General Cable Corporation (NYSE: BGC) reported today
results for the fourth quarter ended December 31, 2017. For the
quarter, reported earnings per share was $0.31 and reported
operating income was $8 million. Adjusted earnings per share and
adjusted operating income were $0.03 and $20 million, respectively,
for the quarter. See page two of this press release for the
reconciliation of reported to adjusted results and related
disclosures.
Michael T. McDonnell, President and Chief Executive Officer,
said, “Our fourth quarter reflects improved performance in Latin
America and demand stability of key businesses in North America
(electric utility, construction and automotive) and Europe (land
turnkey). Although industry dynamics, especially in Europe, and
business uncertainties resulting from our review of strategic
alternatives did impact results, our 2018 outlook is positive based
on trends we have seen since the beginning of this year.” McDonnell
added, “We are also pleased to have now received our stockholders’
approval for the pending merger with Prysmian S.p.A., and we
continue to expect the merger to be completed by the third quarter
of 2018, subject to regulatory approvals and other customary
conditions.”
Summary
- Announced, at its special meeting of
common stockholders on February 16, 2018, a majority of the votes
cast, which also represented a majority of the outstanding shares
of the Company’s common stock, voted to approve the adoption of the
previously announced definitive merger agreement under which
Prysmian will acquire General Cable for $30.00 per share in
cash
- Reported operating income of $8
million primarily impacted by charges of $15 million related to the
review of strategic alternatives that resulted in the previously
announced definitive merger agreement with Prysmian
- Adjusted operating income of $20
million decreased $7 million year over year as restructuring
savings and continued performance improvement in Latin America were
offset by ongoing challenging industry dynamics particularly in
Europe and unfavorable product mix in North America
- Operating cash flow was a use of $39
million for the full year of 2017 including payments totaling $82
million for the resolution of FCPA related matters
- Completed the divestiture program
focused on the sale or liquidation of non-core operations in Asia
Pacific and Africa generating total proceeds of approximately $260
million consistent with management’s expectations
- Maintained significant liquidity
with $326 million of availability on the Company’s $700 million
asset-based revolving credit facility and $85 million of cash and
cash equivalents
- Impact of rising metal prices was a
benefit of $4 million and $5 million for the fourth quarter of 2017
and 2016, respectively
Fourth Quarter Segment
Demand
North America – Unit volume as
measured in metal pounds sold was up 5% versus prior year driven by
stronger demand for aerial transmission cables and construction
products.
Europe – Unit volume as measured in
metal pounds sold was up 6% versus prior year as stronger demand
for electric utility products including land turnkey projects
helped to more than offset lower subsea project activity and
weakness in industrial and construction markets.
Latin America – Unit volume as
measured in metal pounds sold was down 6% versus prior year driven
by uneven spending on electric infrastructure and construction
projects throughout the region as well as the impact of the
Company’s go-to-market initiatives (focused on margin improvement).
Shipments of aerial transmission cables in Brazil were up sharply
year over year.
Net Debt
At the end of 2017 and 2016, total debt was $1,086 million and
$939 million, respectively, and cash and cash equivalents were $85
million and $101 million, respectively. The increase in net debt
was principally driven by payments totaling $82 million related to
the resolution of FCPA matters as well as investments in working
capital (partly due to higher metal prices) and funding of
restructuring actions.
Other Matters – Income
Taxes
The enactment of the Tax Cuts and Jobs Act (“Tax Reform Act”)
provides for a one-time deemed taxable repatriation of the
Company’s off-shore accumulated earnings. This deemed repatriation
resulted in a preliminary estimate of $46 million of noncash
deferred tax expense in the fourth quarter of 2017 as the deemed
repatriation income was offset by existing net operating losses. In
addition, the Tax Reform Act provides for the reduction of the U.S.
corporate income tax rate from 35% to 21%, effective for 2018.
