(BUSINESS WIRE) General Cable Corporation (NYSE: BGC) announced today preliminary selected estimated results for the third quarter ended September 27, 2013. These results are considered preliminary due to the additional time needed to finalize the Company’s restated financial statements for the prior periods described below (see “Other Matters”). Due to the timing and ongoing preparation of the restated financial statements, the Company has provided only selected financial data tables in this press release.
Estimated adjusted operating income in Europe and ROW, specifically Asia Pacific and Latin America, was in line with management’s expectations. The performance of these businesses was more than offset by the impact of lower than expected demand principally in the Company’s North American aluminum-based businesses including aerial transmission, construction and rod and strip products. For the third quarter of 2013, excluding certain items, the Company generated estimated adjusted earnings per share of $0.45 and estimated adjusted operating income of $63 million. For the third quarter of 2013, estimated reported earnings per share were $0.31 and estimated reported operating income was $56 million. A reconciliation of estimated adjusted earnings per share to estimated reported earnings per share and estimated adjusted operating income to estimated reported operating income is included on page 4 of this press release.
Highlights
Europe and Med generated stable estimated results for the second consecutive quarter driven by consistent execution on submarine turnkey projects
Estimated results in ROW reflect stability in Brazil, China and the Philippines and better than expected results in Venezuela
Collectively, acquisitions made in 2012 continue to perform ahead of the original investment case
Expanded the Company’s Senior Secured Credit Facility to $1.0 billion by incorporating certain European assets; maturity extended to 2018
Third Quarter Results
Estimated net sales of $1,556 million and global unit volume of 320 million pounds were lower than expected principally due to demand in North America for aluminum based products including aerial transmission, construction and rod and strip as well as the impact of changes in “bill and hold” revenue recognition accounting for aerial transmission projects in Brazil. Estimated adjusted operating income for the third quarter of 2013 of $63 million reflects stability in Europe and ROW. Adjusted operating results in ROW were buoyed by stronger than expected results in Venezuela and stable results in China and the Philippines. Estimated adjusted operating results in Brazil were stable as the business continues to gain traction in its specialty cable product start-up business as well as the benefit of ongoing shipments of aerial transmission cables. In North America, estimated adjusted operating income was burdened by the impact of lower than expected aluminum unit volume.
Gregory B. Kenny, President and Chief Executive Officer of General Cable, said, “As previously communicated, our businesses continue to feel a bit sluggish. Overall, pricing pressure and uneven global demand patterns in key end markets persist. In North America, we expected more of a pull through on existing orders for aerial transmission projects in the third quarter, which have shifted into the fourth quarter and the early part of next year. Also, while we experienced stable demand for aluminum based construction products and rod and strip in the third quarter the anticipated incremental volume failed to materialize. Similarly, seasonal demand driven by electricity grid reinforcement and maintenance spending by electric utilities was also below expectations. On the other hand, we are encouraged by the relative stability experienced in parts of our business including Europe and ROW, specifically Asia Pacific. We are also encouraged by the continued strong financial performance of our recent acquisitions in the U.S., Canada and China, which continue to exceed the original investment case as the operating margins of these businesses together have surpassed the corporate average in each quarter this year.”
In North America, unit volume was down versus management’s expectations principally due to aluminum-based electric utility product shipments including aerial transmission cables as well as construction cables and rod and strip products. The Company’s copper-based product shipments including electrical infrastructure and specialty were in line with management’s estimates for the third quarter.
In ROW, putting aside the change in bill and hold revenue recognition accounting for aerial transmission product shipments in Brazil, unit volume in Latin America was consistent with expectations in the third quarter driven by aerial transmission product shipments and the Company’s start-up specialty cables business in Brazil. Demand in Asia Pacific remains stable driven by China and the Philippines, which continue to benefit from construction spending.
In Europe and Mediterranean, seasonally lower unit volume was generally in line with expectations across most major end markets throughout the region.
