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, 2007

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

For the transition period from to

000-51043
(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)

12 MASONIC AVE.
CAMDEN, NY 13316
(315) 245-3800
(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 [X] NO [_]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer[_] Accelerated filer[_] Non-accelerated filer[X]

Indicate by check mark whether the registrant is a shell company (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 July 31, 2007, there were
10,005,002 shares, par value $.01 per share, outstanding.

INDEX

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

ITEM 1. FINANCIAL STATEMENTS...........................................1

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................14

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....22

ITEM 4. CONTROLS AND PROCEDURES.......................................23

PART II. - OTHER INFORMATION................................................25

ITEM 1. LEGAL PROCEEDINGS.............................................25

ITEM 1A. RISK FACTORS.................................................25

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS...25

ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................25

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........25

ITEM 5. OTHER INFORMATION.............................................25

ITEM 6. EXHIBITS......................................................26

Certification of Principal Executive Officer................................29

Certification of Principal Financial Officer................................30

Certification of Principal Executive Officer................................31

Certification of Principal Financial Officer................................32

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

JUNE 30, DECEMBER 31,
2007 2006
--------- ---------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

ASSETS
Current assets:
Cash and cash equivalents ................................. $ 1,921 $ 3,315
Accounts receivable, less allowance of $1,160 and $1,738 .. 117,983 97,896
Inventories ............................................... 63,285 58,808
Prepaid expenses and other ................................ 7,075 7,135
Assets held for sale ...................................... 1,527 --
Deferred income taxes ..................................... 14,839 16,701
--------- ---------
Total current assets ................................... 206,630 183,855
Property, plant and equipment, net ........................... 105,594 103,889
Goodwill ..................................................... 62,148 62,148
Identifiable intangibles, net ................................ 17,339 18,369
Deferred financing costs, net ................................ 2,639 2,955
Restricted cash .............................................. 1,531 1,559
Other assets ................................................. 3,133 2,790
--------- ---------
Total assets ........................................... $ 399,014 $ 375,565
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term debt ...................... $ 29 $ 535
Accounts payable and other ................................ 61,067 33,513
Accrued and other liabilities ............................. 15,222 14,264
Accrued payroll and payroll related items ................. 7,538 10,401
Customers' deposits ....................................... 13,046 12,086
Accrued income taxes ...................................... 1,450 1,011
Accrued interest .......................................... 1,833 1,847
--------- ---------
Total current liabilities .............................. 100,185 73,657
Long-term debt, less current maturities ...................... 100,230 113,020
Other long-term liabilities .................................. 3,842 4,029
Deferred income taxes ........................................ 12,771 13,602
--------- ---------
Total liabilities ...................................... 217,028 204,308
--------- ---------
Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares authorized,
10,005,002 and 10,000,002 issued and outstanding ....... 100 100
Contributed capital ....................................... 183,194 181,566
Accumulated deficit ....................................... (2,951) (11,573)
Accumulated other comprehensive income .................... 1,643 1,164
--------- ---------
Total stockholders' equity ............................. 181,986 171,257
--------- ---------
Total liabilities and stockholders' equity ............. $ 399,014 $ 375,565
========= =========

See accompanying notes to the condensed consolidated financial statements.

INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
---------------------------- ----------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)

Net sales .......................................... $ 200,030 $ 214,077 $ 374,155 $ 358,640

Operating expenses:
Cost of goods sold, exclusive of depreciation and
amortization expense shown below .............. 176,180 191,774 326,940 318,931
Selling, general and administrative expenses ....... 11,561 9,985 22,717 17,649
Depreciation ....................................... 3,146 2,587 6,279 4,459
Amortization ....................................... 819 839 1,620 1,649
Loss on sale of property, plant and equipment ...... 6 -- 6 --
------------ ------------ ------------ ------------

Operating income ................................... 8,318 8,892 16,593 15,952

Other income/(expense):
Interest expense .............................. (2,540) (3,778 (4,832) (6,634)
Amortization of deferred financing costs ...... (159) (177 (318) (339)
Other, net .................................... (12) 305 8 239
------------ ------------ ------------ ------------

Income from continuing operations before income tax
provision ..................................... 5,607 5,242 11,451 9,218
Income tax provision from continuing operations .... 1,383 2,104 3,317 3,597
------------ ------------ ------------ ------------
Income from continuing operations .................. 4,224 3,138 8,134 5,621

Income/(loss) from discontinued operations, net of
income tax provision/(benefit) of $33, $77, $65
and ($264) .................................... 73 126 140 (496)
------------ ------------ ------------ ------------

Net income ......................................... $ 4,297 $ 3,264 $ 8,274 $ 5,125
============ ============ ============ ============

Basic net income/(loss) per share:
Income from continuing operations ............. $ 0.42 $ 0.31 $ 0.82 $ 0.56
Income/(loss) from discontinued operations .... 0.01 0.01 0.01 (0.05)
------------ ------------ ------------ ------------
Net income .................................... $ 0.43 $ 0.32 $ 0.83 $ 0.51
============ ============ ============ ============

Diluted net income/(loss) per share:
Income from continuing operations ............. $ 0.41 $ 0.31 $ 0.80 $ 0.56
Income/(loss) from discontinued operations .... 0.01 0.01 0.01 (0.05)
------------ ------------ ------------ ------------
Net income .................................... $ 0.42 $ 0.32 $ 0.81 $ 0.51
============ ============ ============ ============

Weighted average basic shares outstanding .......... 10,001,431 10,000,002 10,000,720 10,000,002
Weighted average diluted shares outstanding ........ 10,255,935 10,000,825 10,162,594 10,001,090

See accompanying notes to the condensed consolidated financial statements.

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

FOR THE SIX MONTHS ENDED
------------------------
JUNE 30, JUNE 30,
2007 2006
--------- ---------
(IN THOUSANDS)

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income ...................................................... $ 8,274 $ 5,125
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ................................................ 6,279 5,196
Amortization ................................................ 1,620 1,976
Amortization of deferred financing costs .................... 318 339
Stock-based compensation expense ............................ 1,565 544
Gain on sale of property, plant and equipment ............... (243) (464)
Deferred income taxes ....................................... 1,347 --
Change in operating assets and liabilities, net of
acquisitions and divestitures:
Accounts receivable ..................................... (19,702) (18,451)
Inventories ............................................. (4,320) (7,093)
Prepaid expenses and other assets ....................... (1,066) (1,089)
Accounts payable and other .............................. 30,435 21,318
Accrued and other liabilities ........................... 908 (751)
Accrued payroll and payroll related items ............... (2,906) 818
Customers' deposits ..................................... 960 1,874
Accrued interest ........................................ (14) 12
Accrued income taxes .................................... 431 3,309
Other long-term liabilities ............................. (235) (332)
--------- ---------
Net cash provided by operating activities ........... 23,651 12,331
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures ........................................ (9,383) (4,915)
Proceeds from sale of property, plant and equipment ......... 497 644
Restricted cash ............................................. 28 (158)
Proceeds from sale of assets held for sale .................. -- 1,975
Acquisition of Phelps Dodge High Performance Conductors of
SC&GA, Inc., net of $45 cash acquired ................... (3,000) (50,012)
--------- ---------
Net cash used in investing activities ............... (11,858) (52,466)
--------- ---------
CASH FLOWS (USED IN)/PROVIDED BY FINANCING ACTIVITIES:
Borrowings of long-term obligations ..................... 176,132 217,510
Repayment of long-term borrowings ....................... (189,428) (175,552)
Proceeds from the issuance of common stock .............. 55 --
Financing fees .......................................... (2) (338)
--------- ---------
Net cash (used in)/provided by financing activities.. (13,243) 41,620
--------- ---------
Effects of exchange rate changes on cash and cash equivalents ........ 56 (1,367)
--------- ---------
Net change in cash and cash equivalents ............. (1,394) 118
Cash and cash equivalents at beginning of the period ................. 3,315 5,422
--------- ---------
Cash and cash equivalents at end of the period ....................... $ 1,921 $ 5,540
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ........................................................ $ 4,846 $ 6,646
========= =========
Net taxes paid (including taxes refunded of $129 in 2006) ............ $ 1,438 $ 247
========= =========
Amount included in accounts payable and other for capital expenditures $ 652 $ --
========= =========

See accompanying notes to the condensed consolidated financial statements.

INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

1. BUSINESS ORGANIZATION AND BASIS OF PRESENTATION

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim condensed 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, results of operations and cash flows of International
Wire Group, Inc. (the "Company ", "we" or "our"). The results for the
three and six months ended June 30, 2007 and 2006 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 included in the
Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 2006.

