General Cable Corporation : General Cable Reports Fourth Quarter Results
02/08/2012| 04:15pm US/Eastern
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General Cable Corporation (NYSE: BGC), one of the most globally
diversified industrial companies, reported today results for the fourth
quarter ended December 31, 2011. Diluted earnings per share for the
fourth quarter of 2011 were $0.09. Included in these results were $0.10
per share of non-cash convertible debt interest expense and $0.11 per
share of mark to market losses on financial derivatives accounted for as
economic hedges. Before the impact of these items, non-GAAP earnings per
share for the fourth quarter of 2011 would have been $0.30.
Highlights
Despite the impact of metal cost headwinds, operating income in
North America of $17.3 million exceeded management's expectation in
the fourth quarter of 2011
Project backlog advanced during the fourth quarter for submarine
and land-based turnkey cable projects in Europe as the Company added
two new projects totaling more than $65 million, collectively,
resulting in a total project backlog at the end of 2011 of more than
$650 million
Pan-European market strategy continues to advance as the Company
further aligns resources and reduces its cost base; including the
action taken in the fourth quarter of 2011, headcount in our Iberian
business has been reduced by 20% at a cost of approximately $29
million over the last four years
Excluding aerial transmission product shipments in Brazil and
our business in Thailand, which was severely impacted by flooding in
the fourth quarter, ROW volume as measured in metal pounds sold in the
fourth quarter of 2011 increased 10% sequentially and 12% year over
year
Operating cash flow in the fourth quarter of $137 million,
reflecting seasonal trends
The Company repurchased $62.5 million or about 5% of its common
shares during the fourth quarter under the terms of its $125 million
Share Repurchase Program
Industry Week's 2011
Top 10 Best Plants in North America was received by our Lawrenceburg,
Kentucky and Lincoln, Rhode Island facilities
Fourth Quarter Results
Net sales for the fourth quarter of 2011 were $1,369.1 million, an
increase of $100.6 million, or 8%, compared to the fourth quarter of
2010 on a metal-adjusted basis. Volume based on metal pounds sold
decreased 5% in the fourth quarter of 2011 compared to 2010 principally
as a result of weaker demand experienced throughout Europe in our
non-project based businesses and the record metal-intensive aerial
transmission product shipments in North America in the fourth quarter of
2010. Sequentially, strong aerial transmission product shipments in
North America and project related activities in our submarine power and
terrestrial high voltage and extra-high voltage businesses in Europe
were more than offset by the weak Iberian market and the impact of
severe flooding in Thailand as volume in terms of metal pounds sold
declined 4%.
Operating income in the fourth quarter of 2011 decreased to $31.7
million or 50% compared to $63.4 million in the third quarter of 2011,
and was down 50% compared to the fourth quarter of 2010. Operating
income for the fourth quarter of 2011 reflects the impact of selling
substantially higher average cost inventory into a lower metal price
environment as metal prices declined rapidly near the end of the third
quarter and into the fourth quarter; further weakening of Iberian end
markets; Spain severance related costs of $3.0 million and the impact of
severe flooding in Thailand which reduced operating income by
approximately $6.5 million. On a metal adjusted basis, operating margin
of 2.3% in the fourth quarter of 2011 was down 220 and 270 basis points
as compared to the third quarter of 2011 and fourth quarter of 2010,
respectively.
Gregory B. Kenny, President and Chief Executive Officer of General
Cable, said, "In ROW, better than anticipated operating earnings in
Central and South America were more than offset by the results of our
Thai operations. The widespread and severe impact of over six weeks of
flooding experienced throughout the fourth quarter nearly brought
domestic activity in Thailand to a halt. In North America, our fourth
quarter earnings were above our expectations as product pricing held up
better than anticipated in a lower metal price environment. In Europe,
strong project related activities in our submarine power and terrestrial
high voltage and extra-high voltage businesses were more than offset by
the further weakening of Iberian end-markets. Conditions in Spain have
grown increasingly more difficult as new construction activity has
nearly ceased, making a meaningful rebound in the near term unlikely. As
a result, the Company took further action to reduce personnel at our
Spanish facilities in the fourth quarter. Despite these difficult times,
our Spanish facilities continue to serve as a global technology hub and
remain a critical part of our pan-European go-to-market strategy as a
substantial proportion of what is produced at these facilities is now
being exported or used as a component in products manufactured at our
facilities in either France or Germany."