Accordingly, the Company’s deferred tax assets and liabilities were
required to be remeasured in the fourth quarter of 2017 resulting
in a preliminary estimated noncash deferred tax benefit of
approximately $62 million. Prospectively, the Company expects its
reported earnings to be favorably impacted by the reduced U.S. tax
rate.
Non-GAAP Financial
Measures
Adjusted operating income (defined as operating income before
extraordinary, nonrecurring or unusual charges and other certain
items), adjusted earnings per share (defined as diluted earnings
per share before extraordinary, nonrecurring or unusual charges and
other certain items) and net debt (defined as long-term debt plus
current portion of long-term debt less cash and cash equivalents)
are “non-GAAP financial measures” as defined under the rules of the
Securities and Exchange Commission (“SEC”). Metal-adjusted
revenues, and return on metal-adjusted sales on a segment basis,
both of which are non-GAAP financial measures, are also provided
herein. See “Segment Information.”
These Company-defined non-GAAP financial measures exclude from
reported results those items that management believes are not
indicative of our ongoing performance and are being provided herein
because management believes they are useful in analyzing the
operating performance of the business and are consistent with how
management reviews our operating results and the underlying
business trends. Use of these non-GAAP measures may be inconsistent
with similar measures presented by other companies and should only
be used in conjunction with the Company’s results reported
according to GAAP. Historical segment adjusted operating results
are disclosed in the Fourth Quarter 2017 Investor Presentation
available on the Company’s website.
A reconciliation of GAAP operating income (loss) and diluted
earnings (loss) per share to adjusted operating income and earnings
per share follows:
Fourth Quarter of 2017 versus Fourth Quarter of 2016
Fourth Quarter 2017 2016
Operating Operating In millions, except per share
amounts Income EPS Income EPS Reported $ 7.5 $ 0.31 $ (96.8 ) $
(2.10 ) Adjustments to reconcile operating Income/EPS Non-cash
convertible debt interest expense (1) - 0.01 - 0.01 Mark to market
(gain) loss on derivative instruments (2) - (0.11 ) - (0.08 )
Restructuring and divestiture costs (3) 17.6 0.20 27.8 0.44 Legal
and investigative costs (4) 0.3 - (0.7 ) (0.01 ) (Gain) loss on
sale of assets (5) - - 1.0 0.02 Foreign Corrupt Practices Act
(FCPA) accrual (6) - - 49.3 0.99 US Pension Settlement (7) - - 7.4
0.12 Asia Pacific and Africa (income)/loss (8) (5.3 ) (0.07 ) 39.3
0.66 Tax reform act (9) - (0.31 ) -
- Total adjustments 12.6
(0.28 ) 124.1 2.15 Adjusted $ 20.1
$ 0.03 $ 27.3 $ 0.05 NOTE: The tables
above reflect EPS adjustments based on the Company's full year
effective tax rate for 2017 of 40% and 2016 of 50%. (1) The
Company's adjustment for the non-cash convertible debt interest
expense reflects the accretion of the equity component of the 2029
convertible notes, which is reflected in the income statement as
interest expense. (2) Mark to market (gains) and losses on
derivative instruments represents the current period changes in the
fair value of commodity instruments designated as economic hedges.
