SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 3, 2006
INTERNATIONAL WIRE GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-51043 43-1705942
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
12 MASONIC AVE., CAMDEN, NY 13316
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (315) 245-3800
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
---------------------
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On July 3, 2006, International Wire Group, Inc. (the "Company") completed the
disposition of its Philippines insulated wire subsidiary, IWG-Philippines,
Incorporated. Pursuant to the terms of the Stock Purchase Agreement, dated as of
June 28, 2006, by and among Draka Holding N.V. ("Draka") and the Company, Draka
purchased all the stock of the Company's Philippines insulated wire subsidiary
for $30 million in cash, plus a post-closing working capital adjustment
estimated at closing to be $2 million. Additionally, Draka agreed to purchase $6
million of copper from the Company, which will be held on consignment by the
Company for Draka.
Also on July 3, 2006, the Company completed the disposition of its Mexican
insulated wire subsidiaries, IWG Services Company, S. de R.L. de C.V., Cables
Durango, S. de R.L. de C.V. and IWG Durango, S. de R.L. de C.V. Pursuant to the
terms of the Stock Purchase Agreement, dated as of June 30, 2006, by and among
Draka, Draka Mexico Holding, S.A. de C.V. and the Company, Draka purchased all
the stock of the Company's Mexican insulated wire subsidiaries for $5 million in
cash.
This description of the transaction contained in this Item 2.01 does not purport
to be complete and is qualified in its entirety by reference to the agreements,
which were filed as Exhibits 2.1 and 2.2 to the Company's Current Report on Form
8-K filed with the Securities and Exchange Commission on July 5, 2006, and are
incorporated herein by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information ($ amounts in thousands)
On July 3, 2006, the Company completed the sale of all of the common stock of
its Philippines and Mexican subsidiaries, previously reported as the Company's
Insulated Wire Segment, to Draka Holding N.V. and Draka Mexico Holding, S.A. de
C.V. ("Draka") for $35,000 plus a working capital adjustment (which will be paid
post-closing) estimated to be $2,049. In addition, the Company will sell
post-closing 1.8 million pounds of copper, which will be held on consignment by
the Company for Draka post-closing, to Draka for $6,339 payable on September 2,
2006.
Accordingly, the accompanying unaudited pro forma statements of operations
reflect the treatment of the Insulated Wire Segment operations, which had been
included in previous reported amounts as continuing operations, as discontinued
operations for all periods presented. In addition, for the three months ended
March 31, 2006 and for the year ended December 31, 2005, the accompanying
unaudited pro forma combined statements of operations include the adjusted
results of Phelps Dodge High Performance Conductors of SC & GA, Inc. (which
subsequently changed its name to IWG High Performance Conductors, Inc.) ("HPC"),
which was acquired on March 31, 2006, as reported on Form 8-K filed June 16,
2006. Reference should be made to this Form 8-K.
The accompanying unaudited pro forma balance sheet and statements of operations
are presented for illustrative purposes only to aid in analysis of the impact to
the Company of the discontinued operations, as if the dispositions had occurred,
in the case of the pro forma balance sheet, as of March 31, 2006, and in the
case of the pro forma statements of operations, as of January 1, 2003. In
addition, the unaudited pro forma statements of operations are not necessarily
indicative of the future results of the Company. The unaudited pro forma balance
sheet and statements of operations and related notes should be read in
conjunction with the historical financial statements of the Company.
