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| BGC > SEC Filings for BGC > Form 10-K/A on 1-Mar-2013 | All Recent SEC Filings |
1-Mar-2013
Annual Report
All of the financial information presented in this Item 7 has been adjusted to
reflect the restatement of our consolidated financial statements as of and for
the fiscal years ended December 31, 2011, 2010, and 2009. Specifically, we have
restated our Consolidated Balance Sheets as of December 31, 2011 and 2010 and
the related Consolidated Statements of Operations and Comprehensive Income
(Loss), Consolidated Statements of Stockholders' Equity and Consolidated
Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009.
The restatement is more fully described in the "Explanatory Note" immediately
preceding Part I, Item 1 and in Note 22 - Restatement of Consolidated Financial
Statements which is included in "Financial Statements and Supplementary Data" in
Item 8 of this Form 10-K/A.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand General
Cable Corporation's financial position, changes in financial condition, and
results of operations. MD&A is provided as a supplement to the Company's
Consolidated Financial Statements and the accompanying Notes to Consolidated
Financial Statements ("Footnote" or "Notes") and should be read in conjunction
with the Consolidated Financial Statements and Notes.
Certain statements in this report including, without limitation, statements
regarding future financial results and performance, plans and objectives,
capital expenditures and the Company's or management's beliefs, expectations or
opinions, are forward-looking statements, and as such, General Cable desires to
take advantage of the "safe harbor" which is afforded such statements under the
Private Securities Litigation Reform Act of 1995. The Company's forward-looking
statements should be read in conjunction with the Company's comments in this
report under the heading, "Disclosure Regarding Forward-Looking Statements."
Actual results may differ materially from those statements as a result of
factors, risks and uncertainties over which the Company has no control. For a
list of these factors, risks and uncertainties, refer to Item 1A - Risk Factors.
Overview
The Company is a global leader in the development, design, manufacture,
marketing and distribution of copper, aluminum and fiber optic wire and cable
products for use in the energy, industrial, construction, specialty and
communications markets. The Company additionally engages in the design,
integration, and installation on a turn-key basis for products such as high and
extra-high voltage terrestrial and submarine systems. The Company analyzes its
worldwide operations based on three geographical segments: North America, Europe
and Mediterranean, and ROW. As of December 31, 2011, the Company manufactures
its product lines in 47 manufacturing facilities and sells its products
worldwide through its global operations. The Company believes it has a strong
market position in each of the segments in which it competes due to the
Company's guiding principles discussed in Item 1 - Business.
Significant Current Business Trends and Events
The wire and cable industry is competitive, mature and cost driven with minimal
differentiation for many product offerings among industry participants from a
manufacturing or technology standpoint. In the latter part of 2010 and in 2011,
the Company has benefited from a recovery in demand. However, demand and pricing
levels generally remain low compared to the levels that were achieved prior to
the impact of the global financial crisis and economic downturn that began in
late 2007. The following are significant trends and events that occurred in 2011
that affected the Company's operating results:
The Company continued and expects to continue to see volatile commodity pricing,
primarily copper and aluminum, as well as other cost inputs. The Company
typically passes these changes in copper and aluminum prices along to its
customers, although there are timing delays of varying lengths depending upon
the volatility of metal prices, the type of product, competitive conditions,
pricing mechanisms and particular customer arrangements. Although the general
trends are detailed in Item 1 - Business - Raw Materials, there is no exact
measure of the effect of the change of raw material cost inputs due to the high
volume of transactions in any given period, each of which involves a number of
factors in the individual pricing decisions. To help reduce this volatility, the
Company has implemented various pricing mechanisms and hedges a portion of its
metal purchases when there is a firm price commitment for a future delivery but
does not engage in speculative metals trading.
The Company entered into a new $400 million Revolving Credit Facility in July
2011. This agreement along with the exchange of convertible debt during the
fourth quarter of 2009, which effectively extended the maturity of the largest
tranche of debt by 20 years, creates greater global operating flexibility to
meet working capital requirement needs and to support organizational and
strategic growth. Due to the rapid and significant volatility in metal prices,
the Company's working capital requirements are expected to be variable for the
foreseeable future.
In 2011, the Company continued to actively identify key trends in the industry
to capitalize on expanding markets and new niche markets or exit declining or
non-strategic markets in order to achieve better returns. The Company also sets
aggressive performance targets for its business and intends to refocus or divest
those activities which fail to meet targets or do not fit long-term strategies.