The Company adjusts for the changes in fair values of these
commodity instruments as the earnings associated with the
underlying contracts have not been recorded in the same period. (3)
Restructuring and divestiture costs represent costs associated with
the Company's announced restructuring and divestiture programs as
well as costs associated with the review of strategic alternatives
that resulted in the previously announced definitive merger
agreement with Prysmian. Examples consist of, but are not limited
to, employee separation costs, asset write-downs, accelerated
depreciation, working capital write-downs, equipment relocation,
contract terminations, consulting fees and legal costs. The Company
adjusts for these charges as management believes these costs will
not continue at the conclusion of both the restructuring and
divestiture programs and closing of the merger. (4) Legal and
investigative costs represent costs incurred for external legal
counsel and forensic accounting firms in connection with the
restatement of our financial statements and the Foreign Corrupt
Practices Act investigation. The Company adjusts for these charges
as management believes these costs will not continue at the
conclusion of these investigations which are considered to be
outside the normal course of business. (5) Gains and losses on the
sale of assets are the result of divesting certain General Cable
businesses. The Company adjusts for these gains and losses as
management believes the gains and losses are one-time in nature and
will not occur as part of the ongoing operations. (6) Foreign
Corrupt Practices Act (FCPA) accrual represents the Company’s
additional accruals recorded in 2016 to settle the investigations
with the SEC and the DOJ. The Company adjusts for this accrual as
management believes this is a one-time charge and will not occur as
part of ongoing operations. (7) The US pension settlement charge is
a one-time cost related to the lump sum payment to term-vested
participants of the US Master Pension Plan. This charge represents
the payments made to those participants who elected to take the
lump sum payment and for which the Company no longer has
obligations to pay in the future. The Company has adjusted for this
US pension settlement charge as management does not expect it to
occur in the future, nor is it part of the ongoing operations. (8)
The adjustment excludes the impact of operations in the Africa and
Asia Pacific segment which are not considered "core operations"
under the Company's strategic roadmap. The Company has divested or
closed these operations which are not expected to continue as part
of the ongoing business. For accounting purposes, the continuing
operations in Africa and Asia Pacific do not meet the requirement
to be presented as discontinued operations. Fourth quarter 2017
reflects a pre-tax gain of $5.4 million on the liquidation of our
New Zealand business. Fourth quarter 2016 reflects the non-cash
impacts of a $28 million currency translation reclassification out
of accumulated other comprehensive income related to the closure of
our South African Facilities and an $11 million asset impairment
charge for the Company’s business in China. (9) The tax reform act
adjustment relates to the effect on the Company’s financial
statements resulting from the enactment of the United States Tax
Cuts and Jobs Act. See “Other Matters – Income Taxes” on page 2 of
this press release. The Company adjusts for the enactment of the
Tax Reform Act as management believes this is a one-time net
benefit and will not occur as part of ongoing operations.
About General Cable
General Cable (NYSE:BGC), with headquarters in Highland Heights,
Kentucky, is a global leader in the development, design,
manufacture, marketing and distribution of aluminum, copper and
fiber optic wire and cable products for the energy, communications,
automotive, industrial, construction and specialty segments.
General Cable is one of the largest wire and cable manufacturing
companies in the world, operating manufacturing facilities in its
core geographical markets, and has sales representation and
distribution worldwide. For more information about General Cable