Cash and Cash Equivalents - The Company's banking arrangements allow for
the Company to fund outstanding checks when presented to the financial
institution for payment. This cash management practice frequently results
in a net cash book overdraft position, which occurs when total issued
checks exceed available cash balances at a single financial institution.
The Company has recorded its cash disbursement accounts with a net cash
book overdraft position in accounts payable in the accompanying condensed
consolidated balance sheets. At June 30, 2007 and December 31, 2006, the
Company had net cash book overdrafts of $2,843 and $0, respectively.

2. ACQUISITION

On March 4, 2006, the Company entered into a Stock Purchase Agreement
("HPC Purchase Agreement") to acquire Phelps Dodge High Performance
Conductors of SC & GA, Inc. ("HPC") from Phelps Dodge Corporation ("PD").
HPC is a manufacturer of specialty high performance conductors which are
plated copper and copper alloy conductors offering both standard and
customized high and low temperature conductors as well as specialty film
insulated conductors and miniature tubing products. The conductors
manufactured are tin, nickel and silver plated, including some proprietary
products. High temperature products are generally used where high thermal
stability and good solderability are required for certain military and
commercial aerospace applications. The medical products include ultra fine
alloys, which are used in medical electronics such as ultrasound equipment
and portable defibrillators. The tubing products are used in a variety of
medical devices in medicine delivery and coronary procedures. These
products are sold to harness assembly manufacturers, distributors and
original equipment manufacturers ("OEM's") in the United States, Europe
and Asia primarily serving the aerospace, medical, automotive, computer,
telecommunications, mass transportation, geophysical and electronics
markets. HPC has manufacturing operations in Inman, South Carolina and
Trenton, Georgia and a sales/distribution facility in Belgium.

On March 31, 2006, the Company completed the acquisition of all of the
outstanding common stock of HPC for $42,000 plus an estimated working
capital adjustment payment at closing of $1,676. An additional working
capital adjustment of $2,671 was paid in August 2006. The acquisition was
funded with borrowings under the Company's Revolver Credit Facility.
Additionally, we purchased the copper inventory held on consignment by HPC
from PD for $5,057. In addition, pursuant to the Purchase Agreement, there
is a contingency payment capped at $3,000 based on performance, and in May
2007, the $3,000 payment was made. Phelps Dodge High Performance
Conductors of SC & GA, Inc. changed its name to IWG High Performance
Conductors, Inc. This acquisition continues the execution of our strategy
to expand our product offerings and sell into new markets.

This acquisition has been accounted for as a purchase on March 31, 2006.
Results of operations of HPC are included in the accompanying condensed
consolidated statements of operations beginning April 1, 2006.

The total purchase price of the HPC acquisition was $55,188 and the
payment of related purchase price, fees and costs is summarized as
follows:

Purchase of common stock and estimated working capital
adjustment at closing ............................. $43,67
Additional working capital adjustment ................ 2,671
Purchase of consigned inventory ...................... 5,057
Contingent payment ................................... 3,000
Fees and costs ....................................... 784
-------
$55,188
=======

The total acquisition costs have been allocated to the acquired net assets
at fair value as follows:

Current assets ..................................... $ 34,288
Property, plant and equipment ...................... 30,789
Identifiable intangibles ........................... 460
Current liabilities, excluding deferred income taxes (3,06)5
Deferred income taxes .............................. (6,937)
Other liabilities .................................. (347)
--------
$ 55,188
========

The allocation of total acquisition cost was based on fair values as
required under Statement of Financial Accounting Standards ("SFAS") No.
141, Business Combinations, including inventory, property, plant and
equipment, identifiable intangibles and certain liabilities. The Company
finalized this allocation in the fourth quarter of 2006.

Based upon the fair value of assets acquired and liabilities assumed
compared to the total purchase price, there was an excess of fair value of
net assets acquired over purchase price, or "negative goodwill" of $2,686.
Pursuant to the provisions of SFAS No. 141, the excess was allocated on a
pro rata basis to the acquired property, plant and equipment and
identifiable intangible assets.

Identifiable intangibles represent the fair market value of alloys
(formulation of two or more metals) and trade names and trademarks. The
fair market values were determined using a discount rate to compute the
present value of the income of the identifiable intangible assets. A
discount rate of 17% was used. The identifiable intangibles of $460
consist of alloys of $92 and trade names and trademarks of $368. Each of
the identifiable intangibles will be amortized over 20 years.

The following table shows summary unaudited pro forma results of
operations as if the Company and HPC had been combined as of the beginning
of the periods presented. The unaudited pro forma results of operations
are based on estimates and assumptions and have been made solely for
purposes of developing such pro forma information. The pro forma
information for the six months ended June 30, 2006 reflects adjustments
including: elimination of intercompany sales; reduction of expenses for
pension and post-retirement medical; adjustment to depreciation relating
to the adjustment to the fair market value and adjusted useful lives of
existing property, plant and equipment; additional amortization of
identifiable intangibles; adjustment of interest expense for additional
borrowings and reflects a 38% effective tax rate. The pro forma
information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that
would have occurred if the acquisition had been consummated at the
beginning of the periods presented:

PRO FORMA
---------
FOR THE SIX
MONTHS ENDED
JUNE 30,
2006
--------
Net sales ........................................ $385,534
Income from continuing operations ................ 6,652
Net income ....................................... 6,156
Basic and diluted net income per
share ......................................... 0.62

3. RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2006, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 ("FIN 48"), to be effective for
fiscal years beginning after December 15, 2006. This interpretation adopts
a two-step approach for recognizing and measuring tax benefits and
requires certain disclosures about uncertainties in income tax positions.
Under FIN 48, the impact of an uncertain income tax position on an income
tax return must be recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant taxing
authority. An uncertain income tax position will not be recognized if it
has less than a 50% likelihood of being sustained. Additionally, FIN 48
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. On
January 1, 2007, the Company adopted the provisions of FIN 48. As a result
of the adoption of FIN 48, the Company recognized a decrease of $348 to
the opening balance of accumulated deficit. See Note 11.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS No. 157"). This statement defines fair value, establishes a
framework for using fair value to measure assets and liabilities and
expands disclosures about fair value measurements. The statement applies
whenever other pronouncements require or permit assets or liabilities to
be measured at fair value. SFAS No. 157 is effective for the Company's
fiscal year beginning January 1, 2008. The Company is evaluating the
impact the adoption of SFAS No. 157 will have on the Company's financial
statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities ("SFAS No. 159") -- including an
amendment to FASB Statement No. 115. This statement permits entities to
choose to measure many financial instruments and certain other items at
fair value in order to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently. SFAS No. 159 is
effective for the Company's fiscal year beginning January 1, 2008. The
Company is evaluating the impact the adoption of SFAS No. 159 will have on
the Company's financial statements.

4. INVENTORIES

The composition of inventories is as follows:

June 30, December 31,
2007 2006
----------- -----------
Raw materials..............................$ 16,969 $ 16,960
Work-in-process............................ 16,303 13,827
Finished goods............................. 30,013 28,021
----------- -----------
Total inventories.....................$ 63,285 $ 58,808
=========== ===========

Inventories are valued at the lower of cost or current estimated market
value. Cost is determined using the last-in, first-out ("LIFO") method for
the Bare Wire and High Performance Conductors segments and the first-in,
first-out ("FIFO") method for the Engineered Wire Products - Europe
segment. The primary components of inventory costs include raw materials
used in the production process (copper, tin, nickel, silver, alloys and
other) and production related labor and overhead costs net of scrap sales.
Had all inventories been valued at the FIFO cost method, inventories would
have been $40,230 and $37,245 higher as of June 30, 2007 and December 31,
2006, respectively.

5. ASSETS HELD FOR SALE

In fiscal 2006, the Company temporarily idled one of its facilities in
Texas due to a decrease in sales demand in that region. Having met the
criteria of SFAS No. 144, these assets have been classified as "held for
sale" in the accompanying condensed consolidated balance sheet at June 30,
2007. These assets are reported within the Bare Wire segment and consist

of real property. The property was sold on August 2, 2007 for $2,350. A
net gain on the sale of approximately $465 will be recorded in the third
quarter of fiscal 2007.

6. GOODWILL AND INTANGIBLE ASSETS

The carrying amounts of goodwill are as follows:
JUNE 30, DECEMBER 31,
2007 2006
-------- --------
Balance, beginning of period ................... $ 62,148 $ 62,307
Reversal of deferred income tax valuation
allowance...................................... -- (159)
-------- --------

Balance, end of period ......................... $ 62,148 $ 62,148
======== ========

At June 30, 2007 and December 31, 2006, all goodwill is included in the
Bare Wire segment. The Company completed its annual impairment test at
December 31, 2006 and concluded that goodwill was not impaired.