Estimated other income was $9.6 million in the third quarter of 2013, which primarily consists of an estimate of $5.4 million of mark to market gains on derivative instruments accounted for as economic hedges, which are used to manage currency and commodity risk principally on the Company’s project business globally, and an estimate of $4.2 million of foreign currency transaction gains. The foreign currency transaction gains are principally the result of authorization received in Venezuela to purchase copper at a 4.3 Bolivars to each US Dollar exchange rate. The Company received this authorization prior to the currency devaluation on February 13, 2013. The Company does not expect to record a gain for the purchase of copper at the pre-devaluation exchange rate in the fourth quarter of 2013 in Venezuela.
Liquidity
Net debt of an estimated $995.5 million at the end of the third quarter of 2013 decreased an estimated $90.6 million from the end of the second quarter of 2013. The decrease in net debt is principally due to reductions in working capital as a result of normal seasonal trends. The Company continues to maintain adequate liquidity to fund operations, internal growth, and continuing product and geographic expansion opportunities as well as its share repurchase program and quarterly dividend.
Taxes
The Company’s adjusted effective tax rate for the third quarter of 2013 was approximately 45%, which reflects a relative greater mix of earnings in higher tax jurisdictions and the impact of full year forecasted tax losses in certain countries and other certain quarter-discrete items. As a result, the Company expects its full year adjusted effective tax rate also to be in the range of 45%.
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 November 25, 2013 to preferred stockholders of record as of the close of business on October 31, 2013. The Company expects the quarterly dividend payment to be less than $0.1 million. This is the last quarterly dividend payable to preferred stockholders. By its terms, the preferred stock, unless converted earlier by the holder(s), will be mandatorily redeemed on November 24, 2013 with the aggregate redemption price of $3.8 million payable on November 25, 2013.
Fourth Quarter 2013 Outlook
The Company’s fourth quarter revenues are expected to be in the range of $1.55 to $1.6 billion on flat to slightly lower global unit volume sequentially. The Company expects operating income to be in the range of $50 to $60 million. Adjusted earnings per share are expected to be in the range of $0.25 to $0.35 per share before the impact of non-cash convertible debt interest expense and mark to market gains or losses on derivative instruments. The Company’s fourth quarter outlook assumes copper and aluminum prices of $3.28 and $0.92. The fourth quarter is expected to be fairly consistent with typical seasonal declines partially offset by project related activity. In North America, orders that were delayed in the third quarter for aerial transmission cables are expected to ship, in part, in the fourth quarter as well as in the early part of next year. In Europe, the Company’s land-based and submarine turnkey project businesses are expected to deliver a number of projects in the fourth quarter. In Brazil, deliveries of aerial transmission projects are expected to continue at a stable rate over the final months of the year.
“Second half unit volume is expected to be weaker than previously anticipated. Overall, utility, mining and construction driven spending has been generally below our expectations. While the macro environment for infrastructure products has been uneven, we are making progress in a number of areas. We have removed significant costs over the past several years in Europe and are improving the cross utilization of our seven plants. In North America, we expect our Prestolite Wire and Alcan Cable acquisitions to perform above our business case for 2013. We are also pleased with our focus on new products and innovation. In North America, over 15% of products sold today have been refreshed or launched over the last three years. We continue to look for ways to reduce manufacturing and logistics costs. In ROW, we are accelerating the use of our Lean toolset with a focus on waste, entitlement capacity, and customer service. Higher value-add specialized products have been identified and are arriving through cross selling initiatives. We are focused on improving the returns on our investments in Brazil, Germany, India, Mexico, Peru and South Africa. Finally, over the past year we have made significant progress building our Company culture and reinforcing our values. Our Global Councils and newly created global roles in Manufacturing, Technology, Supply Chain, Commercial Sales and Communications products are facilitating the sharing of best practices while improving daily execution and working capital management. Despite the economic uncertainty, which continues to impact near term growth, our view of the intermediate and long-term demand growth drivers in our key end markets in North America and ROW is unchanged. As a late cyclical we are well positioned to benefit from the growth trends, energy and infrastructure related investments and construction activity in these markets,” Kenny concluded.
To view the full release including the tables, please click here
Contacts
General Cable Corporation
Len Texter, Vice President, Investor Relations, 859-572-8684
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