visit our website at www.generalcable.com.
Cautionary Statement Regarding
Forward-Looking Statements
Certain statements in this press release including, without
limitation, statements regarding future financial results and
performance, plans and objectives, capital expenditures,
understanding of competition, projected sources of cash flow,
potential legal liability, proposed legislation and regulatory
action, and our management’s beliefs, expectations or opinions, are
forward-looking statements, and as such, we desire to take
advantage of the “safe harbor” which is afforded to such statements
under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are those that predict or describe
future events or trends and that do not relate solely to historical
matters. You can generally identify forward-looking statements as
statements containing the words “believe,” “expect,” “may,”
“anticipate,” “intend,” “estimate,” “project,” “plan,” “assume,”
“seek to” or other similar expressions, or the negative of these
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,
risks and uncertainties include, but are not limited to, the
following: (1) general economic conditions, particularly those
in the construction, energy and information technology sectors;
(2) the volatility in the price of raw materials, particularly
copper and aluminum; (3) the announced review of strategic
alternatives, including a potential sale of the Company, and the
decision to engage or not to engage in any strategic alternative,
could cause disruptions in the business; (4) our ability to
maintain or negotiate and consummate new business or strategic
relationships or transactions; (5) impairment charges with
respect to our long-lived assets; (6) our ability to execute
our plan to exit all of our Asia Pacific and African operations;
(7) our ability to achieve all of our anticipated cost savings
associated with our previously announced global restructuring plan;
(8) our ability to invest in product development, to improve
the design and performance of our products; (9) economic,
political and other risks of maintaining facilities and selling
products in foreign countries; (10) domestic and local country
price competition; (11) our ability to successfully integrate
and identify acquisitions; (12) the impact of technology;
(13) our ability to maintain relationships with our
distributors and retailers; (14) the changes in tax rates and
exposure to new tax laws; (15) our ability to adapt to current
and changing industry standards; (16) our ability to execute
large customer contracts; (17) our ability to maintain
relationships with key suppliers; (18) the impact of
fluctuations in foreign currency rates; (19) compliance with
foreign and U.S. laws and regulations, including the Foreign
Corrupt Practices Act; (20) our ability to negotiate
extensions of labor agreements; (21) our ability to continue
our uncommitted accounts payable confirming arrangements; (22) our
exposure to counterparty risk in our hedging arrangements;
(23) our ability to achieve target returns on investments in
our defined benefit plans; (24) possible future environmental
liabilities and asbestos litigation; (25) our ability to
attract and retain key employees; (26) our ability to make
payments on our indebtedness; (27) our ability to comply with
covenants in our existing or future financing agreements;
(28) lowering of one or more of our debt ratings;
(29) our ability to maintain adequate liquidity; (30) our
ability to maintain effective disclosure controls and procedures
and internal control over financial reporting; (31) the
trading price of our common stock; and (32) other material
factors.
See Item 1A of the Company’s 2016 Annual Report on Form
10-K as filed with the SEC on February 24, 2017 and subsequent
SEC filings for a more detailed discussion on some of these
risks.
Forward-looking statements reflect the views and assumptions of
management as of the date of this press release with respect to
future events. The Company 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. The
inclusion of any statement in this press release does not
constitute an admission by the Company or any other person that the