In ROW, volume as measured in metal pounds sold increased 10% in the
fourth quarter of 2011 compared to the fourth quarter of 2010 and was
down 1% sequentially as compared to the third quarter of 2011. Excluding
the impact of severe flooding in Thailand and metal pounds attributable
to aerial transmission project shipments in Brazil, volume increased
sequentially 10% as compared to the third quarter of 2011. The Company
continues to benefit from higher spending on electrical infrastructure
investment in Brazil and Venezuela and construction activity in Central
America. Copper rod orders in Zambia and Chile normalized as copper
prices settled during the fourth quarter following the rapid and
significant decline experienced at the end of the third quarter and
beginning of the fourth quarter.
In North America, volume as measured in metal pounds sold decreased 6%
in the fourth quarter of 2011 compared to the fourth quarter of 2010 and
was flat sequentially when compared to the third quarter of 2011. The
year over year decrease was principally due to the record
metal-intensive aerial transmission product shipments in the fourth
quarter of 2010. Excluding aerial transmission product shipments, North
America volume decreased about 2% year over year. Sequentially, strong
demand for aerial transmission products and specialty cables,
particularly those used in natural resource extraction applications,
offset normal seasonal declines in the Company's other North American
businesses.
In Europe and Mediterranean, volume as measured in metal pounds sold
decreased 22% in the fourth quarter of 2011 compared to the fourth
quarter of 2010 and was down 14% sequentially when compared to the third
quarter of 2011. Sequentially, volume was lower than expected as
conditions have become increasingly more challenging in Spain as new
construction has nearly come to a standstill. Putting aside metal pounds
sold attributable to our Spanish manufacturing facilities, volume
increased approximately 2% sequentially due to strong project related
activities in our submarine power and terrestrial high voltage and
extra-high voltage businesses. The Company's backlog continued to build
for submarine and land-based turnkey cable projects as the Company added
two additional new projects during the fourth quarter resulting in a
total project backlog of more than $650 million at the end of December
2011.
Other expense was $3.3 million in the fourth quarter of 2011 which
primarily consists of $5.1 million of foreign currency transaction gains
and $8.4 million of mark to market losses on derivative instruments
accounted for as economic hedges which are used to manage currency and
commodity risk on its project business globally. The foreign currency
gains experienced during the fourth quarter of 2011 reflect the impact
of a relatively weaker US dollar against currencies in various markets.
Liquidity
Net debt was $614.8 million at the end of the fourth quarter of 2011, a
decrease of $33.1 million from the end of the third quarter of 2011. The
decrease in net debt is principally due to planned reductions in working
capital as a result of normal seasonal trends coupled with the impact on
working capital of lower average metal costs during the fourth quarter.
The Company continues to maintain adequate liquidity to fund operations,
which could include increased working capital requirements as a result
of higher raw material cost inputs, internal growth and continuing
product and geographic expansion opportunities as well as its stock
repurchase program.
Taxes
The lower than expected effective tax rate for the fourth quarter of
2011 was primarily due to tax benefits recognized in connection with the
favorable settlement of income tax audits and statute of limitations
expirations for certain income tax exposures, the percentage impact of
which was amplified by the relatively lower pre-tax income.
Preferred Stock Dividend
In accordance with the terms of the Company's 5.75% Series A Convertible
Redeemable Preferred Stock, the Board of Directors has declared a
regular quarterly preferred stock dividend of approximately $0.72 per
share. The dividend is payable on February 24, 2012 to preferred
stockholders of record as of the close of business on January 31, 2012.
