1
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 March 31, 2001
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
33-93970
(Commission File Number)
International Wire Group, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
43-1705942
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 719-1000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class April 30, 2001
---------------------------- --------------
Common Stock 1,000
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INTERNATIONAL WIRE GROUP, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000 ................................................. 3
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2001 and 2000 ..................................... 4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2001 and 2000 ..................................... 5
Notes to Condensed Consolidated Financial Statements ................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... 15
Item 3. Quantitative and Qualitative Disclosure About Market Risk .............. 18
PART II - OTHER INFORMATION .................................................... 19
SIGNATURES ..................................................................... 20
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
-----------------------------
2001 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 27,309 $ 32,244
Accounts receivable, less allowance of $2,464
and $2,760, respectively .......................... 87,992 82,339
Inventories ......................................... 78,053 83,527
Other current assets ................................ 29,692 28,163
---------- ----------
Total current assets .............................. 223,046 226,273
Property, plant and equipment, net .................... 144,710 148,414
Intangible and other assets ........................... 208,362 211,047
---------- ----------
Total assets ...................................... $ 576,118 $ 585,734
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term obligations ......... $ 4,067 $ 4,312
Accounts payable .................................... 38,025 42,654
Accrued and other liabilities ....................... 36,928 38,227
Accrued payroll and payroll related items ........... 4,075 11,740
Accrued interest .................................... 11,895 3,195
---------- ----------
Total current liabilities ......................... 94,990 100,128
Long-term obligations, less current maturities ........ 330,355 331,121
Other long-term liabilities ........................... 46,280 46,736
---------- ----------
Total liabilities ................................. 471,625 477,985
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares
authorized, issued and outstanding ................ 0 0
Contributed capital ................................. 246,724 246,724
Carryover of predecessor basis ...................... (67,762) (67,762)
Accumulated deficit ................................. (72,039) (69,989)
Accumulated other comprehensive loss ................ (2,430) (1,224)
---------- ----------
Total stockholder's equity ........................ 104,493 107,749
---------- ----------
Total liabilities and stockholder's equity ........ $ 576,118 $ 585,734
========== ==========
See accompanying notes to the condensed consolidated financial statements.
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INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
-----------------------------
2001 2000
---------- ----------
Net sales ............................................. $ 124,749 $ 144,613
Operating expenses:
Cost of goods sold .................................. 96,483 107,190
Selling, general and
administrative expenses ............................ 11,022 12,415
Depreciation and
amortization ....................................... 8,951 9,108
Unusual charge ...................................... 3,100 -
---------- ----------
Operating income ...................................... 5,193 15,900
Other income (expense):
Interest expense .................................... (8,450) (13,051)
Amortization of deferred financing costs ............ (339) (801)
---------- ----------
Income (loss)from continuing operations
before income tax provision and
extraordinary item .................................. (3,596) 2,048
Income tax provision (benefit) ........................ (1,546) 1,555
---------- ----------
Income (loss) from continuing operations before
extraordinary item .................................. (2,050) 493
Income from discontinued operations, net of
income taxes of $1,598 .............................. - 3,634
---------- ----------
Income (loss) before extraordinary item ............... (2,050) 4,127
Extraordinary item - loss related to early
extinguishment of debt, net of taxes
of $2,073 ........................................... - (2,747)
---------- ----------
Net income (loss) ..................................... $ (2,050) $ 1,380
========== ==========
See accompanying notes to the condensed consolidated financial statements.
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INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
---------------------------
2001 2000
---------------------------
Cash flows provided by (used in) operating
activities:
Net cash used in continuing operations ...... $ (653) $ (7,235)
Net cash provided by (used in)
discontinued operations .................... (332) 1,697
--------- ---------
Net cash provided by (used in) operating
activities .................................. (985) (5,538)
--------- ---------
Cash flows used in investing activities:
Capital expenditures ........................ (3,228) (4,229)
Capital expenditures of discontinued
operations ................................ -- (982)
--------- ---------
Net cash used in investing activities ......... (3,228) (5,211)
--------- ---------
Cash flows provided by (used in) financing
activities:
Repayment of long-term obligations .......... (623) (198,342)
Financing fees and other .................... -- (699)
Net proceeds from sale of Wire Harness
Segment ................................... -- 208,500
--------- ---------
Net cash provided by (used in) financing
activities .................................. (623) 9,459
--------- ---------
Effects of exchange rate changes on cash
and cash equivelants ........................ (99) --
--------- ---------
Net change in cash and cash equivalents ....... (4,935) (1,290)
Cash at beginning of the period ............... 32,244 7,425
--------- ---------
Cash at end of the period ..................... $ 27,309 $ 6,135
========= =========
See accompanying notes to the condensed consolidated financial statements.