No material acquisitions or divestitures were made in the year ended
December 31, 2011; however, the Company completed a Greenfield project in India
in which operations will begin in 2012 as well as completed a significant
investment in the Company's operations in Brazil. In the year ended December 31,
2010, the Company completed several acquisitions, equity investments, and joint
ventures in Egypt, France, Oman, Pakistan, and South Africa. The results of
operations of the acquired businesses have been included in the Consolidated
Financial Statements since the respective dates of the acquisition and have been
determined to be individually and collectively immaterial for additional
disclosure purposes. No material divestitures were made in the year ended
December 31, 2010.
In addition to the factors previously mentioned, the Company is currently being
affected by the following general macro-level trends:
• Currency volatility and continued political uncertainty in certain markets;
• Competitive price pressures in certain markets, particularly those where the Company is a new entrant;
• Continued low levels of demand for a broad spectrum of products in Europe;
• Worldwide underlying long-term growth trends in electric utility and infrastructure markets;
• Continuing demand for natural resources, such as oil and gas, and alternative energy initiatives;
• Increasing demand for further deployment of submarine power and fiber optic communication systems; and
• Population growth in developing countries with growing middle classes that influences demand for wire and cable.
The Company's overall financial results discussed in this section of the annual
report reflect the above trends.
Results of Operations
The following table sets forth, for the periods indicated, consolidated
statement of operations data in millions of dollars and as a percentage of net
sales. Percentages may not add due to rounding.
Year Ended December 31,
2011 2010 2009
Amount % Amount % Amount %
Net sales $ 5,866.7 100.0 % $ 4,864.9 100.0 % $ 4,385.2 100.0 %
Cost of sales 5,259.0 89.6 % 4,319.2 88.8 % 3,879.4 88.5 %
Gross profit 607.7 10.4 % 545.7 11.2 % 505.8 11.5 %
Selling, general and
administrative expenses 377.6 6.4 % 331.6 6.8 % 339.6 7.7 %
Operating income 230.1 3.9 % 214.1 4.4 % 166.2 3.8 %
Other income (expense) (31.7 ) (0.5 )% (28.1 ) (0.6 )% 7.0 0.2 %
Interest expense, net (91.5 ) (1.6 )% (71.6 ) (1.5 )% (83.0 ) (1.9 )%
Loss on extinguishment of
debt - - - - (7.6 ) (0.2 )%
Income before income taxes 106.9 1.8 % 114.4 2.4 % 82.6 1.9 %
Income tax provision (42.7 ) (0.7 )% (46.7 ) (1.0 )% (35.8 ) (0.8 )%
Equity in net earnings of
affiliated companies 2.9 - 1.4 - 0.9 -
Net income including
noncontrolling interest 67.1 1.1 % 69.1 1.4 % 47.7 1.1 %
Less: preferred stock
dividends 0.3 - 0.3 - 0.3 -
Less: net income
attributable to
noncontrolling interest 1.1 - 7.4 0.2 % 7.9 0.2 %
Net income attributable to
Company common shareholders $ 65.7 1.1 % $ 61.4 1.3 % $ 39.5 0.9 %
|
Year Ended December 31, 2011 Compared with Year Ended December 31, 2010
Net Sales
The following tables set forth net sales, metal-adjusted net sales and metal
pounds sold by segment, in millions. For the metal-adjusted net sales results,
net sales for 2010 have been adjusted to reflect the 2011 copper average price
of $4.01 per pound (a $0.58 increase compared to the prior period) and the
aluminum average price of $1.16 per pound (an $0.11 increase compared to the
prior period). Metal-adjusted net sales, a non-GAAP financial measure, are
provided herein in order to eliminate the effect of metal price volatility from
the comparison of revenues from one period to another. The comparable GAAP
financial measure is set forth below. Refer to Item 7 - MD&A - Significant
Current Business Trends and Events in the previous discussion of metal price
volatility.