The Company expects the quarterly dividend payment to be less than $0.1
million.
First Quarter 2012 Outlook and Initial View
Full Year 2012
The Company's first quarter revenues are expected to be in the range of
$1.35 to $1.45 billion assuming average metal prices for the 30 day
period ending February 8. Operating income is expected to be in the
range of $35 to $45 million. The size of these ranges reflects the
recent significant volatility experienced in metal prices, principally
copper, and uncertainty in Europe. Overall, global unit volume in the
first quarter is expected to be sequentially flat to slightly up.
"Operating results are expected to improve within the quarter as the
impact of selling higher average cost inventory into a lower metal price
environment subsides and conditions in Thailand improve as the country
begins to recover following the severe flooding experienced during the
fourth quarter," Kenny continued.
"Our view for the full year 2012 is limited due to the ongoing economic
uncertainty in Europe and the extreme volatility of raw material cost
inputs. However, our initial view of demand in 2012 for the full year is
an increase of metal pounds sold in the range of 3-7% as compared to
2011. This expected improvement is supported by strength in aerial
transmission projects in North America, specialty cable demand for
products used in oil and gas and natural resource extraction in North
America, electrical infrastructure, mining and construction activities
in Central and South America and submarine and land-based HV/EHV
projects in Europe. In addition, our investments in India, South Africa,
Peru and Mexico continue to grow and capture new market opportunities.
In Europe, our pan-European go-to-market strategy continues to advance
resulting in better market coverage, improved logistics and plant
optimization. Our European businesses should show relative strength
during the warmer months when cables can be installed in the Baltic and
North Seas. Overall, we saw some improvement in pricing in certain
markets in 2011 but industry capacity utilization remains at relatively
low levels, particularly in construction related markets, which causes
us to believe that the global pricing environment, as we enter 2012,
will remain unchanged in the near-term," Kenny concluded.
Reconciliation of Non-GAAP Measures
In addition to reporting financial results in accordance with accounting
principles generally accepted in the United States (GAAP), we discuss in
this earnings release earnings per share for the fourth quarter of 2011
and 2010 as adjusted for the impact of non-cash convertible debt
interest expense and mark to market losses on financial derivatives
accounted for as economic hedges. This Company-defined adjusted measure
is being provided because management believes it is useful in analyzing
the operating performance of the business. This non-GAAP measure may be
inconsistent with similar measures presented by other companies and
should only be used in conjunction with our results reported according
to GAAP. A reconciliation of earnings per share as reported to adjusted
non-GAAP earnings per share follows:
Q4 2011
Q4 2010
GAAP earnings per share
$
0.09
$
0.66
Non-cash convertible debt interest expense
0.10
0.09
Mark to market losses on derivative instruments
0.11
-
Adjusted Non-GAAP earnings per share
$
0.30
$
0.75
General Cable will discuss fourth quarter results on a conference call
that will be broadcast live at 8:30 a.m. ET, February 9, 2012. The live
webcast of the Company's conference call will be available in listen
only mode and can be accessed through the Investor Relations page on our
website at www.generalcable.com.
Also available on our website is a copy of an Investor Presentation that
will be referenced throughout the conference call.
General Cable Corporation (NYSE:BGC), a Fortune 500 Company, is a global
leader in the development, design, manufacture, marketing and
distribution of copper, aluminum and fiber optic wire and cable products
and systems for the energy, industrial, specialty, construction and
communications markets. Visit our website at www.generalcable.com.