The components of identifiable intangibles are as follows:

JUNE 30, 2007 DECEMBER 31, 2006
-------------------- --------------------
ACCUMULATED ACCUMULATED
COST AMORTIZATION COST AMORTIZATION
------- ------------ ------- ------------

Customer contracts and relationships..... $ 9,534 $ 1,718 $ 9,534 $ 1,400
Trade names and trademarks .............. 10,568 1,400 10,568 1,135
Leases .................................. 2,671 2,403 2,671 1,958
Alloys .................................. 92 5 92 3
------- ------- ------- -------

Total identifiable
intangibles ................ $22,865 $ 5,526 $22,865 $ 4,496
======= ======= ======= =======

Amortization expense for the six months ended June 30, 2007 and June 30,
2006 was $1,030 and $1,049, respectively. Amortization expense for
identifiable intangibles for the next five fiscal years and thereafter is
as follows:

AMOUNT
-------
2007 (remaining six months) ............................... $ 853
2008....................................................... 1,169
2009....................................................... 1,169
2010....................................................... 1,169
2011....................................................... 1,169
Thereafter ................................................ 11,810

7. STOCK OPTION PLANS AND COMPENSATION EXPENSE

Effective January 1, 2006, the Company adopted Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment ("SFAS No. 123(R)")
which requires measurement of compensation cost for all stock awards at
fair value on the date of grant and recognition of compensation cost
spread over the service periods for awards expected to vest. SFAS No.
123(R) was adopted using the modified-prospective transition method. Under
this method, compensation cost recognized in the six-month periods ended
June 30, 2007 and 2006 includes: (a) compensation cost for all unvested
share-based awards granted prior to January 1, 2006, based on the grant
date fair value estimated in accordance with SFAS No. 123, Accounting For
Stock-Based Compensation, and (b) compensation cost for all share-based
awards granted subsequent to December 31, 2005, based on the grant date
fair value estimated in accordance with SFAS No. 123(R). Stock-based
compensation expense is included in selling, general and administrative
expenses in the accompanying condensed consolidated statements of
operations.

The Company uses the Black-Scholes option model to estimate fair value of
share-based awards with the following weighted average assumptions:

SIX MONTHS ENDED
----------------------------------
JUNE 30, 2007 JUNE 30, 2006
------------- -------------
Stock Options and Awards:
Expected life.................... 6 years 6 years
Expected volatility.............. 58.0% 40.0%
Dividend yield................... 0% 0%
Risk-free interest rate.......... 4.9% 4.9%

The Company calculates expected volatility for stock options using
historical volatility of a group of companies in the wire and cable
industry. The risk-free interest rate is estimated based on the Federal
Reserve's historical data for the maturity of nominal treasury investments
that corresponds to the expected term of the option. The expected life was
determined using the simplified method as these awards meet the definition
of "plain-vanilla" options under the rules prescribed by Staff Accounting
Bulletin 107.

Stock option activity for the six months ended June 30, 2007 is summarized
as follows:

WEIGHTED WEIGHTED
AVERAGE AVERAGE AGGREGATE
OPTIONS EXERCISE REMAINING INTRINSIC
OUTSTANDING PRICE TERM IN YEARS VALUE
----------- -------- ------------- ---------

Outstanding at January 1, 2007............... 1,114,300 $ 15.03

Exercised.................................... (5,000) $ 11.00
----------
Outstanding at June 30, 2007................. 1,109,300 $ 15.05 8.8 $8,819
==========
Vested or expected to vest at June 30, 2007.. 1,053,835 $ 15.05 8.8 $8,378
==========
Exercisable at June 30, 2007................. 668,867 $ 14.93 8.8 $5,398
==========

The Company recorded stock-based compensation expense of $1,565 and $544
for the six months ended June 30, 2007 and 2006, respectively. As of June
30, 2007, the Company had total unrecognized compensation costs of $1,786
which will be recognized as compensation expense over a weighted average
period of 0.8 years. The Company estimates a 5% forfeiture rate in
recording stock-based compensation expense. As of June 30, 2007, no awards
have been exercised under the 2006 Management Stock Option Plan and the
2006 Stock Option Plan for Non-Employee Directors, and options for 5,000
shares have been exercised under the grant to Lane Pennington. The stock
options are non-qualified which results in the creation of a deferred tax
asset until the time the option is exercised.

8. COMPREHENSIVE INCOME

Comprehensive income is comprised of:

FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
------------------- --------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
-------- -------- -------- --------

Net income .............................. $ 4,297 $ 3,264 $ 8,274 $ 5,125
Foreign currency translation adjustment.. 225 1,038 479 2,044
-------- -------- -------- --------
Total comprehensive income ......... $ 4,522 $ 4,302 $ 8,753 $ 7,169
======== ======== ======== ========

9. NET INCOME PER SHARE

Net income per share is calculated using the weighted average number of
common shares outstanding during the period. For purposes of computing
weighted average dilutive shares outstanding, the Company uses the
treasury stock method as required by Statement of Financial Accounting
Standards No. 128, Earnings Per Share (as amended). The following table
provides a reconciliation of the number of shares outstanding for basic
and dilutive earnings per share:

FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
------------------------ ------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
---------- ---------- ---------- ----------

Weighted average shares .... 10,001,431 10,000,002 10,000,720 10,000,002
outstanding-basic
Dilutive effect of stock
options ............... 254,504 823 161,874 1,088
---------- ---------- ---------- ----------
Weighted average shares
outstanding-dilutive... 10,255,935 10,000,825 10,162,594 10,001,090
========== ========== ========== ==========

Weighted average shares outstanding for the three and six month periods
ended June 30, 2006 exclude 1,041,300 options, because they are
antidilutive under the treasury stock method.

10. LONG-TERM DEBT

The composition of long-term debt is as follows:

JUNE 30, DECEMBER 31,
2007 2006
-------- --------
Senior Revolver Credit Facility .................. $ 25,230 $ 38,020
10% Secured Senior Subordinated Notes ............ 75,000 75,000
Other ............................................ 29 535
-------- --------

Total long-term debt ............................. 100,259 113,555
Less current maturities .......................... 29 535
-------- --------
Long-term portion of long-term debt .............. $100,230 $113,020
======== ========

SENIOR REVOLVER CREDIT FACILITY

The Company and its domestic subsidiaries are parties to a credit
agreement (the "Revolver Credit Facility") with Wachovia Capital Financial
Corporation (Central), formerly known as Congress Financial Corporation
(Central), as administrative agent, and several banks and financial
institutions parties. The Revolver Credit Facility is a senior revolver
credit facility in the amount of up to $200,000 subject to borrowing
availability (including, as a sub-facility of the Revolver Credit
Facility, a $25,000 letter of credit facility).

Borrowings under the Revolver Credit Facility are 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. As of June 30, 2007, letters of credit in the amount of $15,472
were outstanding and $25,230 was drawn under the Revolver Credit Facility.
Availability under the Revolver Credit Facility was $117,449 as of June
30, 2007. The Company's domestic subsidiaries are the primary parties to
the Revolver Credit Facility. The Company has guaranteed their obligations
under the Revolver Credit Facility. The collateral for the Revolver 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 Company may choose to pay interest on advances under the Revolver
Credit Facility at either a Eurodollar rate or a base rate plus the
following applicable margin: (1) for base rate Revolver Credit Facility
advances, 0.00 percent, (2) for Eurodollar rate advances, 1.25 percent to
1.75 percent per annum, subject to adjustment in accordance with a pricing
grid based on excess availability and (3) for letters of credit, 1.50
percent per annum. The default rate is 2.00 percent above the rate
otherwise applicable. The Company also has an annual commitment fee of
0.25 percent on the unused balance of its Revolver Credit Facility and an
issuance letter of credit fee equal to 2.00 percent.

The Revolver Credit Facility requires the Company to observe conditions,
affirmative covenants and negative covenants (including financial
covenants). These covenants include limitations on the Company's ability
to pay dividends, make acquisitions, dispose of assets, incur additional
indebtedness, incur guarantee obligations, create liens, make investments,

engage in mergers, make negative pledges, change the nature of its
business or engage in certain transactions with affiliates. In addition,
the Company's subsidiaries are restricted from making dividends and other
restricted payments (which may include payments of intercompany
indebtedness) to the Company for purposes other than the payment of
reasonable compensation to officers, employees and directors for services
rendered to the Company's subsidiaries in the ordinary course of business,
payments by the Company's subsidiaries for actual and necessary reasonable
out-of-pocket legal and accounting, insurance, marketing, payroll and
similar types of services paid for by the Company on behalf of the
Company's subsidiaries, in the ordinary course of their respective
businesses or as the same may be directly attributable to the Company's
subsidiaries, for the payment of taxes by or on behalf of the Company, and
the payments by the Company's subsidiaries for the payment of fees,
principal and interest on the Notes described below. The Company must also
comply with a fixed charge coverage ratio when either (1) the minimum
availability under the credit facility falls below $30,000 or (2) there is
a default or event of default.

