its terms on December 31, 2005. In connection therewith,
certain of our identifiable intangible assets were deemed to be impaired. These
assets derive their values primarily from projected cash flows. Based on the
noticed received in the second quarter, future cash flows were deemed to be
negatively affected and resulted in the decline in value of the segment's
identifiable intangibles. Plant closing changes for the three months ended June
30, 2005 and 2004 were $0.1 million and $0.1 million, respectively from costs
associated with previously closed plants.

Operating income/(loss) for the three months ended June 30, 2005 was ($1.6)
million compared to $0.8 million for the 2004 period, or a decrease of $2.4
million. This decrease was primarily the impact of the higher cost of goods
sold, increased selling, general and administrative expenses and the impairment
charge in the 2005 period. These factors were partially offset by reduced
depreciation and amortization and lower reorganization expenses. Bare wire
segment's operating income of $5.6 million for the 2005 period decreased from
the 2004 period by $1.5 million, or 21.1%, primarily from lower volume levels
and increased costs in the European operations, partially offset by lower
depreciation and amortization. Insulated wire segment's operating (loss) was
($4.2) million for the three months ended June 30, 2005 compared to ($0.7)
million in the 2004 period. This decrease of $3.5 million was from lower sales
volume, higher costs for insulating compound materials and copper rod premium
costs, and the $2.5 million impairment charge. These factors were partially
offset by lower depreciation and amortization. Operating income in the 2005
period also increased by $2.6 million from lower reorganization expenses
partially offset by retention plans expense, other costs associated with the
Insulated Wire Division strategic alternatives, the S-1 registration expenses
and Sarbanes-Oxley compliance costs.

Interest expense was $3.7 million and $2.5 million for the three months ended
June 30, 2005 and 2004, respectively, for an increase of $1.2 million. This
increase was primarily due to the non-recognition of $8.7 million interest on
our $305 million of 11.75% and 14% Senior Subordinated Notes, which were subject
to compromise in the 2004 period, coupled with the 10% interest on our $75
million of new notes. In addition, interest rates are slightly higher on our
senior credit facility in 2005 compared to the Debtor-In-Possession financing
(DIP) in 2004.

Amortization of deferred financing cost decreased $1.3 million to $0.2 million
for the three months ended June 30, 2005 from $1.5 million for the 2004 period
as the result of lower deferred financing fees related to our new senior credit
facility compared to the DIP financing facility in 2004.

Income tax provisions were $0.2 million and $0.4 million for the three months
ended June 30, 2005 and 2004, respectively. The tax provisions represent certain
state and foreign income taxes only.

Net loss of $5.7 million and $3.7 million were recorded for the three months
ended June 30, 2005 and 2004, respectively. The increase of net loss of $2.0
million in the three months ended June 30, 2005 was the result of lower
operating income and increased interest expense, partially offset by lower
amortization of deferred financing fees.

Six Months Ended June 30, 2005 versus Six Months Ended June 30, 2004

Net sales were $313.1 million for the six months ended June 2005 compared to
$281.5 million for the six months ended June 30, 2004. Sales for the six months
ended June 2005 were $31.6 million, or 11.2%, above comparable 2004 levels as a
result of a $30.8 million increase in the average cost and selling price of
copper, a $16.1 million impact of a lower proportion of customers' tolled copper
in the 2005 period compared to the 2004 period, partially offset by a $14.7
million decrease in volume, primarily with automotive, appliance and
electronics/data communications customers, and a $0.6 million decrease in sales
due to lower automotive customer pricing. The average price of copper based upon
COMEX increased to $1.50 per pound for the six months ended June 30, 2005 from
$1.23 per pound for the six months ended June 30, 2004.

Bare wire segment net sales for the six months ended June 30, 2005 were $200.7
million, or an increase of $32.8 million or 19.5%, from sales of $167.9 million
for the comparable 2004 period. This increase was primarily the result of the
previously mentioned increase in the average cost and selling price of copper of
$19.0 million, $16.1 million from the impact of a lower proportion of customers'
tolled copper in the 2005 period compared to the 2004 period and higher volume
to customers supplying the industrial/energy market of $1.6 million. These
factors were partially offset by lower volume to customers supplying the
electronics/data communication, automotive and appliance markets of $3.9
million. Of the total pounds processed for the six months ended June 30, 2005
and 2004 respectively, 41.0% and 51.7% were from customers' tolled copper.