Certain statements in this press release are forward-looking
statements that involve risks and uncertainties, predict or describe
future events or trends and that do not relate solely to historical
matters. Forward looking statements can generally be identified by use
of forward-looking terminology such as"believe," "expect,"
"may," "will" "anticipate," "intend," "estimate," "project," "plan,"
"assume," "seek to" or other similar expressions, although not all
forward-looking statements contain these identifying words. Actual
results may differ materially from those discussed in forward-looking
statements as a result of factors, risks and uncertainties over many of
which we have no control.These factors include, but are not
limited to: the economic strength and competitive nature of the
geographic markets that the Company serves; our ability to increase
manufacturing capacity and productivity; our ability to increase our
selling prices during periods of increasing raw material costs; our
ability to service, and meet all requirements under, our debt, and to
maintain adequate domestic and international credit facilities and
credit lines; the impact of unexpected future judgments or settlements
of claims and litigation; the impact of foreign currency fluctuations,
compliance with U.S. and foreign laws, the Company's ability to
implement and make appropriate, timely and beneficial decisions as to
when, how and if to purchase shares under the repurchase program and the
other risks detailed from time to time in the Company's SEC filings,
including but not limited to, its annual report on Form 10-K for the
fiscal year ending December 31, 2010, and subsequent SEC filings. You
are cautioned not to place undue reliance on these forward-looking
statements. General Cable does not undertake, and hereby disclaims, any
obligation, unless required to do so by applicable securities laws, to
update any forward-looking statements as a result of new information,
future events or other factors.
TABLES TO FOLLOW
General Cable Corporation and Subsidiaries
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Fiscal Months Ended
Twelve Fiscal Months Ended
December 31,
December 31,
December 31,
December 31,
2011
2010
2011
2010
Net sales
$
1,369.1
$
1,357.8
$
5,866.7
$
4,864.9
Cost of sales
1,241.5
1,211.4
5,241.1
4,310.9
Gross profit
127.6
146.4
625.6
554.0
Selling, general and administrative expenses
95.9
83.2
377.6
331.6
Operating income
31.7
63.2
248.0
222.4
Other income (expense)
(3.3
)
3.7
(31.7
)
(28.1
)
Interest income (expense):
Interest expense
(26.2
)
(19.8
)
(99.2
)
(77.0
)
Interest income
1.5
1.7
7.7
5.4
(24.7
)
(18.1
)
(91.5
)
(71.6
)
Income before income taxes
3.7
48.8
124.8
122.7
Income tax provision
(0.4
)
(14.3
)
(42.5
)
(47.2
)
Equity in net earnings of affiliated companies
0.7
0.4
2.9
1.4
Net income including noncontrolling interests
4.0
34.9
85.2
76.9
Less: preferred stock dividends
0.1
0.1
0.3
0.3
Less: net income attributable to noncontrolling interest
(0.5
)
(0.2
)
1.1
7.4
Net income attributable to Company common shareholders
$
4.4
$
35.0
$
83.8
$
69.2
EPS
Earnings per common share - basic
$
0.09
$
0.67
$
1.61
$
1.33
Weighted average common shares - basic
50.9
52.1
51.9
52.1
Earnings per common share-
assuming dilution
$
0.09
$
0.66
$
1.57
$
1.31
Weighted average common shares-
assuming dilution
52.1
53.1
53.7
53.1
General Cable Corporation and Subsidiaries
Consolidated Statements of Operations
Segment Information
(in millions)
(unaudited)
Three Fiscal Months Ended
Twelve Fiscal Months Ended
December 31,
December 31,
December 31,
December 31,