The Company's Revolver Credit Facility commitment expires on August 22,
2011.

The Company may prepay the loans or reduce the commitments under its
credit facility in a minimum amount of $5,000 and additional integral
amounts in multiples of $1,000 in respect of the Revolver Credit Facility.
The commitments under the Revolver Credit Facility may not be reduced by
more than $10,000 in any twelve-month period.

The Company must prepay the loans under the Revolver Credit Facility by
the following amounts (subject to certain exceptions):

o An amount equal to 100 percent of the net proceeds of any
incurrence of indebtedness by the Company or any of its
subsidiaries;

o An amount equal to 100 percent of the net proceeds of any
non-ordinary course sale or other disposition by the Company
or any of its subsidiaries of any assets, except for certain
exceptions.

SECURED SENIOR SUBORDINATED NOTES

The 10% 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's domestic
subsidiaries; and secured by a second-priority 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 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 April 15
and October 15. Interest on overdue principal accrues at 2 percent per
annum in excess of the above rate. 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.

11. INCOME TAXES

During the second quarter, the 2007 annual effective tax rate was lowered
to 31.6%, exclusive of discreet items for the six months ended June 30,
2007, due to changes in certain state tax laws.

On January 1, 2007, the Company adopted the provisions of FIN 48. The
total amount of the liability for unrecognized tax benefits as of the date
of adoption was $907, which is included in "Other long-term liabilities."
As a result of the adoption of FIN 48, the Company recognized a decrease
in the liability for unrecognized tax benefits, net of deferred income
taxes, as of January 1, 2007 with a corresponding decrease in the
Company's accumulated deficit totaling $348.

The total unrecognized tax benefits balance at January 1, 2007 is
comprised of tax benefits that, if recognized, would affect the effective
rate.

The Company recognizes interest and penalties accrued related to
unrecognized tax benefits in income tax expense. During the year ended
December 31, 2006, the Company recognized approximately $58 in penalties
and interest. The Company had $58 accrued for the payment of interest and
penalties at December 31, 2006. Upon adoption of FIN 48 on January 1,
2007, the Company decreased its accrual for interest and penalties to $8.

The Company is subject to taxation in the United States and various state
and foreign jurisdictions. The Company's tax years from 2001 to 2006 are
subject to examination by the taxing authorities.

12. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company's three reportable segments are Bare Wire, Engineered Wire
Products-Europe, and High Performance Conductors. These segments are
strategic business units organized around three product categories that
follow management's internal organization structure. The Company evaluates
segment performance based on segment operating income.

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 OEM's for use in computer and data communications products,
general industrial, energy, appliances, automobiles, and other
applications. The Bare Wire segment is in the primary business of copper
fabrication. The Company may provide such copper to its customers or use
their copper in the fabrication process. While the Company bills its
customers for copper it provides, it does not distinguish in its records
these customer types and it is therefore not practical to provide such
disclosure.

The Engineered Wire Products-Europe segment manufactures and engineers
connections and bare copper wire products (or conductors) to conduct
electricity either for power or for grounding purposes and are sold to a
diverse customer base of various OEM's for use in electrical appliances,
power supply, aircraft and railway, and automotive products.

The High Performance Conductors segment, which resulted from the Company's
acquisition described in Note 2, manufactures specialty high performance
conductors which include tin, nickel and silver plated copper and copper
alloy conductors including high and low temperature standard and
customized conductors as well as specialty film, insulated conductors and
miniature tubing products.

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

ENGINEERED
WIRE HIGH
PRODUCTS- PERFORMANCE
BARE WIRE EUROPE CONDUCTORS CORPORATE ELIMINATIONS TOTAL
--------- ------ ---------- --------- ------------ -----

NET SALES
Three months ended
June 30, 2007 $152,475 $ 16,936 $ 31,191 $ -- $ (572) $200,030
Three months ended
June 30, 2006 170,863 14,272 29,028 -- (86) 214,077
Six months ended
June 30, 2007 278,580 34,037 62,403 -- (865) 374,155
Six months ended
June 30, 2006 302,919 26,938 29,028 -- (245) 358,640

OPERATING INCOME/(LOSS)
Three months ended
June 30, 2007 4,654 1,500 3,449 (1,285) -- 8,318
Three months ended
June 30, 2006 5,312 1,158 2,962 (540) -- 8,892
Six months ended
June 30, 2007 9,417 2,524 6,721 (2,069) -- 16,593
Six months ended
June 30, 2006 11,320 2,219 2,962 (549) -- 15,952

GOODWILL
June 30, 2007 .... 62,148 -- -- -- -- 62,148
December 31, 2006 62,148 -- -- -- -- 62,148

TOTAL ASSETS
June 30, 2007 .... 272,066 39,778 63,838 30,970 (7,638) 399,014
December 31, 2006 247,778 40,115 62,863 32,161 (7,352) 375,565

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

FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
---------------------- ----------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
-------- -------- -------- --------
United States .......... $181,093 $199,805 $335,543 $331,702
Europe ................. 18,937 14,272 38,612 26,938
-------- -------- -------- --------

Total ............. $200,030 $214,077 $374,155 $358,640
======== ======== ======== ========

The following table presents property, plant and equipment, net, by
geographic region based on the location of the asset (excludes amounts
included in assets held for sale):

JUNE 30, DECEMBER 31,
2007 2006
-------- --------
United States ........................ $ 95,984 $ 94,568
Europe ............................... 9,610 9,321
-------- --------

Total ........................... $105,594 $103,889
======== ========

13. RELATED PARTY TRANSACTIONS

The Company sells a portion of its production scrap to Prime Materials
Recovery, Inc. ("Prime") and Prime also performs certain scrap processing
services for the Company. Prime is a closely held company and its major
shareholder, chairman and director is the Chief Executive Officer 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 $6,275 and $7,572 for the three months ended June 30, 2007 and
2006, respectively, and $9,573 and $11,278 for the six months ended June
30, 2007 and 2006, respectively. The outstanding trade receivables were
$2,028 and $2,564 at June 30, 2007 and December 31, 2006, respectively.
The Company incurred scrap conversion costs from Prime of $389 and $0 for
the three months ended June 30, 2007 and 2006, respectively, and $414 and
$0 for the six months ended June 30, 2007 and 2006, respectively. The
outstanding trade payables were $16 and $0 at June 30, 2007 and December
31, 2006, respectively. Sales to and purchases from Prime were made at
terms comparable to those of other companies in the industry.

14. 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 OEM's
for certain claims and damages related to certain water inlet hoses
supplied by and through the Company's former wire harness business
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 OEM's 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 its 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 OEM's 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 sale of the Company's former wire harness business
to Viasystems International, Inc. in March 2000, 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, 2007, December 31, 2006
and December 31, 2005 (in thousands, except number of claims):

VALUE OF
NO. OF ALLEGED
CLAIMS DAMAGES
------- -------
As of December 31, 2005 .......................... 310 $ 3,611
For the year ended December 31, 2006:
New uninsured claims ........................ 668 6,956
Resolved uninsured claims ................... (681) (6,386)
------- -------

As of December 31, 2006 .......................... 297 4,181
For the six months ended June 30, 2007:
New uninsured claims ........................ 99 1,724
Resolved uninsured claims ................... (231) (2,837)
------- -------
As of June 30, 2007 .............................. 165 $ 3,068
======= =======

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,
2007 and December 31, 2006, 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, 2007 and December 31, 2006, 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, 2007 and December 31, 2006, the aggregate
settlement costs, cost of administering and litigating and average cost
per resolved claim were as follows:

FOR THE SIX FOR THE
MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
2007 2006
-------- --------
Aggregate settlement costs ......................... $ 86 $482

Cost of administering and litigating ............... $ 78 $215

Average cost per resolved claim .................... $ 1 $ 1

The Company had a reserve of $1,086 and $1,250 as of June 30, 2007 and
December 31, 2006, 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.

The Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to
the operations of the Company. The Company does not believe that such
proceedings and actions would materially affect the Company.

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.

We make 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. We do not have any intention or obligation to
update forward-looking statements after the filing of this Form 10-Q.