2
INTERNATIONAL WIRE GROUP, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2006
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPANY AS INSULATED
REPORTED WIRE(1) PRO FORMA
-------- ------- ---------
ASSETS
Current assets:
Cash and cash equivalents..................... $ 6,106 $ 38,991 $ 45,097
Accounts receivable........................... 102,687 (12,399) 90,288
Inventories................................... 83,959 (11,942) 72,017
Prepaid expenses and other.................... 9,852 (2,461) 7,391
Assets held for sale.......................... 5,171 (5,171) --
Deferred income taxes......................... 5,266 4,789 10,055
--------- --------- ---------
Total current assets....................... 213,041 11,807 224,848
Property, plant and equipment, net................ 106,503 (8,816) 97,687
Goodwill.......................................... 71,193 -- 71,193
Identifiable intangibles, net..................... 23,324 (1,372) 21,952
Deferred financing costs, net..................... 2,416 -- 2,416
Restricted cash................................... 1,922 -- 1,922
Other assets...................................... 2,374 (571) 1,803
--------- --------- ---------
Total assets............................... $ 420,773 $ 1,048 $ 421,821
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 61,512 $ (2,002) $ 59,510
Accrued and other liabilities................. 18,053 (725) 17,328
Accrued payroll and payroll related items..... 6,035 (752) 5,283
Customers' deposits........................... 13,417 -- 13,417
Accrued income taxes.......................... 1,547 3,726 5,273
Accrued interest.............................. 3,722 -- 3,722
--------- --------- ---------
Total current liabilities.................. 104,286 247 104,533
Long-term debt.................................... 149,021 -- 149,021
Other long-term liabilities....................... 3,823 -- 3,823
Deferred income taxes............................. 8,324 812 9,136
--------- --------- ---------
Total liabilities.......................... 265,454 1,059 266,513
--------- --------- ---------
Stockholders' equity
Common stock, $.01 par value, 20,000,000
shares authorized, 10,000,002 issued and
outstanding.................................. 100 -- 100
Contributed capital........................... 175,606 -- 175,606
Accumulated (deficit)......................... (20,087) (11) (20,098)
Accumulated other comprehensive (loss)........ (300) -- (300)
--------- --------- ---------
Total stockholders' equity/(deficit).......... 155,319 (11) 155,308
--------- --------- ---------
Total liabilities and stockholders' equity.... $ 420,773 $ 1,048 $ 421,821
========= ========= =========
------------------------------
(1) Reflects the sale of the Philippines and Mexican insulated wire
subsidiaries, the related cash proceeds and the related estimated after-tax
loss in accumulated deficit.
3
INTERNATIONAL WIRE GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRO FORMA PRO FORMA
--------------------------- ---------------------------
DISPOSITION
COMPANY AS ACQUISITION ADJUSTMENTS
REPORTED HPC ADJUSTMENTS COMBINED (7) COMBINED
----------- ----------- ----------- ----------- ----------- -----------
Net sales............................... $ 166,618 $ 27,089 $ (195)(1) $ 193,512 $ (22,055) $ 171,457
Operating expenses:
Cost of goods sold, exclusive of
depreciation expense shown below... 148,591 23,628 (750)(2) 171,469 (21,434) 150,035
Selling, general and administrative
expenses........................... 7,664 732 -- 8,396 -- 8,396
Depreciation............................ 2,105 892 (327)(3) 2,670 (233) 2,437
Amortization............................ 933 -- 31 (4) 964 (123) 841
Gain/(loss) on sale of property plant
and equipment...................... (64) -- -- (64) 64 --
----------- ----------- ----------- ----------- ----------- -----------
Operating income/(loss)................. 7,389 1,837 851 10,077 (329) 9,748
Other income/(expense):
Interest income/(expense).......... (3,257) (308) (727)(5) (4,292) 401(8) (3,891)
Amortization of deferred financing
fees............................... (162) -- -- (162) -- (162)
Other, net......................... (127) 13 -- (114) 61 (53)
----------- ----------- ----------- ----------- ----------- -----------
Income before income tax provision...... 3,843 1,542 124 5,509 133 5,642
Income tax provision.................... 1,442 588 47 (6) 2,077 51 2,128
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing operations....... $ 2,401 $ 954 $ 77 $ 3,432 $ 82 $ 3,514
=========== =========== =========== =========== =========== ===========
Basic and diluted net income per share:
Income from continuing operations. $ 0.24 $ 0.34 $ 0.35
=========== =========== ===========
Weighted average basic shares
outstanding........................ 10,000,002 10,000,002 10,000,002
Weighted average diluted shares
outstanding........................ 10,001,354 10,001,354 10,001,354
The total purchase price of the HPC acquisition was $51,471 and the payment of
related purchase price, fees and costs is summarized as follows:
Purchase of common stock and estimated
working capital at closing....................... $43,676
Estimated additional working capital adjustment...... 2,131
Purchase of consigned inventory...................... 5,057
Fees and costs....................................... 607
----------
$51,471
==========
The total acquisition costs have been allocated to the acquired net assets as
follows:
Current assets....................................... $34,611
Property, plant and equipment........................ 26,734
Identifiable intangibles............................. 2,500
Current liabilities.................................. (6,406)
Deferred credit...................................... (3,000)
Deferred income taxes................................ (2,619)
Other liabilities.................................... (349)
----------
$51,471
==========
The above allocation of total acquisition costs is preliminary and based upon
the estimate of fair values as determined under SFAS No. 141 including
inventory, property, plant and equipment, identifiable intangibles and certain
liabilities. The Company expects to finalize this allocation in the second
quarter of 2006 including final deferred income tax amounts.