2011
2010
2011
2010
Revenues (as reported)
North America
$
483.4
$
466.6
$
2,120.2
$
1,785.0
Europe and Mediterranean
401.3
445.7
1,735.7
1,498.6
Rest of World
484.4
445.5
2,010.8
1,581.3
Total
$
1,369.1
$
1,357.8
$
5,866.7
$
4,864.9
Revenues (metal adjusted)
North America
$
483.4
$
439.6
$
2,120.2
$
1,909.7
Europe and Mediterranean
401.3
419.3
1,735.7
1,600.3
Rest of World
484.4
409.6
2,010.8
1,731.7
Total
$
1,369.1
$
1,268.5
$
5,866.7
$
5,241.7
Metal Pounds Sold
North America
77.0
82.0
317.4
300.7
Europe and Mediterranean
59.6
76.6
273.8
279.1
Rest of World
108.7
98.7
415.0
352.5
Total
245.3
257.3
1,006.2
932.3
Operating Income (loss)
North America
$
17.3
$
23.9
$
121.8
$
96.9
Europe and Mediterranean
(1.5
)
18.3
30.3
36.8
Rest of World
15.9
21.0
95.9
88.7
Total
$
31.7
$
63.2
$
248.0
$
222.4
Return on Metal Adjusted Sales
North America
3.6
%
5.4
%
5.7
%
5.1
%
Europe and Mediterranean
-0.4
%
4.4
%
1.7
%
2.3
%
Rest of World
3.3
%
5.1
%
4.8
%
5.1
%
Total Company
2.3
%
5.0
%
4.2
%
4.2
%
Capital Expenditures
North America
$
7.0
$
7.1
$
22.2
$
20.5
Europe and Mediterranean
13.4
13.2
41.1
32.9
Rest of World
15.2
13.6
58.5
63.0
Total
$
35.6
$
33.9
$
121.8
$
116.4
Depreciation & Amortization
North America
$
7.8
$
8.5
$
32.4
$
34.7
Europe and Mediterranean
8.8
9.1
39.0
35.9
Rest of World
10.8
9.9
43.4
34.9
Total
$
27.4
$
27.5
$
114.8
$
105.5
Revenues by Major Product Lines
Electric Utility
$
450.1
$
431.2
$
1,851.3
$
1,501.4
Electrical Infrastructure
411.1
358.3
1,708.3
1,345.7
Construction
309.3
370.3
1,395.3
1,196.7
Communications
149.3
140.9
655.3
593.7
Rod Mill Products
49.3
57.1
256.5
227.4
Total
$
1,369.1
$
1,357.8
$
5,866.7
$
4,864.9
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in millions, except share data)
Assets
December 31, 2011
December 31, 2010
Current Assets:
(unaudited)
Cash and cash equivalents
$ 434.1
$ 458.7
Receivables, net of allowances of $17.2 million at December 31,
2011 and $21.1 million at December 31, 2010
1,080.9
1,067.0
Inventories
1,228.7
1,118.9
Deferred income taxes
43.4
39.8
Prepaid expenses and other
100.0
121.3
Total current assets
2,887.1
2,805.7
Property, plant and equipment, net
1,028.6
1,039.6
Deferred income taxes
18.6
11.3
Goodwill
164.9
174.9
Intangible assets, net
181.6
199.6
Unconsolidated affiliated companies
18.6
17.3
Other non-current assets
71.0
79.3
Total assets
$ 4,370.4
$ 4,327.7
Liabilities and Total Equity
Current Liabilities:
Accounts payable
$ 946.5
$ 922.5
Accrued liabilities
420.0
376.7
Current portion of long-term debt
156.3
121.0
Total current liabilities
1,522.8
1,420.2
Long-term debt
892.6
864.5
Deferred income taxes
200.0
202.4
Other liabilities
243.1
235.3
Total liabilities
2,858.5
2,722.4
Commitments and Contingencies
Total Equity:
Redeemable convertible preferred stock, at redemption value
(liquidation preference of $50.00 per share)
December 31, 2011 - 76,002 outstanding shares
December 31, 2010 - 76,202 outstanding shares
3.8
3.8
Common stock, $0.01 par value, issued and outstanding shares:
December 31, 2011 - 49,697,763 (net of 8,758,267 treasury shares)
December 31, 2010 - 52,116,390 (net of 6,211,854 treasury shares)
0.6
0.6
Additional paid-in capital
666.7
652.8
Treasury stock
(136.5)
(74.0)
Retained earnings
959.1
875.3
Accumulated other comprehensive income (loss)
(95.1)
23.5
Total Company shareholders' equity
1,398.6
1,482.0
Noncontrolling interest
113.3
123.3
Total equity
1,511.9
1,605.3
Total liabilities and equity
$ 4,370.4
$ 4,327.7
General Cable Corporation Len Texter, Manager, Investor Relations,
859-572-8684
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