Many important factors could cause our results to differ materially from
those expressed in forward-looking statements. These factors include, but
are not limited to, fluctuations in our operating results and customer
orders, unexpected decreases in demand or increases in inventory levels,
changes in the price of copper, tin, nickel and silver, copper premiums
and alloys, the failure of our acquisitions and expansion plans to perform
as expected, the competitive environment, our reliance on our significant
customers, lack of long-term contracts, substantial dependence on business
outside of the U.S. and risks associated with our international
operations, limitations due to our indebtedness, loss of key employees or
the deterioration in our relationship with employees, litigation, claims,
liability from environmental laws and regulations and other factors. For
additional information regarding risk factors, see our discussion in Part
I, Item 1A of our Annual Report on Form 10-K for the year ended December
31, 2006.

OVERVIEW

We, together with our subsidiaries, manufacture and market wire products,
including bare and tin-plated copper wire, engineered wire products and
high performance conductors for other wire suppliers and original
equipment manufacturers or " OEM's ". 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 aerospace, appliance, automotive,
electronics/data communications, general industrial/energy and medical
device industries. As of June 30, 2007, we manufacture and distribute our
products at 14 facilities located in the United States, Belgium, France
and Italy. For the period ended June 30, 2007, we operated our business in
the following three segments:

o Bare Wire. 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 OEM's for use in computer and data
communications products, general industrial, energy,
appliances, automobiles and other applications.

o Engineered Wire Products - Europe. Our bare copper wire
products are engineered and used to conduct electricity either
for power or for grounding purposes and are sold to a diverse
customer base of various OEM's for use in electrical
appliances, power supply, aircraft and railway and automotive
products.

o High Performance Conductors. Our High Performance Conductors
segment manufacturers specialty high performance conductors
which include tin, nickel and silver-plated copper and copper
alloy conductors including high and low temperature standard
and customized conductors as well as specialty film insulated
conductors and miniature tubing products. This segment
resulted from our acquisition of Phelps Dodge High Performance
Conductors of SC & GA, Inc. ("HPC") on March 31, 2006.

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 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.

o Automobiles - North American industry production statistics,
which are influenced by labor relations issues, regulatory
requirements and trade agreements. For the first six months of
2007, automotive industry production volumes decreased 5.6%
compared to the same period for 2006.

o Additional factors for the High Performance Conductors segment
include commercial aircraft shipments, military aircraft
deliveries and electro-medical equipment demand rates.
Deliveries of large civil aircraft in the first six months of
2007 increased 20% over the same period in 2006. Demand for
medical devices was also strong in the first six months of
2007 due to the broadening acceptance of products available
for minimally invasive procedures and increased product
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 efficiently manufacture our products,
which assists in our ability to provide competitively priced products.
Also, we invest in engineering and product 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.

A portion of our revenue 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 at any time. The remainder of our
sales included non-customer owned copper ("owned copper" ). Accordingly,
for these sales, copper is included in both sales and cost of sales.

Our expenses in producing these products fall into three main categories -
raw materials, including copper, silver, nickel, tin and alloys, 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 2006
levels as a result of a combination of continued sustained demand from
China and India and continued unprecedented levels of investment fund
involvement. The average price of copper based upon The New York
Mercantile Exchange, Inc. ("COMEX ") increased to $3.46 per pound for the
three months ended June 30, 2007 from $3.37 per pound for the three months
ended June 30, 2006, or 3%. 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 an approximate $2.5 million impact on our
working capital. Increased working capital requirements cause us to
increase our borrowings, which increases our interest expense.

Copper prices remain volatile. The average copper price for the six months
ended June 30, 2007 of $3.08 per pound was higher than the COMEX price of
$2.85 as of December 31, 2006. However, the price of copper on the COMEX
was $3.37 per pound on August 9, 2007.

With the HPC acquisition, other raw materials used include silver and
nickel. The cost of silver and nickel components in our products is
generally passed-through to our customers. For the three months ended June
30, 2007, the average price of silver increased by 9% and the average
price of nickel increased by 141% compared to the three months ended June
30, 2006.

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, workers'
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.

RESULTS OF OPERATIONS

The following table sets forth certain unaudited statements of operations
data in millions of dollars and percentage of net sales for the periods
indicated. The Company's insulated wire business is included in
discontinued operations.

FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
------------------------------------ -------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2007 2006 2007 2006
---------------- ----------------- ----------------- -----------------

Net sales................... $ 200.0 100.0% $ 214.1 100.0% $ 374.2 100.0% $ 358.6 100.0%
Operating expenses:
Cost of goods sold,
exclusive of
depreciation and
amortization expense
shown below ........... 176.2 88.1 191.8 89.6 327.0 87.4 318.9 88.9
Selling, general and
administrative
expenses .............. 11.6 5.8 10.0 4.7 22.7 6.1 17.6 4.9
Depreciation and
amortization .......... 3.9 1.9 3.4 1.6 7.9 2.1 6.1 1.7
------- ------- -------- ------- -------- ------- -------- -------
Operating income ........... 8.3 4.2 8.9 4.1 16.6 4.4 16.0 4.5
Other income/(expense):
Interest expense ...... (2.5) (1.3) (3.8) (1.7) (4.8) (1.3) (6.6) (1.8)
Amortization of
deferred
financing costs ... (0.2) (0.1) (0.2) (0.1) (0.3) -- (0.4) (0.1)

Other, net ............ -- -- 0.3 0.1 -- -- 0.2 --
------- ------- -------- ------- -------- ------- -------- -------
Income from continuing
operations before
income tax provision... 5.6 2.8 5.2 2.4 11.5 3.1 9.2 2.6
Income tax provision ....... 1.4 0.7 2.1 1.0 3.3 0.9 3.6 1.0
------- ------- -------- ------- -------- ------- -------- -------
Income from continuing
operations ............ 4.2 2.1 3.1 1.4 8.2 2.2 5.6 1.6
Income/(loss) from
discontinued
operations ............ 0.1 0.1 0.2 0.1 0.1 -- (0.5) (0.2)
------- ------- -------- ------- -------- ------- -------- -------
Net income.................. $ 4.3 2.2% $ 3.3 1.5% $ 8.3 2.2% $ 5.1 1.4%
======= ======= ======== ======= ======== ======= ======== =======

We have three reportable segments: Bare Wire, Engineered Wire
Products-Europe, and High Performance Conductors. The following table sets
forth unaudited net sales and operating income for the periods presented
in millions of dollars and percentages of totals:

Net sales:
Bare Wire.............. $ 152.5 76% $ 170.9 80% $ 278.6 75% $ 302.9 84%
Engineered Wire
Products -
Europe ............ 16.9 8 14.3 7 34.0 9 26.9 8
High Performance
Conductors ........ 31.2 16 29.0 13 62.4 16 29.0 8
Eliminations .......... (0.6) -- (0.1) -- (0.8) -- (0.2) --
------- ------- -------- ------- -------- ------- -------- -------
Total.............. $ 200.0 100% $ 214.1 100% $ 374.2 100% $ 358.6 100%
======= ======= ======== ======= ======== ======= ======== =======

Operating income:
Bare Wire.............. $ 4.7 49% $ 5.3 56% $ 9.4 51% $ 11.3 69%
Engineered Wire
Products -
Europe............. 1.5 16 1.1 12 2.5 13 2.2 13
High Performance
Conductors......... 3.4 35 3.0 32 6.7 36 3.0 18
------- ------- -------- ------- -------- ------- -------- -------
Subtotal........... 9.6 100% 9.4 100% 18.6 100% 16.5 100%
======= ======= ======= =======
Corporate.............. (1.3) (0.5) (2.0) (0.5)
------- -------- -------- --------
Total.............. $ 8.3 $ 8.9 $ 16.6 $ 16.0
======= ======== ======== ========

THREE MONTHS ENDED JUNE 30, 2007 VERSUS THREE MONTHS ENDED JUNE 30, 2006

Net sales were $200.0 million and $214.1 million for the three months
ended June 30, 2007 and 2006, respectively. Sales for the three months
ended June 30, 2007 were $14.1 million, or 6.6%, lower than comparable
2006 levels, as a result of a higher proportion of tolled copper shipped
in the 2007 period compared to the 2006 period ($26.4 million) and lower
volume ($0.9 million). These factors were partially offset by an increase
in the average cost and selling price of copper ($10.8 million), higher
customer pricing/mix ($1.3 million) and the impact of a stronger euro
versus the U.S. dollar ($1.1 million). The average price of copper based
upon COMEX increased to $3.46 per pound for the three months ended June
30, 2007 from $3.37 per pound for the three months ended June 30, 2006.