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. 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 and results of operations of
International Wire Group, Inc. (the "Company"). The results for the
three months ended March 31, 2001 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, 2000.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (the "FASB")
adopted Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value and that changes in the
derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset
related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. The
Company adopted SFAS No. 133 as of January 1, 2001. The adoption of this
statement did not have a significant impact on the Company's
consolidated financial position or results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, a Replacement of FASB Statement No. 125". SFAS No. 140
revised the standards for accounting for securitizations and other
transfers of financial assets and collateral and requires certain
disclosures. SFAS No. 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
March 31, 2001. Management does not anticipate SFAS No. 140 will have a
material effect on the Company's consolidated financial position or
results of operations.
2. Discontinued Operations
On March 29, 2000, the Company consummated the sale of its Wire Harness
business (the "Wire Harness Sale") for $210,000 in cash. The results of
operations of the Wire Harness business have been reclassified to
discontinued operations for all periods presented.
3. Unusual Charge
During the first quarter of 2001, the Company announced its plan for a
realignment of its insulated wire production. In connection with the
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
realignment, the Company initiated the closure of three of its
manufacturing facilities located in Alabama and Indiana. The production
capacity for these locations is being primarily transferred and
consolidated into the Company's existing manufacturing facilities in
Texas, which are being expanded, as necessary, to accommodate the
production transfer. In addition to the production realignment announced
in the first quarter, the Company anticipates further realignment
actions in the second and third quarters of 2001. In addition to the
plant consolidations announced in the first quarter and the additional
actions anticipated for the second and third quarters, the Company has
undertaken a strategic initiative and expects to establish a
"greenfield" insulated wire facility in Mexico by the end of 2001. The
startup of this Mexican facility, will complete the Company's
realignment.
The Company estimates that it will incur total costs of approximately
$3,600 related to the plant closures and the transition of production
capacity, of which, $3,100 has been accrued for as of March 31, 2001.
The additional realignment activity anticipated by the Company will
likely result in additional charges of between $1,400 and $3,400. In
connection with the plant closures, 138 employees will be terminated,
all of whom were notified in the first quarter. The Company estimates
that the plant closures announced in the first quarter will be complete
by the end of the third quarter.
A summary of activity related to plant closings is as follows:
Three
Months
Ended
March 31,
-----------
2001
-----------
Balance, beginning of period ................................ $ --
Charges to operations:
Facility shut-down costs .................................. 859
Personnel and severance costs ............................. 2,241
--------
3,100
--------
Costs incurred:
Facility shut-down costs .................................. (720)
Personnel and severance costs ............................. (263)
--------
(983)
--------
Balance, end of period ...................................... $ 2,117
========
4. Extraordinary Item - Loss Related to Early Retirement of Debt
Substantially all of the net proceeds (after the payment of fees and
expenses) from the Wire Harness Sale were used to repay indebtedness
outstanding under the Company's senior credit facility. Accordingly, the
Company recorded an extraordinary loss during the first quarter of 2000
of $2,747, net of income tax benefit, related to the write-off of
deferred financing fees.
5. Inventories
The composition of inventories at March 31, 2001 and December 31, 2000
is as follows:
March 31, December 31,
2001 2000
---- ----
Raw materials ........... $ 18,726 $ 28,402
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Work-in-process ......... 30,097 26,414
Finished goods .......... 29,230 28,711
--------- ---------
Total .................. $ 78,053 $ 83,527
========= =========
The carrying value of inventories on a last-in, first-out basis, at
March 31, 2001 and December 31, 2000, approximates their current cost.
6. Long-Term Obligations
The composition of long-term obligations at March 31, 2001 and December
31, 2000 is as follows:
March 31, December 31,
2001 2000
---- ----
Amended and Restated Credit Agreement:
Revolving credit facility ................... $ - $ -
Term facility ............................... 2,273 2,273
Senior Subordinated Notes ..................... 150,000 150,000
Series B Senior Subordinated Notes ............ 150,000 150,000
Series B Senior Subordinated Notes Premium .... 8,135 8,523
Industrial revenue bonds ...................... 15,500 15,500
Other ......................................... 8,514 9,137
-------- --------
334,422 335,433
Less, current maturities ...................... 4,067 4,312
-------- --------
$330,355 $331,121
======== ========
The schedule of principal payments for long-term obligations, excluding
premium, at March 31, 2001 is as follows:
2001 ...................... $ 2,078
2002 ...................... 1,815
2003 ...................... 375
2004 ...................... 125
2005 ...................... 314,137
Thereafter ................ 7,757
---------
Total ................... $ 326,287
=========
As of March 31, 2001, the Credit Agreement provides senior secured
financing under the Term A Loan of up to $2,273 (the "Term Facility")
and a $75,000 revolving loan and letter of credit facility (the
"Revolver"). Mandatory principal payments of the Term Facility are due
in quarterly installments. The final installment is due September 30,
2002, at which time the Revolver is also due.