Based upon the fair value of assets and liabilities compared to the total
purchase price, there is an excess of fair value of assets and liabilities over
purchase price, or "negative goodwill" of $3,000. Pursuant to the provisions of
SFAS No. 141, the Company has recorded the contingent consideration as a
deferred credit at March 31, 2006. There was no negative goodwill remaining
4
after recording this deferred credit. When the contingency is resolved and
consideration is issued or becomes issuable, any difference between the fair
value of the contingent consideration issued or issuable and the deferred credit
will be accounted for as follows:
o Any excess of the fair value of the contingent consideration issued or
issuable over the amount of the deferred credit will be recognized as
additional cost of the acquired entity.
o Any excess of the deferred credit over the fair value of the consideration
issued or issuable will first be recognized as a pro rata reduction of the
amounts that were initially assigned to eligible acquired assets, after
which any remaining difference would be recognized as an extraordinary
gain.
Identifiable intangibles as of March 31, 2006 represent the fair market value of
alloys, customer contracts and relationships and trade names and trademarks. The
fair market values were determined using a discount rate to compute the present
value of the income or cost savings of the identifiable intangible assets. A
discount rate of 17% was used. The identifiable intangibles of $2,500 consist of
alloys of $100, customer contracts and relationships of $2,100 and trade names
and trademarks of $300. Each of the identifiable intangibles will be amortized
over 20 years.
------------------------------
(1) Reflects the adjustment for the elimination of intercompany sales.
(2) Reflects expenses of $555 for HPC's pension and post retirement medical
plans not acquired and the adjustment for the elimination of intercompany
sales of $195.
(3) Reflects the adjustment to depreciation relating to the adjustment to fair
market value and adjusted useful lives of property, plant and equipment as
follows:
Elimination of historical depreciation............... ($892)
Depreciation expense on property, plant and
equipment restated to fair value as of
January 1, 2005.................................. 565
-------
($327)
=======
(4) Reflects the amortization of identifiable intangibles using 20-year useful
lives and consists of $1 for alloys, $26 for customer contracts and
relationships and $4 for trade names and trademarks.
(5) Reflects the adjustment of interest expense on existing borrowings of
$17,000 and additional borrowings of $37,411 at an 8.0% interest rate which
is the average revolver rate. A 1/8% change in the interest rate would
result in an increase or decrease of $17 for the three months ended March
31, 2006.
(6) Reflects income before income taxes at a 38% effective income tax rate.
(7) For the quarter ended March 31, 2006, the results of operations for the
Insulated Wire Durango, Mexico operations were previously reported as
discontinued operations as it ceased operations at the end of January and
was closed on March 31, 2006. Accordingly, the results included in the
disposition adjustments column represent the results of the operations of
the Insulated Wire Cebu, Philippines plant.
(8) Interest expense has been allocated to discontinued operations under the
provision of EITF 87-24.