Bare Wire segment net sales for the three months ended June 30, 2007 were
$152.5 million, or a decrease of $18.4 million, or 10.8%, from net sales
of $170.9 million for the comparable 2006 period. This decrease was
primarily the result of lower volume to customers supplying the
electronics/data communications and appliance markets ($2.9 million) and
the impact of a higher proportion of tolled copper shipped in the 2007
period compared to the 2006 period ($26.4 million). These decreases were
partially offset by the impact of an increase in the average cost and
selling price of copper ($9.4 million), higher volume to customers
supplying the industrial/energy and automotive markets ($0.2 million) and
increased customer pricing/mix ($1.3 million). Of the total pounds
processed for the three months ended June 30, 2007 and 2006, respectively,
49.7% and 42.9% were from customers' tolled copper.

Engineered Wire Products-Europe net sales of $16.9 million for the three
months ended June 30, 2007 were $2.6 million, or 18.2%, higher than sales
of $14.3 million for the 2006 period. This increase was the result of $0.8
million for the increase in the average cost and selling price of copper,
$1.1 million from the impact of a stronger euro versus the U.S. dollar and

$0.7 million from increased volume from improved customer demand in all
markets.

High Performance Conductors net sales of $31.2 million for the three
months ended June 30, 2007 were $2.2 million, or 7.6%, higher than sales
of $29.0 million for the 2006 period. This increase was the result of $0.6
million for the increase in the average cost and selling price of copper
and $1.6 million from increased volume from improved customer demand in
the aerospace and medical device markets.

Cost of goods sold, exclusive of depreciation and amortization, as a
percentage of sales decreased to 88.1% for the three months ended June 30,
2007 from 89.6% for the same period in 2006. The decrease of 1.5
percentage points was due to the impact of a higher proportion of tolled
copper sales in 2007 compared to 2006 (1.5 percentage points), higher
customer pricing/mix (0.6 percentage points) and an increased contribution
from High Performance Conductors (0.6 percentage points), partially offset
by the increase in the average cost and selling price of copper (0.7
percentage points), and lower overhead absorption (0.5 percentage points).

Selling, general and administrative expenses were $11.6 million for the
three months ended June 30, 2007 compared to $10.0 million for the same
period in 2006. This increase of $1.6 million was the result of $0.2
million of stock-based compensation expense, $1.1 million of higher
professional fees and $0.3 million of other cost increases. These
expenses, as a percent of net sales, increased to 5.8% for the three
months ended June 30, 2007 from 4.7% for the three months ended June 30,
2006, primarily from the impact of lower sales from a higher proportion of
tolled copper in 2007 compared to 2006 and the previously mentioned
increased costs.

Depreciation and amortization was $3.9 million for the three months ended
June 30, 2007 compared to $3.4 million for the same period in 2006. This
increase of $0.5 million was the result of higher depreciation on
property, plant and equipment additions.

Operating income for the three months ended June 30, 2007 was $8.3 million
compared to $8.9 million for the 2006 period, or a decrease of $0.6
million, or 6.7%, primarily from increased stock-based compensation costs,
professional fees and depreciation and amortization. Bare Wire segment's
operating income of $4.7 million for the 2007 period decreased by $0.6
million, or 11.3%, compared to $5.3 million for the 2006 period, primarily
from lower sales volume, lower overhead absorption and higher depreciation
which were partially offset by higher customer pricing/mix. Engineered
Wire Products-Europe operating income was $1.5 million, or an increase of
$0.4 million from the 2006 period as the result of $1.1 million increased
sales volume to all major markets. High Performance Conductors operating
income was $3.4 million, or an increase of $0.4 million from the 2006
period of $3.0 million from increased sales volume and a higher gross
profit rate. Operating income in the 2007 period also decreased by $0.8
million from increased charges for stock-based compensation expense and
professional fees.

Interest expense was $2.5 million for the three months ended June 30, 2007
compared to $3.8 million for the three months ended June 30, 2006. This
decrease of $1.3 million was the result of the impact of lower levels of
borrowings from improved operating cashflows, including higher accounts
payable and a lower cost debt structure.

Amortization of deferred financing costs was $0.2 million for both the
three months ended June 30, 2007 and 2006.

Income tax provision was $1.4 million and $2.1 million for the three
months ended June 30, 2007 and 2006, respectively. The Company's effective
tax rate for the three months ended June 30, 2007 was 24.7% and 40.1% for
the three months ended June 30, 2006. The lower effective tax rate in 2007
was the result of efficient state tax strategies and changes in certain
state tax laws.

Income from continuing operations was $4.2 million and $3.1 million for
the three months ended June 30, 2007 and 2006, respectively, or an
increase of $1.1 million primarily from reduced interest expense and a
lower effective tax rate which were partially offset by higher selling,
general and administrative expenses and depreciation and amortization.

Income from discontinued operations was $0.1 million and $0.2 million for
the three months ended June 30, 2007 and 2006, respectively. The 2007
amount included a gain of $0.2 million from the sale of property, plant
and equipment of the former Insulated Wire business. The 2006 amount
included the results of the Insulated Wire business that was sold in July
2006.

As a result of the aforementioned changes, net income was $4.3 million, or
$0.43 per basic share and $0.42 per diluted share, and $3.3 million, or
$0.32 per basic and diluted share, for the three months ended June 30,
2007 and 2006, respectively.

SIX MONTHS ENDED JUNE 30, 2007 VERSUS SIX MONTHS ENDED JUNE 30, 2006

Net sales were $374.2 million and $358.6 million for the six months ended
June 30, 2007 and 2006, respectively. Sales for the six months ended June
30, 2007 were $15.6 million, or 4.4%, above comparable 2006 levels, as a
result of an increase in the average cost and selling price of copper
($31.5 million), higher customer pricing/mix ($2.5 million), the impact of
a stronger euro versus the U.S. dollar ($2.2 million) and from the
acquisition of HPC ($31.2 million) on March 31, 2006. These factors were
partially offset by a higher proportion of tolled copper shipped in the
2007 period compared to the 2006 period ($47.7 million) and lower volume
($4.1 million). The average price of copper based upon COMEX increased to
$3.08 per pound for the six months ended June 30, 2007 from $2.81 per
pound for the six months ended June 30, 2006.

Bare Wire segment net sales for the six months ended June 30, 2007 were
$278.6 million, or a decrease of $24.3 million, or 8.0%, from sales of
$302.9 million for the comparable 2006 period. This decrease was primarily
the result of lower volume to customers supplying the electronics/data
communications and appliance markets ($7.3 million) and the impact of a
higher proportion of tolled copper shipped in the 2007 period compared to
the 2006 period ($47.7 million). These decreases were partially offset by
the impact of an increase in the average cost and selling price of copper
($28.2 million) and increased customer pricing/mix ($2.5 million). Of the
total pounds processed for the six months ended June 30, 2007 and 2006,
respectively, 49.5% and 44.0% were from customers' tolled copper.

Engineered Wire Products-Europe net sales of $34.0 million for the six
months ended June 30, 2007 were $7.1 million, or 26.4%, higher than sales
of $26.9 million for the 2006 period. This increase was the result of $2.7
million for the increase in the average cost and selling price of copper,
$2.2 million impact of a stronger euro versus the U.S. dollar and $2.2
million from increased volume from improved customer demand in all
markets.

High Performance Conductors net sales of $62.4 million for the six months
ended June 30, 2007 were $33.4 million, or 115.2%, higher than sales of
$29.0 million for the 2006 period. This increase was the result of $0.6
million for the increase in the average cost and selling price of copper,
$1.6 million from increased volume from improved customer demand in the
aerospace and medical device markets and $31.2 million for the three
months ended March 31, 2007 with no similar sales for the three months
ended March 31, 2006 as HPC was acquired on March 31, 2006.

Cost of goods sold, exclusive of depreciation and amortization, as a
percentage of sales decreased to 87.4% for the six months ended June 30,
2007 from 88.9% for the same period in 2006. The decrease of 1.5
percentage points was due to the impact of a higher proportion of toll
copper sales in 2007 compared to 2006 (1.7 percentage points), higher
customer pricing/mix (0.6 percentage points) and the favorable
contribution of HPC sales (0.6 percentage points) partially offset by the
increase in the average cost and selling price of copper (1.2 percentage
points) and lower overhead absorption (0.2 percentage points).