Insulated wire segment net sales for the six months ended June 30, 2005 were
$114.8 million compared to $117.2 million in the six months ended June 30, 2004,
for a decrease of $2.4 million, or 2.0%, from comparable 2004 period. Lower
sales resulted from reduced automotive and appliance sales volume of $13.6
million, which was due to reduced industry-wide production rates year-over-year
and customers' inventory adjustments, and lower automotive customer pricing of
$0.6 million. Industry-wide automotive production was down 3.1% for the six
months ended June 30, 2005 compared to the six months ended June 30, 2004.
Appliance sales decreased to our customers supplying the appliance market in
both the U.S. and Mexico. These factors were partially offset by the previously
mentioned higher average cost and selling price of copper of $11.8 million.

Cost of goods sold as a percentage of sales increased to 89.5% for the six
months ended June 30, 2005 from 86.2% for the same period in 2004. The increase
of 3.3 percentage points was primarily due to: the increase in the average cost
and selling price of copper of 1.1 percentage points; the impact of a lower
proportion of customers' tolled copper in the 2005 period compared to the 2004
period of 0.7 percentage points; higher insulating compound material costs of
1.3 percentage points; increased copper rod premium for insulated wire products
of 0.3 percentage points; 0.2 percentage points from lower customer pricing; and
0.2 percentage points from higher costs in the European operations. These
increases were partially offset by product mix and other cost reductions of 0.5
percentage points.

Selling, general and administrative expenses were $20.7 million and $17.4
million for the six months ended June 30, 2005 and 2004, respectively. Included
in the 2005 period were $2.0 million of expense under the Insulated Wire
Division and the bankruptcy retention plans and other costs associated with the
process of seeking strategic alternatives for the Insulated Wire Division, a
$1.4 million charge for payments to be made to our former Chief Executive
Officer under his employment agreement, $0.7 million for expenses related to our
S-1 registration statement and $0.3 million for costs associated with
Sarbanes-Oxley compliance. Excluding these amounts, selling general and
administrative expense decreased $1.1 million in the 2005 period from the 2004
period. This decrease was the result of lower accruals for personnel related
costs, volume related shipping and freight costs and bad debt provision
partially offset by higher professional fees. Excluding the previously mentioned
amounts in 2005, selling, general and administration expenses, as a percent of
net sales, decreased from 6.2% for the six months ended June 30, 2004 to 5.2%
for the six months ended June 30, 2005, primarily from the effect of higher
copper costs and selling prices and a lower proportion of customers' tolled
copper in the 2005 period.

Depreciation and amortization was $7.8 million for the six months ended June 30,
2005, compared to $11.6 million for the same period in 2004. This decrease of
$3.8 million was primarily due to lower depreciation on property, plant and
equipment as the result of the adoption of "fresh start" reporting under SOP
90-7 as the carrying values were adjusted to fair market values as of October
20, 2004. This reduction was partially offset by increased amortization of
identifiable intangibles.

Reorganization expenses relating to the Chapter 11 bankruptcy filing and the
related process preceding the bankruptcy filing were $8.2 million for the six
months ended June 30, 2004. There were no similar expenses in the 2005 period.

Impairment and plant closing charges for the six months ended June 30, 2005 were
$2.6 million and $0.4 million in the six months ended June 30, 2004. The 2005
period included the aforementioned $2.5 million impairment of intangible assets
related to the insulated wire segment. Plant closing charges for the six months
ended June 30, 2005 and 2004 were $0.1 million and $0.4 million, respectively
from costs associated with previously closed plants.

Operating income/(loss) for the six months ended June 30, 2005 was $1.8 million
compared to $1.4 million for the 2004 period, or an increase of $0.4 million.
This increase was primarily from reduced depreciation and amortization and lower
reorganization expenses. These factors were partially offset by the higher cost
of goods sold, increased selling, general and administrative expenses and the
impairment charge in the 2005 period. Bare wire segment's operating income for
the six months ended June 30, 2005 was $11.5 million compared to $11.5 million
in the 2004 period, or no change between the 2005 and 2004 period. Insulated
wire segment's operating (loss) of ($5.5) million for the six months ended June
30, 2005 compared to ($1.7) million in the 2004 period, or a decrease of $3.8
million, primarily resulted from lower sales volume, higher costs for insulating
compound materials and copper rod premium costs and the $2.5 million impairment
charge recorded in the second quarter. These factors were partially offset by
lower depreciation and amortization. Operating income in the 2005 period also
increased by $4.2 million from lower reorganization expenses partially offset by
retention plans expense, other costs associated with the Insulated Wire Division
strategic alternatives, S-1 registration expenses and Sarbanes-Oxley compliance
costs.