5
INTERNATIONAL WIRE GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRO FORMA PRO FORMA
------------------------- --------------------------
COMPANY AS ACQUISITION DISPOSITION
REPORTED HPC ADJUSTMENTS COMBINED ADJUSTMENTS(7) COMBINED
-------- -------- ---------- -------- ----------- ----------
Net sales.............................. $539,285 $85,537 $ (381)(1) $624,441 $(114,556) $509,885
Operating expenses:
Cost of goods sold, exclusive of
depreciation expense shown below.. 472,581 76,303 (2,673)(2) 546,211 (108,703) 437,508
Selling, general and administrative
expenses.......................... 34,222 2,265 -- 36,487 -- 36,487
Depreciation........................... 9,347 3,835 (1,724)(3) 11,458 (1,284) 10,174
Amortization........................... 3,709 -- 125 (4) 3,834 (540) 3,294
Impairment and plant closing charges... 3,529 -- -- 3,529 (3,529) --
Gain on sale of property plant and
equipment......................... (721) -- -- (721) -- (721)
-------- -------- -------- -------- -------- --------
Operating income/(loss)................ 16,618 3,134 3,891 23,643 (500) 23,143
Other income/(expense):
Interest income/(expense)......... (13,350) (893) (2,762)(5) (17,005) 1,746 (8) (15,259)
Amortization of deferred
financing fees.................... (646) -- -- (646) -- (646)
Other, net........................ (137) (69) -- (206) 157 (49)
-------- -------- -------- -------- -------- --------
Income before income tax
provision/(benefit)............... 2,485 2,172 1,129 5,786 1,403 7,189
Income tax provision/(benefit)......... 4,129 1,043 429 (6) 5,601 (7,625) (2,024)
-------- -------- -------- -------- -------- --------
Income/(loss) from continuing
operations........................ $(1,644) $1,129 $700 $185 $9,028 $9,213
======== ======== ======== ======== ======== ========
Basic and diluted net income/(loss)
per share:
Income/(loss) from continuing
operations....................... $(0.17) $0.02 $0.92
======== ======== ========
Weighted average basic and diluted
shares outstanding................ 10,000,002 10,000,002 10,000,002
------------------------------
(1) Reflects the adjustment for the elimination of intercompany sales.
(2) Reflects expenses of $2,292 for HPC's pension and post retirement medical
plans not acquired and the adjustment for the elimination of intercompany
sales of $381.
(3) Reflects the adjustment to depreciation relating to the adjustment to fair
market value and adjusted useful lives of property, plant and equipment as
follows:
Elimination of historical depreciation............... ($3,835)
Depreciation expense on property, plant and
equipment restated to fair value as of
January 1, 2005.................................. 2,111
---------
($1,724)
=========
(4) Reflects the amortization of identifiable intangibles using 20-year useful
lives and consists of amortization of $5 for alloys, $105 for customer
contracts and relationships and $15 for trade names and trademarks.
(5) Reflects the adjustment of interest expense on existing borrowings of
$17,000 and additional borrowings of $37,471 at a 6.7% interest rate, which
is the average revolver rate. A 1/8% change in the interest rate would
result in an increase or decrease of $68 for the year ended December 31,
2005.
(6) Reflects income before income taxes at a 38% effective income tax rate.
(7) For the year ended December 31, 2005, the results included in the
disposition adjustments column represent the results of the operations for
the Insulated Wire plants in Durango, Mexico and Cebu, Philippines.
(8) Interest expense has been allocated to discontinued operations under the
provision of EITF 87-24.
6
INTERNATIONAL WIRE GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 20, 2004 TO DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPANY AS INSULATED
REPORTED WIRE(1) PRO FORMA
------------ ------------ ------------
Net sales......................................... $ 85,103 $ (16,764) $ 68,339
Operating expenses:
Cost of goods sold, exclusive of depreciation
expense shown below.......................... 71,336 (13,353) 57,983
Selling, general and administrative expenses...... 6,006 -- 6,006
Depreciation...................................... 2,934 (867) 2,067
Amortization...................................... 825 (113) 712
Impairment and plant closing charges.............. 1,632 -- 1,632
Gain on sale of property plant and equipment...... (8) (2) (10)
------------ ------------ ------------
Operating income/(loss)........................... 2,378 (2,429) (51)
Other income/(expense):
Interest income/(expense) (2)................ (2,586) 286 (2,300)
Amortization of deferred financing fees...... (127) -- (127)
Other, net................................... 39 27 66
------------ ------------ ------------
Loss before income tax provision/(benefit)........ (296) (2,116) (2,412)
Income tax provision/(benefit).................... (34) 34 --
------------ ------------ ------------
Loss from continuing operations................... $ (262) $ (2,150) $ (2,412)
============ ============ ============
Basic and diluted net loss per share:
Loss from continuing operations............. $ (0.03) $ (0.24)
============ ============
Weighted average basic and diluted shares
outstanding.................................. 10,000,002 10,000,002
---------------------------
(1) For the period from October 20, 2004 to December 31, 2004, the results
included in the Insulated Wire column represent the results of the
operations for the Durango, Mexico plant and the Cebu, Philippines plant.
(2) Interest expense has been allocated to discontinued operations under the
provisions of EITF 87-24.