Borrowings under the Term A Loan and Revolver bear interest, at the
option of the Company, at a rate per annum equal to (a) the Alternate
Base Rate (as defined in the Credit Agreement) plus an applicable margin
as defined in the Credit Agreement; or (b) the Eurodollar Rate (as
defined in the Credit Agreement) plus an applicable margin as defined in
the Credit Agreement. The Alternate Base Rate and Eurodollar Rate
margins are established quarterly based on a formula as defined in the
Credit Agreement. Interest payment dates vary depending on the interest
rate option to which the Term Facility and the Revolver are tied, but
generally interest is payable quarterly. The Credit Agreement contains
several financial covenants which, among other things, require the
Company to maintain certain financial ratios and restrict the Company's
ability to incur indebtedness, make capital expenditures and pay
dividends.
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company's 11 3/4% Senior Subordinated Notes, 11 3/4% Series B Senior
Subordinated Notes, and 14% Senior Subordinated Notes (collectively, the
"Senior Notes") restrict, among other things, the incurrence of
additional indebtedness by the Company, the payment of dividends and
other distributions in respect of the Company's capital stock, the
imposition of restrictions on the payment of dividends and other
distributions by the Company's subsidiaries, the creation of liens on
the properties and the assets of the Company to secure certain
subordinated debt and certain mergers, sales of assets and transactions
with affiliates.
7. Business Segment Information
The Company operates its business as one business segment.
8. Guarantor Subsidiaries
The Senior Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured, senior subordinated basis by each
subsidiary of the Company (the "Guarantor Subsidiaries") other than
IWG-Philippines, Inc., IWG International, Inc., Italtrecce-Societa
Italiana Trecce & Affini S.r.l., International Wire SAS, Tresse
Metalique J. Forissier, S.A., Cablerie E. Charbonnet, S.A. and
Fressynet, S.A. (the "Non-Guarantor Subsidiaries"). Each of the
Guarantor Subsidiaries and Non-Guarantor Subsidiaries is wholly owned by
the Company.
The following condensed, consolidating financial statements of the
Company include the accounts of the Company, the combined accounts of
the Guarantor Subsidiaries and the combined accounts of the
Non-Guarantor Subsidiaries.
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
-----------------------------------------------------------------
BALANCE SHEET
AS OF MARCH 31, 2001
ASSETS
Cash and cash equivalents ......................... $ -- $ 23,598 $ 3,711 $ -- $ 27,309
Accounts receivable ............................... -- 71,114 16,878 -- 87,992
Inventories ....................................... -- 67,083 10,970 -- 78,053
Other assets ...................................... -- 28,520 1,172 -- 29,692
--------- --------- --------- --------- ---------
Total current assets ........................... -- 190,315 32,731 -- 223,046
Property, plant and equipment, net ................ -- 124,533 20,177 -- 144,710
Investment in subsidiaries ........................ 467,300 -- -- (467,300) --
Intangibles and other assets ...................... 7,874 187,625 12,863 -- 208,362
--------- --------- --------- --------- ---------
Total assets ................................... $ 475,174 $ 502,473 $ 65,771 $(467,300) $ 576,118
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities ............................... $ 14,642 $ 70,177 $ 10,171 $ -- $ 94,990
Long-term obligations, less current maturities .... 315,946 14,409 -- -- 330,355
Other long-term liabilities ....................... -- 44,913 1,367 -- 46,280
Intercompany (receivable) payable ................. (30,099) (6,822) 36,921 -- --
--------- --------- --------- --------- ---------
Total liabilities .............................. 300,489 122,677 48,459 -- 471,625
Stockholder's equity:
Common stock ..................................... 0 0 0 0 0
Contributed capital .............................. 246,724 297,106 11,887 (308,993) 246,724
Carryover of predecessor basis ................... -- (67,762) -- -- (67,762)
Retained earnings (accumulated deficit) .......... (72,039) 150,452 7,855 (158,307) (72,039)
Other comprehensive loss ......................... -- -- (2,430) -- (2,430)
--------- --------- --------- --------- ---------
Total stockholder's
equity ....................................... 174,685 379,796 17,312 (467,300) 104,493
--------- --------- --------- --------- ---------
Total liabilities and
stockholder's equity ......................... $ 475,174 $ 502,473 $ 65,771 $(467,300) $ 576,118
========= ========= ========= ========= =========
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
-----------------------------------------------------------------
BALANCE SHEET
AS OF DECEMBER 31, 2000
ASSETS
Cash .................................................. $ -- $ 27,772 $ 4,472 $ -- $ 32,244