Interest expense was $7.0 million and $13.7 million for the six months ended
June 30, 2005 and 2004, respectively, for a decrease of $6.7 million. This
decrease was primarily due to the exchange of $305 million of our 11.75% and 14%
Senior Subordinated Notes (which were subject to compromise in the 2004 period)
for $75 million of new notes and equity, as well as, lower interest rates on our
senior credit facility and DIP compared to the 10.375% Senior Secured Notes and
the 11.75% and 14% Senior Subordinated Notes during the period January 1, 2004
to March 24, 2004.

Amortization of deferred financing cost decreased $4.4 million to $0.3 million
for the six months ended June 30, 2005 from $4.7 million for the 2004 period as
the result of lower deferred financing fees related to our new senior credit
facility compared to the DIP financing facility in 2004 and the write-off of
deferred financing fees related to our 10.375% Senior Secured Notes that were
repaid before maturity on March 24, 2004.

Income tax provisions were $0.6 million and $0.5 million for the six months
ended June 30, 2005 and 2004, respectively. The tax provisions represent certain
state and foreign income taxes only.

Net loss of $6.1 million and $17.6 million were recorded for the six months
ended June 30, 2005 and 2004, respectively. The decrease of $11.5 million in the
six months ended June 30, 2005 was the result of higher operating income, lower
interest expense and lower amortization of deferred financing fees.

FINANCIAL CONDITION

At the end of the second quarter, total cash and cash equivalents was $8.3
million, down $6.9 million from year-end 2004. During the first six months of
2005, we used $6.6 million of cash to pay for reorganization activities.

Accounts receivable increased $19.1 million from year-end 2004 primarily as the
result of increased copper prices. Days sales outstanding improved slightly at
the end of the second quarter compared to year-end 2004.

Inventories of $74.7 million as of June 30, 2005, decreased by $8.6 million from
December 31, 2004 from planned reductions and a $3.4 million increase in the
LIFO reserve. Accordingly, inventory turns improved in the 2005 period compared
to 2004.

Accounts payable were $31.6 million as of June 30, 2005, or an increase of $18.9
million from December 31, 2004 levels, as trade vendor terms were re-established
after emerging from Chapter 11 bankruptcy.

CRITICAL ACCOUNTING POLICIES

The process of preparing financial statements in conformity with accounting
principles generally accepted in the United States requires us to use estimates
and assumptions regarding certain types of our assets, liabilities, revenues and
expenses. We base these estimates and assumptions upon the best information
available at the time of the estimates or assumptions. Actual results could
change materially from our estimates and assumptions. The following is a
discussion of certain of our critical accounting policies and the related
management estimates and assumptions necessary in determining the value of
related assets or liabilities.

Revenue Recognition

We recognize revenue when all of the following criteria are satisfied:
persuasive evidence of an arrangement exists; risk of loss and title transfer to
the customer; the price is fixed and determinable; and collectibility is
reasonably assured. Generally, sales and related cost of goods sold are included
in income when goods are delivered to customers in accordance with the invoice
terms F.O.B. destination for bare wire products and when goods are shipped to
customers in accordance with invoice terms F.O.B. shipping point for insulated
wire products. A provision for product returns is recorded based on historical
experience and any notification received of pending returns. Such returns have
historically been within our expectations and the provisions established.

We recognize revenue from services performed to process customer-owned
("tolled") copper. Such revenue is recognized at the time the product is
received by the customer. The value of tolled copper is excluded from both sales
and cost of goods sold, as title to these materials and the related risks of
ownership do not pass to us.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits
based upon payment history and the customer's current creditworthiness, as
determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon our historical experience and any specific
customer collection issues that have been identified. While such credit losses
have historically been within our expectations and the provisions established,
we cannot guarantee that the historical credit loss rates will continue in the
future. Since we have a number of relatively large customers, a significant
change in the liquidity or financial position of one of these customers could
have a material adverse impact on the collectibility of our accounts receivables
and our future operating results.