7
INTERNATIONAL WIRE GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2004 TO OCTOBER 19, 2004
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPANY AS INSULATED
REPORTED WIRE(1) PRO FORMA
------------ ------------ ------------
Net sales......................................... $ 346,310 $ (75,010) $ 271,300
Operating expenses:
Cost of goods sold, exclusive of depreciation
expense shown below.......................... 288,901 (69,283) 219,618
Selling, general and administrative expenses...... 21,027 -- 21,027
Depreciation...................................... 11,387 (2,470) 8,917
Amortization...................................... 1,751 (463) 1,288
Reorganization.................................... 3,062 -- 3,062
Impairment and plant closing charges.............. 262 -- 262
Gain/(loss) on sale of property plant and
equipment.................................... (158) 57 (101)
------------ ------------ ------------
Operating income/(loss)........................... 20,078 (2,851) 17,227
Other income/(expense):
Bankruptcy reorganization.................... (12,710) -- (12,710)
Gain from debt forgiveness................... 259,252 -- 259,252
Interest income/(expense) (2)................ (14,625) 1,921 (12,704)
Amortization of deferred financing fees...... (6,813) -- (6,813)
Other, net................................... (182) 182 --
------------ ------------ ------------
Income/(loss) before income tax
provision/(benefit).......................... 245,000 (748) 244,252
Income tax provision/(benefit).................... 666 (331) 335
------------ ------------ ------------
Income/(loss) from continuing operations.......... $ 244,334 $ (417) $ 243,917
============ ============ ============
Basic and diluted net income per share:
Income from continuing operations........... $ 244,334 $ 243,917
============ ============
Weighted average basic and diluted shares
outstanding.................................. 1,000 1,000
----------------------------
(1) For the period from January 1, 2004 to October 19, 2004, the results
included in the Insulated Wire column represent the results of the
operations for the Durango, Mexico plant and the Cebu, Philippines plant.
(2) Interest expense has been allocated to discontinued operations under the
provisions of EITF 87-24.
8
INTERNATIONAL WIRE GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
COMPANY AS INSULATED
REPORTED WIRE(1) PRO FORMA
------------ ------------ ------------
Net sales......................................... $ 269,313 $ (52,765) $ 216,548
Operating expenses:
Cost of goods sold, exclusive of depreciation
expense shown below.......................... 204,974 (42,215) 162,759
Selling, general and administrative expenses...... 24,093 -- 24,093
Depreciation...................................... 14,217 (2,853) 11,364
Amortization...................................... 2,498 (482) 2,016
Impairment and plant closing charges.............. 1,188 -- 1,188
Reorganization.................................... 2,172 -- 2,172
Goodwill impairment............................... 2,973 -- 2,973
------------ ------------ ------------
Operating income/(loss)........................... 17,198 (7,215) 9,983
Other income/(expense):
Interest income/(expense) (2)................ (39,722) 4,889 (34,833)
Amortization of deferred financing fees...... (4,873) -- (4,873)
Other, net................................... (49) 49 --
------------ ------------ ------------
Loss from continued operations before tax
provision/(benefit).......................... (27,446) (2,277) (29,723)
Income tax provision/(benefit).................... 291 (55) 236
------------ ------------ ------------
Loss from continuing operations.................. $ (27,737) $ (2,222) $ (29,959)
============ ============ ============
Basic and diluted net loss per share:
Loss from continuing operations............. $ (27,737) $ (29,959)
============ ============
Weighted average basic and diluted shares
outstanding.................................. 1,000 1,000
---------------------------
(1) For the year ended December 31, 2003, the results included in the Insulated
Wire column represent the results of the operations for the Durango, Mexico
plant and the Cebu, Philippines plant.
(2) Interest expense has been allocated to discontinued operations under the
provisions of EITF 87-24.
9
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
99.1 Press Release, dated July 5, 2006, announcing the closing of the
previously announced sales of its insulted wire subsidiaries in
the Philippines and Mexico to Draka Holding N.V. and Draka Mexico
Holding, S.A. de C.V.
10
SIGNATURES
Pursuant to the requirements of the Securities 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.
Date: July 11, 2006 By: /s/ Glenn J. Holler
----------------------------------
Name: Glenn J. Holler
Title: Senior Vice President and
Chief Financial Officer
11
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
99.1 Press Release, dated July 5, 2006, announcing the closing of the
previously announced sales of its insulted wire subsidiaries in
the Philippines and Mexico to Draka Holding N.V. and Draka Mexico
Holding, S.A. de C.V.
12