events or circumstances described in such statement are
material.
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,
2017 2016 2017 2016 Net sales $ 981.9 $
910.0 $ 3,837.2 $ 3,858.4 Cost of sales 884.5
835.9 3,411.1 3,451.3
Gross profit 97.4 74.1 426.1 407.1
Selling, general and administrative
expenses
89.9 170.9 416.8 408.9 Goodwill impairment charges - - - 9.0
Intangible asset impairment charges - -
- 7.5 Operating income (loss)
7.5 (96.8 ) 9.3 (18.3 ) Other income (expense) 10.6 2.5 28.5
7.2 Interest income (expense): Interest expense (19.4 )
(22.3 ) (78.7 ) (89.5 ) Interest income 0.6
1.3 2.0 2.5 (18.8 )
(21.0 ) (76.7 ) (87.0 ) Income (loss)
before income taxes (0.7 ) (115.3 ) (38.9 ) (98.1 ) Income tax
(provision) benefit 16.5 11.4 (15.8 ) 3.7 Equity in net earnings of
affiliated companies - 0.2 -
0.9 Net income (loss) including noncontrolling
interest 15.8 (103.7 ) (54.7 ) (93.5 ) Less: net income (loss)
attributable to noncontrolling interest (0.2 ) 0.9
1.9 0.3 Net income (loss)
attributable to Company common shareholders $ 16.0 $ (104.6
) $ (56.6 ) $ (93.8 )
Earnings (loss) per share - Net income
(loss) attributable to Company common shareholders per common
share Earnings (loss) per common share - basic $ 0.32 $
(2.10 ) $ (1.13 ) $ (1.89 ) Weighted average common shares - basic
50.5 49.7 50.1
49.6 Earnings (loss) per common share- assuming dilution $
0.31 $ (2.10 ) $ (1.13 ) $ (1.89 ) Weighted average common
shares- assuming dilution 51.9 49.7
50.1 49.6
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, 2017
2016 2017 2016 Revenues (as reported)
North America $ 536.7 $ 476.5 $ 2,218.1 $ 2,041.7 Europe 255.4
212.2 874.5 875.7 Latin America 186.4 174.0 677.9 655.2 Africa /
Asia Pacific 3.4 47.3 66.7
285.8
Total $ 981.9 $ 910.0
$ 3,837.2 $ 3,858.4
Revenues (metal
adjusted) (1) North America $ 536.7 $ 530.0 $ 2,218.1 $
2,235.8 Europe 255.4 229.8 874.5 936.0 Latin America 186.4 205.5
677.9 755.7 Africa / Asia Pacific 3.4 52.5
66.7 320.8
Total $ 981.9
$ 1,017.8 $ 3,837.2 $ 4,248.3
Metal Pounds Sold North America 139.5 132.5 580.9 548.0
Europe 40.1 37.7 152.4 154.0 Latin America 59.0 62.5 232.2 239.3
Africa / Asia Pacific - 12.8
14.5 85.1
Total 238.6
245.5 980.0 1,026.4
Operating Income (loss) North America $ 3.9 $ (39.1 )
$ 68.6 $ 62.4 Europe (6.4 ) (14.4 ) (12.4 ) 2.6 Latin America 4.7
(4.0 ) 17.6 (14.4 ) Africa / Asia Pacific 5.3
(39.3 ) (64.5 ) (68.9 )
Total $ 7.5 $
(96.8 ) $ 9.3 $ (18.3 )
Adjusted Operating Income
(loss) (2) North America $ 21.8 $ 32.0 $ 128.5 $ 136.8
Europe (6.4 ) (3.6 ) (6.3 ) 21.5 Latin America 4.7
(1.1 ) 17.8 (8.3 )
Total $ 20.1
$ 27.3 $ 140.0 $ 150.0
Return
on Metal Adjusted Sales (3) North America 4.1 % 6.0 %
5.8 % 6.1 % Europe -2.5 % -1.6 % -0.7 % 2.3 % Latin America 2.5 %
-0.5 % 2.6 % -1.1 %
Total 2.1 % 2.8 % 3.7 % 3.8 %
Capital Expenditures North America $ 6.2 $ 21.1 $ 49.7 $
51.3 Europe 5.6 6.7 28.6 19.8 Latin America 1.7 2.6 6.9 12.4 Africa
/ Asia Pacific - 0.2 0.2
0.6
Total $ 13.5 $ 30.6 $ 85.4
$ 84.1
Depreciation & Amortization
North America $ 7.6 $ 9.3 $ 34.2 $ 41.4 Europe 6.0 5.6 22.8 22.6
Latin America 3.5 4.2 15.8 16.9 Africa / Asia Pacific -
0.6 1.1 5.1
Total $ 17.1 $ 19.7 $ 73.9 $ 86.0
Revenues by Major Product Lines Electric
Utility $ 348.0 $ 303.0 $ 1,336.2 $ 1,357.1 Electrical
Infrastructure 244.4 228.6 976.7 989.7 Construction 228.6 217.1
855.8 820.8 Communications 115.6 113.1 490.8 473.8 Rod Mill
Products 45.3 48.2 177.7
217.0
Total $ 981.9 $ 910.0
$ 3,837.2 $ 3,858.4
(1)
Metal-adjusted revenues, a non-GAAP
financial measure, is provided in order to eliminate an estimate of
metal price volatility from the comparison of revenues from one
period to another.
(2)
Adjusted operating income (loss) is a
non-GAAP financial measure. The Company is providing adjusted
operating income (loss) on a segment basis because management
believes it is useful in analyzing the operating performance of the
business and is consistent with how management reviews the
underlying business trends. A reconciliation of segment reported
operating income (loss) to segment adjusted operating income (loss)
is provided in the appendix of the Fourth Quarter 2017 Investor
Presentation, located on the Company's website.