Inventories

Inventories are valued at the lower of cost, determined using the last in, first
out ("LIFO") method, or the current estimated market value of the inventory.
Because the main component of our products is copper, a worldwide traded
commodity, the estimated fair market value of the inventory is subject to wide
fluctuations. Any significant decline in the average COMEX price of copper can
result in an inventory valuation adjustment.

Deferred Taxes

We establish deferred tax assets and liabilities based on profits or losses in
each jurisdiction in which we operate. Associated valuation allowances reflect
the likelihood of the recoverability of these assets. Our judgment of the
recoverability of these assets is based primarily on our estimate of current and
expected future earnings as well as prudent and feasible tax planning
strategies. Any reversal of valuation allowance that existed at October 20,
2004, the date we emerged from bankruptcy, will first offset goodwill, then
intangible assets and then increase additional paid-in capital in accordance
with SOP 90-7.

As a result of the reorganization, the Company underwent an ownership change
within the meaning of Section 382 of the Internal Revenue Code (IRC). As a
result, the Company is subject to an annual limitation of approximately $8
million on the amount of NOL and credit carryforwards and other built-in losses,
consisting principally of the bad debt reserves and amortization deductions,
which the Company may utilize in the U.S.

A debtor is not required to include gain on the discharge of debt in income if
the debt discharge occurs in bankruptcy. However, IRC Section 108 requires that
the debtor's NOL, capital and credit carryovers first be reduced and then tax
basis in assets be reduced. The Company expects to reduce available current year
tax losses and NOL carryforwards by approximately $102 million as a result of
the bankruptcy reorganization. After consideration of this reduction, the
Company expects to have NOL carryforwards of approximately $45 million as of
December 31, 2004, available to offset future federal taxable income. These NOL
carryforwards expire in varying amounts in the years 2010 to 2023 if not
utilized.

Long Lived Assets

We review the net realizable value of our long-lived assets through an
assessment of the estimated future cash flows related to those assets. In the
event we determine that the carrying values of long-lived assets are in excess
of estimated gross future cash flows for those assets, we will write-down the
value of the assets to a level commensurate with a discounted cash flow analysis
of the estimated future cash flows. As for goodwill, we compare the carrying
value of our reporting units to the fair value of such units based primarily on
the reporting unit's cash flows. To the extent the carrying value exceeds such
fair value, the respective goodwill is written down to its fair value.

We test for goodwill impairment annually and between annual tests if an event
occurs or if circumstances change that would more likely than not reduce the
fair value of a reporting unit below the unit's carrying amount. Performing the
impairment test requires us to estimate the fair values using the present value
of estimated future cash flows. We will perform our annual impairment test for
2005 in the fourth quarter of 2005. A significant downward revision in the
estimated fair value of future cash flows could result in a material impairment
of our remaining goodwill.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 4 to our Consolidated Financial Statements for a discussion of recently
issued accounting standards that are not yet effective for us.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital and Cash Flows

Net cash provided by continuing operations was $7.5 million for the six months
ended June 30, 2005, compared to net cash used by continuing operations of $14.2
million for the six months ended June 30, 2004. This improvement of $21.7
million was primarily the result of increased accounts payable terms from trade
vendors of $16.1 million after emerging from Chapter 11 bankruptcy, a decrease
in inventories of $15.5 million and lower accounts receivable during the periods
of $2.8 million. These factors were partially offset by the payment of accrued
payroll related items of $2.8 million in the 2005 period and lower accrued
liabilities and other items of $9.9 million.

Net cash used in discontinued operations was $0.4 million in both the six months
ended June 30, 2005 and 2004 and represented payments associated with hose
claims.

Net cash used in reorganization activities was $6.6 million in the six months
ended June 30, 2005 compared to $4.9 million in the 2004 period. This increase
of $1.7 million resulted from the final payments of legal and professional fees
under the Chapter 11 bankruptcy as approved by the court in the 2005 period.

Net cash used in investing activities for capital expenditures was $3.9 million
for the six months ended June 30, 2005, compared to $5.2 million for the six
months ended June 30, 2004, primarily from a slight decrease for normal
replacement and cost reduction expenditures.