Selling, general and administrative expenses were $22.7 million for the
six months ended June 30, 2007 compared to $17.6 million for the same
period in 2006. This increase of $5.1 million was the result of $2.5
million from the HPC acquisition on March 31, 2006, $1.0 million of
stock-based compensation expense and $1.2 million of higher professional
fees (primarily in the three months ended June 30) and $0.4 million of
other cost increases. These expenses, as a percent of net sales, increased
to 6.1% for the six months ended June 30, 2007 from 4.9% for the six
months ended June 30, 2006, primarily from the impact of the HPC expenses,
increased stock-based compensation and professional fee expenses in the
2007 period and the effect of a higher proportion of tolled copper in 2007
compared to 2006.

Depreciation and amortization was $7.9 million for the six months ended
June 30, 2007 compared to $6.1 million for the same period in 2006. This
increase of $1.8 million was the result of the HPC acquisition ($1.3
million) and higher depreciation on other property, plant and equipment
additions ($0.5 million).

Operating income for the six months ended June 30, 2007 was $16.6 million
compared to $16.0 million for the 2006 period, or an increase of $0.6
million, primarily from the contribution of the HPC acquisition. Bare Wire
segment's operating income of $9.4 million for the 2007 period decreased
by $1.9 million, or 16.8%, compared to $11.3 million for the comparable
2006 period, primarily from lower sales volume and higher depreciation
partially offset by higher customer pricing/mix. Engineered Wire
Products-Europe operating income was $2.5 million, or an increase of $0.3
million, from the 2006 period of $2.2 million from increased sales volume
to all major markets. High Performance Conductors operating income was
$6.7 million, or an increase of $3.7 million, from the 2006 period of $3.0
million primarily after being acquired on March 31, 2006. Operating income
in the 2007 period also decreased by $1.5 million from increased charges
for stock-based compensation and professional fees.

Interest expense was $4.8 million for the six months ended June 30, 2007
compared to $6.6 million for the six months ended June 30, 2006. This
decrease of $1.8 million was the result of the impact of lower levels of
borrowings from improved operating cashflows, including higher accounts
payable and a lower cost debt structure.

Amortization of deferred financing costs was $0.3 million and $0.4 million
for the six months ended June 30, 2007 and 2006, respectively.

Income tax provision was $3.3 million and $3.6 million for the six months
ended June 30, 2007 and 2006, respectively. The Company's effective tax
rate for the six months ended June 30, 2007 was 29.0% and 39.4% for the
six months ended June 30, 2006. The lower effective tax rate in 2007 was
the result of efficient state tax strategies and certain changes in state
tax laws.

Income from continuing operations was $8.2 million and $5.6 million for
the six months ended June 30, 2007 and 2006, respectively, or an increase
of $2.6 million primarily from higher operating income, reduced interest
expense and a lower effective tax rate.

Income/(loss) from discontinued operations was $0.1 million and ($0.5)
million for the six months ended June 30, 2007 and 2006, respectively. The
2007 amount included a gain of $0.2 million from the sale of property,
plant and equipment of the former Insulated Wire business. The 2006 amount
included the results of the Insulated Wire business that was sold in July
2006.

As a result of the aforementioned changes, net income was $8.3 million, or
$0.83 per basic share and $0.81 per diluted share, and $5.1 million, or
$0.51 per basic and diluted share, for the six months ended June 30, 2007
and 2006, respectively.

FINANCIAL CONDITION

At the end of the second quarter, total cash and cash equivalents were
$1.9 million, down $1.4 million from year-end 2006. During the first six
months of 2007, cash levels decreased throughout the period as we used
excess cash to reduce outstanding long-term debt borrowings.

Accounts receivable increased $20.1 million, or 20.5%, from year-end 2006.
This increase was primarily due to the increase in sales for the
immediately preceding period. The number of days sales outstanding
remained constant at 52 days. The allowance for doubtful accounts as a
percentage of accounts receivable decreased from 1.7% at December 31, 2006
to 0.9% as of June 30, 2007 reflecting primarily the write-off of
remaining Insulated Wire accounts deemed uncollectible against the
allowance in the first quarter of 2007.

Inventories of $63.3 million as of June 30, 2007 increased by $4.5 million
from December 31, 2006. This increase was the result of an increase in
pounds of copper held and other inventory in the Bare Wire segment ($9.0
million) and increased inventory levels at HPC ($1.3 million), partially
offset by an increase in the LIFO reserve ($3.0 million) and lower

quantities in the Engineered Wire Products-Europe segment of ($2.8
million). Inventory turns in the first six months of 2007 were comparable
to 2006 levels.

Accounts payable were $61.1 million as of June 30, 2007, or an increase of
$27.6 million from December 31, 2006 levels, as trade vendor terms were
extended from a major copper vendor, more pounds were purchased and the
effect of the timing of payments.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2006, the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, - an interpretation of FASB Statement No. 109
("FIN 48") to be effective for fiscal years beginning after December 31,
2006. This Interpretation adopts a two-step approach for recognizing and
measuring tax benefits and requires certain disclosures about
uncertainties in income tax positions. It also adopts the recognition
threshold of "more likely than not." On January 1, 2007, the Company
adopted the provisions of FIN 48. As a result of the implementation of FIN
48, the Company recognized a decrease of $0.3 million to the opening
balance of accumulated deficit. See Note 11 to the unaudited condensed
consolidated financial statements in this Form 10-Q.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS No. 157"). This statement defines fair value, established a
framework for using fair value to measure assets and liabilities and
expands disclosures about fair value measurements. The statement applies
whenever other pronouncements require or permit assets or liabilities to
be measured at fair value. SFAS No. 157 is effective for the Company's
fiscal year beginning January 1, 2008. The Company is evaluating the
impact the adoption of SFAS No. 157 will have on the Company's financial
statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities -- including an amendment to FASB
Statement No. 115 ("SFAS No. 159"). This statement permits entities to
choose to measure many financial instruments and certain other items at
fair value in order to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently. SFAS No. 159 is
effective for the Company's fiscal year beginning January 1, 2008. The
Company is evaluating the impact the adoption of SFAS No. 159 will have on
the Company's financial statements.

LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL AND CASH FLOWS

Net cash provided by operating activities was $23.7 million for the six
months ended June 30, 2007, compared to net cash provided by operating
activities of $12.3 million for the six months ended June 30, 2006. This
improvement of $11.4 million was the result of increased net income ($3.2
million), non-cash stock-based compensation expense ($1.0 million),
inventory changes ($2.8 million) and increased accounts payable ($9.1
million), partially offset by lower accrued payroll and payroll related
items ($3.7 million) and other, net ($1.0 million).

Net cash used in investing activities was $11.9 million for the six months
ended June 30, 2007, compared to $52.5 million for the six months ended
June 30, 2006. This decrease in net cash used of $40.6 million resulted
primarily from the acquisition of HPC for $50.0 million in the 2006
period. In addition, capital expenditures were $9.4 million for the six
months ended June 30, 2007 compared to $4.9 million for the six months
ended June 30, 2006, primarily from spending for the new plant in
Sherrill, New York of $5.3 million, including site preparation, deposits
for equipment and installation costs. Total capital expenditures related
to the acquisition of the Sherrill, New York facility are expected to be
approximately $5.5 million over the remaining life of the project.
Proceeds from the sale of property, plant and equipment and assets held
for sale in the 2006 period were $2.1 million greater than in the 2007
period.

Net cash used in financing activities was $13.2 million for the six months
ended June 30, 2007, compared to net cash provided by financing activities
of $41.6 million for the six months ended June 30, 2006, for a decrease of
$54.8 million. There were net repayment of borrowings of $13.3 million for
the six months ended June 30, 2007, and net borrowings of $42.0 million
for the HPC acquisition in the six months ended June 30, 2006.

FINANCING ARRANGEMENTS

The Company and its subsidiaries are party to a revolving credit facility
with Wachovia Capital Finance Corporation (Central) (the "Revolver Credit
Facility"). The Revolver Credit Facility provides for a $200 million
revolver credit facility subject to borrowing availability (including a
$25 million letter of credit facility) and matures August 22, 2011.

The Company and its subsidiaries are party to an indenture governing the
Notes we issued in October 2004. For a description of the terms of the
Revolving Credit Facility and the Notes, see Note 10 to the unaudited
condensed 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, silver, nickel,
tin and alloy costs increase significantly or rapidly. Currently, a $0.10
per pound fluctuation in the price of copper will have an approximate $2.5
million impact on our working capital. The average price of copper based
upon COMEX increased to $3.46 per pound for the three months ended June
30, 2007 from $3.37 per pound for the three months ended June 30, 2006.
Copper prices continue to be volatile, and the price of copper on the
COMEX was $3.37 per pound as of August 9, 2007.

Our principal sources of cash are generated from operations and
availability under our Revolver Credit Facility.