Net Sales
Year Ended
Dec 31, 2011 Dec 31, 2010
Amount % Amount %
North America $ 2,120.2 36 % $ 1,785.0 37 %
Europe and Mediterranean 1,735.7 30 % 1,498.6 31 %
ROW 2,010.8 34 % 1,581.3 32 %
Total net sales $ 5,866.7 100 % $ 4,864.9 100 %
Metal-Adjusted Net Sales
Year Ended
Dec 31, 2011 Dec 31, 2010
Amount % Amount %
North America $ 2,120.2 36 % $ 1,909.7 36 %
Europe and Mediterranean 1,735.7 30 % 1,600.3 31 %
ROW 2,010.8 34 % 1,731.7 33 %
Total metal-adjusted net sales $ 5,866.7 100 % $ 5,241.7 100 %
Metal adjustment - (376.8 )
Total net sales $ 5,866.7 $ 4,864.9
Metal Pounds Sold
Year Ended
Dec 31, 2011 Dec 31, 2010
Pounds % Pounds %
North America 317.4 32 % 300.7 32 %
Europe and Mediterranean 273.8 27 % 279.1 30 %
ROW 415.0 41 % 352.5 38 %
Total metal pounds sold 1,006.2 100 % 932.3 100 %
|
Net sales increased $1,001.8 million, or 21%, to $5,866.7 million in 2011 from
2010 and metal-adjusted net sales increased $625 million, or 12%, in 2011 from
2010. The increase in metal-adjusted net sales of $625 million reflects
favorable selling price and product mix of $348.7 million, favorable foreign
currency exchange rate changes of $147.3 million, higher sales volume of $107.0
million, and incremental net sales of $22.0 million attributable to
acquisitions. Volume, as measured by metal pounds sold, increased by 73.9
million pounds, or 8%, in 2011 compared to 2010. Metal pounds sold is provided
herein as the Company believes this metric to be a consistent year over year
measure of sales volume since it is not impacted by metal prices or foreign
currency exchange rate changes.
Metal-adjusted net sales in the North America segment increased $210.5 million,
or 11%, principally due to favorable selling price and product mix of $164.8
million, higher sales volumes of $34.4 million, favorable foreign currency
exchange rate changes of $7.8 million, principally related to the Canadian
dollar, and incremental net sales of $3.5 million attributable to acquisitions.
Volume, as measured by metal pounds sold, increased by 16.7 million pounds, or
6%, in 2011 compared to 2010. The increase in sales volume is primarily
attributable to volume improvement in aerial bare transmission products as well
as products primarily used in specialty applications due to increased spending
in the transportation sector as well as the market for oil and gas exploration
coupled with volume improvement for industrial products.
Metal-adjusted net sales in the Europe and Mediterranean segment increased
$135.4 million, or 8%, in 2011 compared to 2010 due to favorable selling price
and product mix of $86.8 million, favorable foreign currency exchange rate
changes of $71.3 million, primarily due to a stronger Euro relative to the U.S.
dollar, and incremental net sales attributable to the results of acquired
businesses of $18.1 million partially offset by lower sales volume of $40.8
million. Volume, as measured by metal pounds sold, decreased by 5.3 million
pounds, or 2%, in 2011 compared to 2010. Economic conditions in Europe remained
weak, influencing demand across a broad spectrum of products and regions,
particularly in the Iberia region as well as in Algeria partially offset by the
Company's project related activities in Germany and France.
Metal-adjusted net sales in the ROW segment increased $279.1 million, or 16%,
due to higher sales volume of $113.5 million, favorable selling price and
product mix of $97.0 million, and favorable foreign currency exchange rate
changes of $68.2 million, primarily due to the strengthening of certain
currencies in Central and South America relative to the U.S. dollar. Volume, as
measured by metal pounds sold, increased by 62.5 million pounds, or 18%, in 2011
compared to 2010 which is primarily attributable to increase in demand for
high-voltage aerial transmission products and low-and medium-voltage
distribution cables in Brazil as well as infrastructure investment in Central
America.
Cost of Sales
Cost of sales increased $939.8 million, or 22%, from 2010. The increase in 2011
as compared to 2010 was principally driven by the increase in volume sold of 8%,
the increase in raw material costs, including a 17% increase in the average cost
of copper and a 10% increase in the average cost of aluminum as well as an
increase in other raw material costs, and an increase due to currency
translation of 3%. As noted in Item 1 - Business. the Company's products are raw
material intensive with copper and aluminum comprising the major cost components
for cable products. At current metal prices, material costs are approximately
85% of total product costs with copper and aluminum metal costs comprising
approximately 60% of total product cost for the year ended December 31, 2011.