Net cash used in financing activities was $3.6 million for the six months ended
June 30, 2005, compared to net cash provided by financing activities of $3.8
million for the six months ended June 30, 2004. The decrease was primarily the
result of net reduction of $4.7 million under our senior revolving credit
facility in the 2005 period compared to net debtor-in-possession borrowings of
$86.6 million in 2004 which was used to repay $82.0 million of Senior Secured
Notes in the 2004 period.

Financing Arrangements

Concurrently with the consummation of our reorganization, we and our domestic
subsidiaries entered into (1) a credit agreement which provides for a five-year
senior revolving credit facility in an amount up to $110.0 million (including as
a sub-facility of the revolving credit facility, a $25 million letter of credit
facility), and (2) a credit agreement which provides for a $30.0 million
five-year senior term loan facility. The proceeds of the facilities were used to
repay our DIP facility and for working capital and other general corporate
purposes. We also issued the $75 million of 10% Secured Senior Subordinated
Notes to the former holders of our Subordinated Notes. For a description of the
terms of these facilities and the Notes, see Note 9 to the unaudited
Consolidated Financial Statements.

Liquidity

We require cash for working capital, capital expenditures, debt service and
taxes. Our working capital requirements generally increase when demand for our
products increase or when copper, copper premiums or compound costs material
increase significantly or rapidly. Currently, a $0.10 per pound fluctuation in
the price of copper will have a $4.7 million impact on our working capital. The
average price of copper based upon COMEX increased to $1.53 per pound for the
three months ended June 30, 2005 from $1.23 per pound for the three months ended
June 30, 2004.

Our principal sources of cash are generated from operations and availability
under our debt financing arrangements. We expect that ongoing requirements for
working capital, capital expenditures, debt service and taxes will be funded
from operating cash flow and borrowings under our $110 million revolving credit
facility dated October 20, 2004.

As of June 30, 2005, we had $8.3 million of unrestricted cash and cash
equivalents. Actual borrowings availability under our revolving credit facility
is subject to a borrowing base calculation, generally based upon a percentage of
eligible accounts receivable, inventory and property, plant and equipment. As of
June 30, 2005, our borrowing base was $105.3 million and our outstanding
indebtedness under the revolving credit facility (including outstanding letters
of credit) was $66.1 million, resulting in a remaining availability as of such
date of $39.2 million. As of July 31, 2005, our borrowing base was $104.9
million, and, as of August 31, 2005, our outstanding indebtedness under the
revolving credit facility (including outstanding letters of credit) was $51.7
million.

For the year ended December 31, 2005, we anticipate that our capital
expenditures will be approximately $8.0 to $10.0 million. In addition, for full
year 2005, we expect that our debt service obligations will be approximately
$15.3 million. We expect our cash on hand, operating cash flow, together with
available borrowings under the senior revolving credit facility, will be
sufficient to meet our anticipated future operating expenses, capital
expenditures and debt service requirements. However, our ability to generate
sufficient cash flow to meet our operating needs could be affected by general
economic, financial, competitive, legislative, regulatory, business and other
factors beyond our control. Any significant reduction in customer demand for our
products, change in competitive conditions, increases in our major material
components including copper and insulating materials, or adverse changes in
economic conditions in the U.S. or worldwide could impact our ability to
generate sufficient cash flow to fund operations.

OFF-BALANCE SHEET ARRANGEMENTS

We have not historically utilized off-balance sheet financing arrangements and
have no such arrangements as of June 30, 2005. However, we do finance the use of
certain facilities and equipment under lease agreements provided by various
institutions. Since the terms of these agreements meet the definitions of
operating lease agreements, the sum of future lease payments is not reflected on
our consolidated balance sheets. As of June 30, 2005, the future minimum lease
payments under these arrangements totaled $3.2 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We do not ordinarily hold market risk sensitive instruments for trading
purposes. We do, however, recognize market risk from interest rate, foreign
currency exchange and commodity price exposure.

Interest Rate Risk

At June 30, 2005, approximately $86.9 million of $161.9 million of long-term
debt, specifically, $86.9 million of borrowings under our senior credit
facility, bear interest at variable rates. A hypothetical 1% increase in
variable interest rates would reduce annual income by $0.9 million based on the
debt outstanding as of June 30, 2005. We are not currently engaged in any
hedging activities.