Accounts receivable ................................... -- 66,362 15,977 -- 82,339
Inventories ........................................... -- 73,573 9,954 -- 83,527
Other current assets .................................. -- 26,937 1,226 -- 28,163
--------- --------- --------- --------- ---------
Total current assets .............................. -- 194,644 31,629 -- 226,273
Property, plant and
equipment, net ...................................... -- 127,661 20,753 -- 148,414
Investment in subsidiaries ............................ 461,033 -- -- (461,033) --
Intangible and other assets ........................... 8,357 189,099 13,591 -- 211,047
--------- --------- --------- --------- ---------
Total assets ................................ $ 469,390 $ 511,404 $ 65,973 $(461,033) $ 585,734
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities ................................... $ 5,942 $ 84,003 $ 10,183 $ -- $ 100,128
Long term obligations, less current
maturities .......................................... 313,049 18,072 -- -- 331,121
Other long-term liabilities ........................... -- 45,472 1,264 -- 46,736
Intercompany (receivable) payable ..................... (26,336) (10,589) 36,925 -- --
--------- --------- --------- --------- ---------
Total liabilities ........................... 292,655 136,958 48,372 -- 477,985
Stockholder's equity (deficit):
Common stock ........................................ 0 0 0 0 0
Contributed capital ................................. 246,724 297,106 11,887 (308,993) 246,724
Carryover of predecessor basis ...................... -- (67,762) -- -- (67,762)
Retained earnings (accumulated
deficit) ......................................... (69,989) 145,102 6,938 (152,040) (69,989)
Other comprehensive loss ............................ -- -- (1,224) -- (1,224)
--------- --------- --------- --------- ---------
Total stockholder's equity
(deficit) ................................. 176,735 374,446 17,601 (461,033) 107,749
--------- --------- --------- --------- ---------
Total liabilities and
stockholder's equity
(deficit) ................................. $ 469,390 $ 511,404 $ 65,973 $(461,033) $ 585,734
========= ========= ========= ========= =========
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
-----------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 2001
Net sales ............................................... $ -- $ 109,132 $ 15,617 $ -- $ 124,749
Operating expenses:
Cost of goods sold ................................. -- 84,476 12,007 -- 96,483
Selling, general and administrative expenses ....... -- 9,881 1,141 -- 11,022
Depreciation and amortization ...................... 144 7,773 1,034 -- 8,951
Unusual item ....................................... -- 3,100 -- -- 3,100
--------- --------- --------- --------- ---------
Operating income ........................................ (144) 3,902 1,435 -- 5,193
Other income (expense):
Interest expense ................................... (7,834) (244) (372) -- (8,450)
Amortization of deferred financing costs ........... (339) -- -- -- (339)
Equity in net income of subsidiaries ............... 6,267 -- -- (6,267) --
--------- --------- --------- --------- ---------
Income (loss) before tax provision
(benefit) .......................................... (2,050) 3,658 1,063 (6,267) (3,596)
Income tax provision (benefit) .......................... -- (1,692) 146 -- (1,546)
--------- --------- --------- --------- ---------
Net income .............................................. $ (2,050) $ 5,350 $ 917 $ (6,267) $ (2,050)
========= ========= ========= ========= =========
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
-----------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000
Net sales ................................................ $ -- $ 128,853 $ 15,760 $ -- $ 144,613
Operating expenses:
Cost of goods sold .................................. -- 96,280 10,910 -- 107,190
Selling, general and administrative expenses ........ -- 11,292 1,123 -- 12,415
Depreciation and amortization ....................... 156 7,914 1,038 -- 9,108
--------- --------- --------- --------- ---------
Operating income ......................................... (156) 13,367 2,689 -- 15,900
Other income (expense):
Interest expense .................................... (12,763) (189) (99) -- (13,051)
Amortization of deferred financing costs ............ (801) -- -- -- (801)
Equity in net income of subsidiaries ................ 17,847 -- -- (17,847) --
--------- --------- --------- --------- ---------
Income from continuing operations
before income tax provision
and extraordinary item ............................... 4,127 13,178 2,590 (17,847) 2,048
Income tax provision ..................................... -- 1,171 384 -- 1,555
--------- --------- --------- --------- ---------
Income from continuing operations
before extraordinary item ............................ 4,127 12,007 2,206 (17,847) 493