As of June 30, 2007, we had $1.9 million of unrestricted cash and cash
equivalents. Actual borrowings availability under our Revolver 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, 2007, our borrowing base was $158.1
million and our outstanding indebtedness under the Revolver Credit
Facility (including outstanding letters of credit) was $40.7 million,
resulting in a remaining availability as of such date of $117.4 million.

We expect our cash on hand, operating cash flow, together with available
borrowings under the Revolver Credit Facility, will be sufficient to meet
our anticipated future operating expenses, capital expenditures and debt
service requirements for the next twelve months and the foreseeable
future. 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, reduction in vendor terms from our suppliers,
increases in prices of our major material components including copper,
silver, nickel, tin and alloy, increases in other expenses such as utility
costs, 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, 2007. 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 definition of operating lease agreements, the sum of future lease
payments is not reflected on our consolidated balance sheets. As of June
30, 2007, the future minimum lease payments under these arrangements
totaled $6.8 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not ordinarily hold market risk sensitive instruments for trading
purposes.

INTEREST RATE RISK

At June 30, 2007, approximately $25.2 million of $100.2 million of
long-term debt, specifically, $25.2 million of borrowings under our
Revolver Credit Facility, bear interest at variable rates. A hypothetical

1% increase in variable interest rates would increase our interest rate
expense by $0.3 million based on the debt outstanding as of June 30, 2007.
We are not currently engaged in any hedging activities.

FOREIGN CURRENCY RISK

As of June 30, 2007, we had operations in Belgium, France and Italy. Our
operations may, therefore, be subject to volatility because of currency
fluctuations. Sales and expenses are denominated in the euro for the
Belgium, French and Italian operations. As a result, these operations are
subject to fluctuations in the relative value of the euro. 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. Our net foreign currency investment in foreign subsidiaries and
affiliates translated into U.S. dollars using month-end exchange rates at
June 30, 2007 and year-end exchange rates at December 31, 2006, was $24.5
million and $22.0 million, respectively.

At June 30, 2007, 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 primarily from the major copper producers in North
America, Europe and South America. 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. The average price
of copper based upon COMEX increased to $3.46 per pound for the three
months ended June 30, 2007 from $3.37 per pound for the three months ended
June 30, 2006. 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.
Currently, a $0.10 per pound fluctuation in the price of copper will have
an approximate $2.5 million impact on our working capital.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer, with the
participation of other members of management, conducted an evaluation of
the effectiveness of the design and operation of the disclosure controls
and procedures pursuant to Rules 13a-15(b) and 15d-15(b) under the
Securities and Exchange Act of 1934. Based upon the evaluation and because
of the material weaknesses described below, our officers concluded that,
as of the end of the period covered by this report, our disclosure
controls and procedures were not effective. Notwithstanding the material
weaknesses discussed below, the Company's management has concluded that
the financial statements included in this Form 10-Q fairly present in all
material respects the Company's financial position and its results of
operations for the periods presented in conformity with generally accepted
accounting principles.

As of December 31, 2005, we did not maintain effective controls over the
evaluation and completeness of our deferred tax assets and liabilities,
the associated valuation allowances established in previous years to
reflect the likelihood of the recoverability of net deferred tax assets
and the income tax provision/(benefit) for continuing and discontinued
operations. Specifically, we did not have effective controls in place to
identify net operating loss carryforwards and the differences between book
and tax accounting for fixed assets, certain inventory reserves and LIFO
inventories and certain intangibles. This material weakness resulted in a
restatement of the Company's 2005 annual consolidated financial statements
with respect to income taxes. In addition, this control deficiency could
result in a material misstatement to the aforementioned accounts such as
deferred tax assets, deferred tax liabilities, goodwill, and income tax
provision/(benefit) that would result in a material misstatement to the
Company's annual or interim consolidated financial statements that would
not be prevented or detected. Accordingly, management has determined that
this control deficiency constitutes a material weakness. This material
weakness existed throughout 2006 and at June 30, 2007.

As of December 31, 2006 and June 30, 2007, we did not maintain a
sufficient number of personnel with an appropriate level of knowledge to
adequately prepare the financial statements, which contributed to the
following control deficiencies:

1. We did not have an adequate process in place to perform analysis and
independent secondary review of complex or non-routine accounting matters,
such as accounting for discontinued operations, certain aspects of a debt
modification, purchase accounting transactions and stock-based
compensation.

2. We did not maintain an adequate process to analyze and review
certain accrued liabilities and related expense accounts involving
management's judgments and estimates.

3. We did not maintain effective policies and procedures related to our
financial close process to ensure that the presentation and disclosures in
the financial statements were prepared and reviewed in a timely and
accurate manner.

A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's annual or
interim financial statements will not be prevented or detected on a timely
basis. These control deficiencies, either individually or in the
aggregate, could result in material misstatements to annual or interim
financial statements that would not be prevented or detected. Accordingly,
management determined that these control deficiencies combined constituted
a material weakness.

REMEDIATION PLAN

Our remediation plan for the deferred tax accounting weakness included a
special project in which we staffed qualified outside tax and accounting
consultants, beginning in the second quarter of 2006, to fully assess the
material weakness. Management also obtained internal and external
resources for the preparation of the 2006 and 2007 quarter-end and
year-end closings. The initial phase of the remediation plans has resulted
in the restatement of the 2005 annual consolidated financial statements as
more fully described in Amendment No. 1 to the Form 10-K for December 31,
2005 in Note 1A. We continue to strengthen our controls over income tax
accounting with additional internal accounting and external resources
through and including the preparation of the 2006 and 2007 income tax
provision and related footnote disclosures. To remediate the control
weakness related to personnel, management has hired a Manager of Financial
Reporting who possesses the technical qualifications to properly account
for both non-routine and routine transactions. Management has additionally
hired a Manager of Internal Audit/SOX to assist management in the proper
implementation of adequate disclosure controls. Management, with the
assistance of the Manager of Internal Audit/SOX, has developed, and will
continue to develop, detailed control remediation steps for each of the
deficiencies noted above and has begun implementation of those steps.
Management has conducted an analysis of the current financial reporting
staff and validated that the roles and responsibilities have been properly
allocated and assessed the potential need for additional resources.
Management is in the process of obtaining those resources deemed
necessary.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Except as otherwise discussed above, 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 three months ended June 30, 2007, there have been no material
developments in the Company's legal proceedings. For more detailed
information, see the disclosures provided in Note 14 to the unaudited
condensed consolidated financial statements in this Form 10-Q and Note 18
to our Consolidated Financial Statements and in "Item 3-Legal Proceedings"
set forth in our 2006 Form 10-K.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should
carefully consider the factors discussed in Part I, Item 1A, "Risk
Factors" in our 2006 Form 10-K for the year ended December 31, 2006, which
could materially affect our business, financial condition or future
results. The Risk Factors included in our 2006 Form 10-K have not
materially changed. The risks described in our 2006 Form 10-K are not the
only risks we face. Additional risks and uncertainties not currently known
to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating
results.

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

Our Annual Meeting of Stockholders was held on June 7, 2007. At the Annual
Meeting, stockholders voted on two matters and each matter was approved.
The number of shares voted with respect to each matter required to be
reported herein are as follows:

1. Election of Directors

Rodney D. Kent For: 8,174,946 Withheld: 0
Mark K. Holdsworth For: 8,174,946 Withheld: 0
William Lane Pennington For: 8,174,946 Withheld: 0
Peter Blum For: 8,174,946 Withheld: 0
David M. Gilchrist, Jr. For: 8,174,946 Withheld: 0
Robert A. Hamwee For: 8,174,946 Withheld: 0
Lowell W. Robinson For: 8,174,946 Withheld: 0
John T. Walsh For: 8,174,946 Withheld: 0

2. Ratification of the Audit Committee's selection of Deloitte & Touche
LLP as our independent registered public accounting firm.

For: 8,174,946 Against: 0 Abstain: 0

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
----------- -----------------------------------------------------------------

10.1 Letter agreement regarding Amended and Restated Registration
Rights Agreement, dated April 24, 2007, among International Wire
Group, Inc., GSCP (NJ), Inc., Special Value Absolute Return Fund,
LLC and Special Value Opportunities Fund, LLC (filed as Exhibit
10.1 to the Company's Current Report on Form 8-K filed April 27,
2007, and incorporated herein by reference).

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 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: August 10, 2007 By: /s/ GLENN J. HOLLER
---------------------------------
Name: Glenn J. Holler
title: Senior Vice President, Chief
Financial Officer (Principal
Financial and Accounting Officer)
and Secretary

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
----------- -----------------------------------------------------------------

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.