Foreign Currency Risk

We have operations in Mexico, France, Italy and the Philippines. Our operations
may, therefore, be subject to volatility because of currency fluctuations. Sales
and expenses are denominated in local currencies for the French and Italian
operations. The U.S. Dollar is the functional currency for Mexico and the
Philippines operations. As a result, these operations are subject to market risk
with respect to fluctuations in the relative value of currencies. We evaluate
from time-to-time various currency hedging programs that could reduce the risk.

In terms of foreign currency translation risk, we are exposed primarily to the
euro, the Mexican peso and the Philippine peso. Our net foreign currency
investment in foreign subsidiaries and affiliates translated into United States
dollars using month-end exchange rates at June 30, 2005 and year-end exchange
rates at December 31, 2004, was $70.1 million and $62.3 million, respectively.

At August 30, 2005, we had no financial instruments outstanding that were
sensitive to changes in foreign currency rates.

Commodity Price Risk

The principal raw material used by us is copper, which is purchased in the form
of 5/16-inch rod from the major copper producers in North American, Europe and
Asia. Copper rod prices are based on market prices, which are generally
established by reference to the COMEX prices, plus a premium charged to convert
copper cathode to copper rod and deliver it to the required location. As a
worldwide traded commodity, copper prices have historically been subject to
fluctuations. While fluctuations in the price of copper may directly affect the
per unit prices of our products, these fluctuations have not had, nor are
expected to have, a material impact on our profitability due to copper price
pass-through arrangements that we have with our customers. These sales
arrangements are based on similar variations of monthly copper price formulas.
Use of these copper price formulas minimizes the differences between raw
material copper costs charged to the cost of sales and the pass-through pricing
charge to customers. However, a severe increase in the price of copper could
negatively impact our short-term liquidity because of the period of time between
our purchase of copper at an increased price and the time at which we receive
cash payments after selling end products to customers reflecting the increased
price. These formulas for our insulated wire customers do not, however, include
adjustments for the fluctuations in the premiums charged to convert copper
cathode to copper rod and deliver it to the required locations. In 2004, the
premium to convert copper cathode to copper rod increased by 16.0%. Beginning
January 1, 2005, the premium to convert copper cathode to copper rod increased
by another 19.9%. We believe that higher premiums may continue.

Other major raw materials we consume include PVC compounds, XPLE compounds,
silicone compounds and tin. The prices of these items are generally affected by
world oil prices and worldwide supply and demand and increased significantly in
2004. World oil prices are impacted by a number of factors, including seasonal
fluctuations, political instability and meteorological events. In 2004, the
price of a barrel of oil increased 34.4%. Correspondingly, in 2004, the price of
PVC compounds, XPLE compounds, silicone compounds and tin increased 24.6%,
21.4%, 19.3% and 32.6% respectively. The prices of PVC compounds have increased
an additional 5.7% from January 1, 2005 to June 30, 2005. Our contracts with
customers for insulated wire do not include adjustments for fluctuations in the
price of oil, PVC compounds, XPLE compounds, silicone compounds or tin. From
January 1, 2005 to August 31, 2005, the price of a barrel of oil increased 64%
and we believe higher compound costs may continue.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Quarterly Report on Form
10-Q. Based on that evaluation, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures are effective to
provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that
occurred during the period covered by this Quarterly Report on Form 10-Q that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the quarter ended June 30, 2005, there have been no material developments
in the Company's legal proceedings. For more detailed information, see Note 13
to our Consolidated Financial Statements and the disclosures provided in
"Business--Legal Proceedings" set forth in Amendment No. 4 to the Company's
registration statement on Form S-1 (File No. 333-120736) filed on August 2, 2005

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

On September 13, 2005, Joseph M. Fiamingo resigned as a director from our
company.

ITEM 6. EXHIBITS

Exhibit
Number Description
------ -----------

10.1 Form of Indemnification Agreement

31.1 Certification of Principal Executive Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2 Certification of Principal Financial Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1 Certification of Principal Executive Officer Required by Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Principal Financial Officer Required by Rule
13a-14(b) of the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

INTERNATIONAL WIRE GROUP, INC.

Dated: September 14, 2005 By: /s/ GLENN J. HOLLER
--------------------------------------
Name: Glenn J. Holler
Title: Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)

EXHIBIT INDEX

Exhibit
Number Description
------ -----------

10.1 Form of Indemnification Agreement

31.1 Certification of Principal Executive Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2 Certification of Principal Financial Officer Required by Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.