(3)
Return on Metal Adjusted Sales is
calculated on Adjusted Operating Income (Loss)
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (in millions, except share
data) December 31, December
31,
Assets
2017 2016 Current Assets:
(unaudited)
Cash and cash equivalents $ 84.7 $ 101.1 Receivables, net of
allowances of $19.2 million at December 31, 2017 and $20.2
million at December 31, 2016 714.2 664.5 Inventories 736.1 768.2
Prepaid expenses and other 60.0 65.4
Total current assets 1,595.0 1,599.2 Property, plant and
equipment, net 530.3 529.3 Deferred income taxes 7.9 20.4 Goodwill
11.0 12.0 Intangible assets, net 23.3 28.3 Unconsolidated
affiliated companies 0.2 9.0 Other non-current assets 67.6
43.4 Total assets $ 2,235.3 $
2,241.6
Liabilities and
Total Equity
Current Liabilities: Accounts payable $ 437.5 $ 414.0 Accrued
liabilities 308.8 419.6 Current portion of long-term debt
46.9 67.5 Total current liabilities 793.2
901.1 Long-term debt 1,038.8 871.1 Deferred income taxes
108.6 126.7 Other liabilities 162.9 173.8
Total liabilities 2,103.5 2,072.7
Commitments and Contingencies Total Equity:
Common stock, $0.01 par value, issued and outstanding shares:
December 31, 2017 - 50,583,870 (net of 8,054,826 treasury shares)
December 31, 2016 - 49,390,850 (net of 9,419,116 treasury shares)
0.6 0.6 Additional paid-in capital 706.6 711.0 Treasury stock
(151.9 ) (169.9 ) Retained earnings (deficit) (195.3 ) (102.2 )
Accumulated other comprehensive loss (230.8 ) (286.4
) Total Company shareholders' equity 129.2 153.1 Noncontrolling
interest 2.6 15.8 Total equity
131.8 168.9 Total liabilities and equity $
2,235.3 $ 2,241.6
GENERAL CABLE
CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash
Flows (in millions) (unaudited)
Twelve Fiscal Months Ended December 31,
December 31, 2017 2016 Cash flows of
operating activities: Net income (loss) including
noncontrolling interest $ (54.7 ) $ (93.5 ) Adjustments to
reconcile net income (loss) to net cash flows of operating
activities: Depreciation and amortization 73.9 86.0 Foreign
currency exchange (gain) loss 3.4 0.6 Non-cash asset impairment
charges 2.3 59.5 Non-cash interest charges 4.0 5.0 Deferred income
taxes (12.1 ) (22.7 ) (Gain) loss on disposal of subsidiaries 71.9
(25.6 ) (Gain) loss on disposal of property (1.4 ) 2.1 Changes in
operating assets and liabilities, net of effect of divestitures:
(Increase) decrease in receivables (25.3 ) 11.2 (Increase) decrease
in inventories 18.1 52.6 (Increase) decrease in other assets 6.4
7.3 Increase (decrease) in accounts payable 7.8 2.8 Increase
(decrease) in accrued and other liabilities (133.3 )
70.9 Net cash flows of operating activities (39.0 )
156.2
Cash flows of investing activities:
Capital expenditures (85.4 ) (84.1 ) Proceeds from properties sold
11.9 1.5 Disposal of subsidiaries, net of cash disposed of 2.2 81.8
Investment in restricted cash (10.0 ) - Other (0.1 )
0.2 Net cash flows of investing activities (81.4 )
(0.6 )
Cash flows of financing activities: Dividends
paid to shareholders (37.4 ) (35.6 ) Proceeds from debt 2,101.1
1,516.2 Repayments of debt (1,967.3 ) (1,635.2 ) Purchase of
noncontrolling interest - (18.0 ) Dividends paid to noncontrolling
interest - (0.1 ) Proceeds from sale leaseback transaction - 6.2
Impact of stock options and other 2.1 (0.4 )
Net cash flows of financing activities 98.5
(166.9 ) Effect of exchange rate changes on cash and cash
equivalents 5.5 - Increase (decrease)
in cash and cash equivalents (16.4 ) (11.3 ) Cash and cash
equivalents-beginning of year 101.1 112.4
Cash and cash equivalents-end of year $ 84.7 $ 101.1
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