Income from discontinued
operations, net of taxes of $1,598 ................... -- 2,288 1,346 -- 3,634
--------- --------- --------- --------- ---------
Income before extraordinary
item ................................................. 4,127 14,295 3,552 (17,847) 4,127
Extraordinary item - loss
related to early
extinguishment of debt,
net of taxes of $2,073 ............................... (2,747) -- -- -- (2,747)
--------- --------- --------- --------- ---------
Net income (loss) ........................................ $ 1,380 $ 14,295 $ 3,552 $ (17,847) $ 1,380
========= ========= ========= ========= =========
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
-------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2001
Net cash used in operating
activities ................................ $ -- $ (637) $ (348) $ -- $ (985)
----------- ----------- ----------- ----------- -----------
Cash flows used in investing
activities for capital
expenditures .............................. -- (2,914) (314) -- (3,228)
----------- ----------- ----------- ----------- -----------
Cash flows used in financing
activities for repayment of
long-term obligations ..................... -- (623) -- -- (623)
----------- ----------- ----------- ----------- -----------
Effect of exchange rate changes
on cash and cash equivalents ............. -- -- (99) -- (99)
----------- ----------- ----------- ----------- -----------
Net change in cash and cash equivalents ..... $ -- $ (4,174) $ (761) $ -- $ (4,935)
=========== =========== =========== =========== ===========
TOTAL TOTAL
COMPANY GUARANTOR NON-GUARANTOR ELIMINATIONS TOTAL
--------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2000
Net cash provided by (used
in) operating activities .................. $ (10,161) $ 3,206 $ 1,417 $ -- $ (5,538)
----------- ----------- ----------- ----------- -----------
Cash flows used in investing
activities for capital
expenditures .............................. -- (3,571) (1,640) -- (5,211)
----------- ----------- ----------- ----------- -----------
Cash flows provided by (used in)
financing activities:
Repayment of long-term
obligations ........................... (197,640) (702) -- -- (198,342)
Financing fees and other ................ (699) -- -- -- (699)
Net proceeds from sale of
Wire Harness Segment .................. 208,500 -- -- -- 208,500
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities ...................... 10,161 (702) -- -- 9,459
----------- ----------- ----------- ----------- -----------
Net change in cash and cash equivalents ..... $ -- $ (1,067) $ (223) $ -- $ (1,290)
=========== =========== =========== =========== ===========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following discussion and analysis includes the results of operations for the
three months ended March 31, 2001, compared to the three months ended March 31,
2000.
In March 2000, the Company sold its Wire Harness Segment to Viasystems Group,
Inc. The Wire Harness Segment was previously reported as a separate segment. The
results of operations of the Wire Harness Segment for the first quarter of 2000
have been reclassified to discontinued operations.
A portion of the Company's revenues is derived from processing customer-owned
("tolled") copper. The value of tolled copper is excluded from both sales and
costs of sales of the Company, as title to these materials and the related risks
of ownership do not pass to the Company.
The cost of copper has historically been subject to fluctuations. While
fluctuations in the price of copper may directly affect the per unit prices of
the Company's products, these fluctuations have not had, nor are expected to
have, a material impact on the Company's profitability due to copper price
pass-through arrangements that the Company has with its 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
charged to customers.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Net sales for the quarter were $124.7 million, a decrease of $19.9 million, or
13.7%, compared to the three months ended March 31, 2000. This decrease in sales
was primarily the result of reduced demand from customers supplying the
automotive and electronics/data communications markets, which was partially
offset by increased volume in the general industrial market. In general, the
Company prices its wire products based on a spread over the cost of copper,
which results in an increased dollar value of sales when copper costs increase.
The average price of copper based on the New York Mercantile Exchange, Inc.
("COMEX") was $0.82 per pound during both quarters ended March 31, 2001 and
March 31, 2000.
Cost of goods sold as a percentage of sales increased to 77.3% for the three
months ended March 31, 2001, from 74.1% for the three months ended March 31,
2000. This change was due primarily to lower pricing under new agreements with
customers who supply the automotive industry and operating inefficiencies
associated with lower production levels.