Gross Profit
Gross profit increased $62.0 million, or 11%, in 2011 from 2010. The increase in
gross profit was primarily due to an increase in volume in North America and ROW
and a shift in product mix and pricing in North America. Gross profit as a
percentage of sales was 10% and 11% in 2011 and 2010, respectively. Despite
volume and related revenue increases for the year gross profit did not increase
as a percentage of sales. In the first half of the year gross profit as a
percentage of sales increased due to selling prices rising faster than the
average cost of metal prices which was offset in the latter part of the year due
to the increased volatility and declines in metal prices.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $46.0 million, or 14%, in
2011 from 2010. The increase in SG&A is primarily a result of incremental
investment in resources related to the Company's global sales network and
product technology as well as increased costs for new market penetration
strategies in 2011 as compared to 2010. The increase in SG&A is also due in part
to foreign currency exchange rates in 2011 as compared to 2010 in the amount of
$8.7 million. SG&A as a percentage of metal-adjusted net sales was 6% for 2011
and 2010, respectively.
Operating Income
The following table sets forth operating income by segment, in millions of
dollars.
Operating Income
Year Ended
Dec 31, 2011 Dec 31, 2010
Amount % Amount %
North America $ 121.8 53 % $ 96.9 45 %
Europe and Mediterranean 30.3 13 % 36.8 17 %
ROW 78.0 34 % 80.4 38 %
Total operating income $ 230.1 100 % $ 214.1 100 %
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The increase in operating income for the North America segment of $24.9 million is primarily attributable to benefits from a shift in product mix, as well as a more favorable pricing environment due to an increase in market demand in most product lines, excluding electrical utility distribution products in 2011, as well as increased sales volume. The increases to operating income were partially offset by an increase in SG&A expenses of $11.8 million in 2011 as compared to 2010; the SG&A increases were for the reasons noted above.
The decrease in operating income for the Europe and Mediterranean segment of
$6.5 million was primarily attributable to continued weak demand and pricing due
to the economic slowdown in many European end markets, as well as an increase in
SG&A expenses of $11.0 million in 2011 as compared to 2010; the SG&A increases
were for the reasons noted above. Partially offsetting these negative impacts
were the current year benefit of European targeted cost reduction efforts, which
include, among other actions, personnel reductions which resulted in a charge of
$19.5 million recorded in 2010.
The decrease in operating income for the ROW segment of $2.4 million is
primarily attributable to unfavorable impacts in Thailand due to the country's
significant flooding in the second half of 2011, as well as unfavorable product
mix and price in Thailand and Chile. The decrease in operating income was also
due to an increase in SG&A expenses of $23.2 million in 2011 as compared to 2010
for the reasons noted above. Partially offsetting the decrease in operating
income in 2011was the impact of increased volume in 2011 in Brazil and Central
America.
Other Income (Expense)
Other income (expense) primarily includes foreign currency transaction gains or
losses, which result from changes in exchange rates between the designated
functional currency and the currency in which a transaction is denominated as
well as gains and losses on derivative instruments that are not designated as
cash flow hedges. During 2011 and 2010 the Company recorded a $31.7 million loss
and a $28.1 million loss, respectively. For 2011, other expense was primarily
attributable to other expense of $24.4 million attributable to foreign currency
transaction gains and losses which resulted from changes in exchange rates in
the various countries in which the Company operates, primarily Africa, South
America, and Mexico, and losses of $6.1 million on derivative instruments which
were not designated as cash flow hedges. For 2010, other income (expense) was
primarily attributable to the $29.8 million Venezuelan currency devaluation, as
well as other income of $7.7 million attributable to foreign currency
transaction gains and losses of which resulted from changes in exchange rates in
the various countries in which the Company operates and losses of $6.0 million
on derivative instruments which were not designated as cash flow hedges.
On January 8, 2010, the Venezuelan government announced the devaluation of its
currency, BsF, and established a two-tier foreign exchange structure. Due to the
impact of the devaluation of its currency by the Venezuelan government, the
Company recorded a pre-tax charge of $29.8 million in the first quarter of 2010
related to the remeasurement of the local balance sheet on the date of the
devaluation at the official non-essential rate. The functional currency of the
Company's subsidiary in Venezuela is the U.S. dollar.
Effective January 1, 2011, the Central Bank of Venezuela and the Ministry of
Finance published an amendment to Convenio Cambiario No. 14 (the Exchange Law),
whereby the official exchange rate was set at 4.30 BsF per U.S. dollar,
eliminating the 2.60 BsF per U.S. dollar rate previously established for
essential goods in the first quarter of 2010. Thereafter, the Company can only
import copper at the 4.30 BsF per U.S. dollar rate. In the year ended
December 31, 2011, the Company purchased 19.1 million pounds of copper at the
4.30 BsF per U.S. dollar rate recording no foreign currency gains or losses. In
the second quarter of 2010, the Company received authorization to purchase
dollars to import copper at the official exchange rate for essential goods of
2.60 BsF per U.S. dollar. In 2010, the Company recorded $16.6 million in foreign
exchange gains related to transactions completed at the 2.60 BsF per U.S. dollar
essential rate. Copper imports prior to the approval were imported at the
parallel rate of about 6.88 BsF per U.S. dollar, which was closed on June 9,
2010. In 2010, the Company recorded $10.7 million in foreign exchange losses
related to copper imports at this parallel rate. Refer to Item 7 - MD&A -
Venezuelan Operations for additional detail.