Selling, general and administrative expenses decreased $1.4 million to $11.0
million for the three months ended March 31, 2001, compared to $12.4 million for
the same period in 2000 due to a reduction in headcount and other cost
containment actions.
Depreciation and amortization was $9.0 million for the three months ended March
31, 2001, compared to $9.1 million for the same period in 2000.
During the first quarter of 2001, the Company announced its plan for a
realignment of its insulated wire production. In connection with the
realignment, the Company initiated the closure of three of its manufacturing
facilities located in Alabama and Indiana. The production capacity for these
locations is being primarily
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transferred and consolidated into the Company's existing manufacturing
facilities in Texas, which are being expanded, as necessary, to accommodate the
production transfer. In addition to the actions taken in the first quarter, the
Company is also in the process of reviewing its remaining facilities and
anticipates further realignment activity. The Company has undertaken a strategic
initiative and expects to establish a "greenfield" insulated wire facility in
Mexico by the end of 2001. The startup of this Mexican facility, along with the
additional plant closures, will complete the Company's realignment.
The Company estimates that it will incur total costs of approximately $3,600
related to the plant closures and the transition of production capacity, of
which, $3,100 has been accrued for as of March 31, 2001. The additional
realignment activity anticipated by the Company will likely result in additional
charges of between $1,400 and $3,400. In connection with the plant closures, 138
employees will be terminated, all of whom were notified in the first quarter.
The Company estimates that the plant closures announced in the first quarter
will be complete by the end of the third quarter. There was no such unusual
charge during the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Inflation has not been a material factor affecting the Company's business. As a
result of the copper price pass-through arrangements that the Company has with
its customers, fluctuations in the price of copper have not, nor are expected to
have, a material impact on the Company's profitability. The Company's general
operating expenses, such as salaries, employee benefits and facilities costs are
subject to normal inflationary pressures.
Net cash used in operating activities by continuing operations for the three
months ended March 31, 2001 was $0.7 million, compared to $7.2 million for the
three months ended March 31, 2000. This change was primarily due to improved
working capital requirements partially offset by the lower operating results.
Net cash used in investing activities, representing capital expenditures, was
$3.2 million for the three months ended March 31, 2001, compared to $5.2 million
for the three months ended March 31, 2000. The change in capital expenditures
was due, in part, to the capital expenditures from discontinued operations
incurred in the first quarter of 2000.
Net cash provided by (used in) financing activities was ($0.6) million,
representing the repayment of long-term obligations, for the three months ended
March 31, 2001, compared $9.5 million for the three months ended March 31, 2000.
In March 2000, the Company generated $208.5 million in proceeds from the sale of
its Wire Harness business, net of transaction costs of approximately $1.5
million. The Company applied substantially all of the net proceeds from this
sale for repayment of outstanding obligations under the Company's Amended and
Restated Credit Agreement.
The Company's ability to fund its liquidity and capital requirements and to pay
its indebtedness is limited to its ability to receive dividends and other
distributions from its subsidiaries. The Company's Amended and Restated Credit
Agreement and its Senior Notes prohibit the Company from imposing certain
restrictions on the ability of its subsidiaries to pay dividends or make other
distributions to the Company.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (the "FASB") adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
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recorded in the balance sheet as either an asset or liability measured at its
fair value and that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133 is effective for
fiscal years beginning after June 15, 2000. The Company adopted SFAS No. 133 as
of January 1, 2001. The adoption of this statement did not have a significant
impact on the Company's consolidated financial position or results of
operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, a Replacement
of FASB Statement No. 125". SFAS No. 140 revised the standards for accounting
for securitizations and other transfers of financial assets and collateral and
requires certain disclosures. SFAS No. 140 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. Management does not anticipate SFAS No. 140 will have a material
effect on the Company's consolidated financial position or results of
operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
In accordance with Item 305 of Regulation S-K, the Company provided quantitative
and qualitative information about market risk in "Item 7a. Quantitative and
Qualitative Disclosures About Market Risk" of the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the year ended
December 31, 2000. There have been no material changes to the information
disclosed in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 2000.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the reporting period.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL WIRE GROUP, INC.
Dated: May 14, 2001 By : /s/ DAVID M. SINDELAR
---------------------------------
Name : David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By : /s/ GLENN J. HOLLER
---------------------------------
Name : Glenn J. Holler
Title: Vice President - Finance
(Principal Accounting Officer)
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