Interest Expense
Net interest expense increased to $91.5 million in 2011 from $71.6 million in
2010. Interest expense increased primarily due to additional debt used to fund
higher working capital requirements related to increased demand and higher metal
costs. Also, in the third quarter of 2011, the Company expensed $1.3 million in
unamortized fees and expenses related to the Terminated Credit Facility.
Tax Provision
The Company's effective tax rate for 2011 and 2010 was 39.9% and 40.8%,
respectively. The Company's 2011 effective tax rate reflects the adverse impact
of valuation allowances recorded against deferred tax assets in foreign
jurisdictions, partially offset by tax benefits recognized for uncertain tax
positions due to statute of limitations expirations and tax audit settlements.
The Company's 2010 effective tax rate was adversely impacted by the
nondeductible Venezuelan devaluation loss and valuation allowances recorded
against deferred tax assets in certain foreign jurisdictions, partially offset
by the recognition of tax benefits related to uncertain tax positions that were
primarily due to statute of limitations expirations and tax audit settlements.
Preferred Stock Dividends
During 2011 and 2010, the Company accrued and paid $0.3 million in dividends on
its Series A preferred stock.
Year Ended December 31, 2010 Compared with Year Ended December 31, 2009
Net Sales
The following tables set forth net sales, metal-adjusted net sales and metal
pounds sold by segment, in millions. For the metal-adjusted net sales results,
net sales for 2009 have been adjusted to reflect the 2010 copper COMEX average
price of $3.43 per pound (a $1.08 increase compared to the prior period) and the
aluminum rod average price of $1.05 per pound (a $0.25 increase compared to the
prior period). Metal-adjusted net sales, a non-GAAP financial measure, are
provided herein in order to eliminate the effect of metal price volatility from
the comparison of revenues from one period to another. The comparable GAAP
financial measure is set forth above. Refer to Item 7 - MD&A - Overview in the
previous discussion of metal price volatility.
Net Sales
Year Ended
Dec 31, 2010 Dec 31, 2009
Amount % Amount %
North America $ 1,785.0 37 % $ 1,484.6 34 %
Europe and Mediterranean 1,498.6 31 % 1,562.7 36 %
ROW 1,581.3 32 % 1,337.9 30 %
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Metal-Adjusted Net Sales
Year Ended
Dec 31, 2010 Dec 31, 2009
Amount % Amount %
North America $ 1,785.0 37 % $ 1,720.5 33 %
Europe and Mediterranean 1,498.6 31 % 1,783.9 35 %
ROW 1,581.3 32 % 1,632.4 32 %
Total metal-adjusted net sales $ 4,864.9 100.0 % $ 5,136.8 100.0 %
Metal adjustment - (751.6 )
Total net sales $ 4,864.9 $ 4,385.2
Metal Pounds Sold
Year Ended
Dec 31, 2010 Dec 31, 2009
Pounds % Pounds %
North America 300.7 32 % 304.7 32 %
Europe and Mediterranean 279.1 30 % 295.9 31 %
ROW 352.5 38 % 349.3 37 %
Total metal pounds sold 932.3 100.0 % 949.9 100.0 %
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Net sales increased $479.7 million, or 10.9%, to $4,864.9 million in 2010 from 2009 while metal-adjusted net sales decreased $271.9 million, or 5.3%, in 2010 from 2009. The decrease in metal-adjusted net sales of $271.9 million reflects lower sales volume of $51.9 million, unfavorable foreign currency exchange rate changes of $52.0 million and unfavorable selling price/product mix of $207.6 million. These decreases in metal-adjusted net sales have been partially offset by the incremental net sales of $39.6 million attributable to acquisitions. Volume, as measured by metal pounds sold, decreased by 17.6 million pounds or 1.9% in 2010 compared to 2009. Sales volume was lower due to the ongoing weak global economic conditions which resulted in lower demand across a broad spectrum of the Company's products. Metal pounds sold is provided herein as the Company believes this metric to be a consistent year over year measure of sales . . .
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