General Cable Releases 3Q Financial Results

General Cable Corp., a diversified industrial company, has reported revenues and earnings for the third quarter ended October 2

In a release on October 26, the company noted that diluted earnings per share for the third quarter of 2009 were $0.31. Included in these results were approximately $0.09 per share of non-cash net lower of cost or market (LCM) and LIFO inventory accounting related charges and $0.15 per share of non-cash interest charges resulting from a change in accounting for convertible debt. Before the impact of these items, adjusted non-GAAP earnings per share for the third quarter of 2009 would have been $0.55, at the upper end of management's indicated range of $0.45 to $0.55.

Highlights

- Reported revenues and adjusted earnings per share within range of management's guidance

- Generated $228.9 million of cash flow from operating activities; $365.1 million year-to-date

- Decreased net debt by $187.3 million to $764.4 million

- Named one of Fortune's 100 Fastest Growing Companies for the third consecutive year

Third Quarter Results

Net sales for the third quarter of 2009 were $1,081.8 million, a decrease of $362.6 million, or 25.1 percent, compared to the third quarter of 2008 on a metal-adjusted basis. Before the impact of $5.4 million of revenues from acquired businesses and $73.9 million related to the unfavorable impact of changes in foreign currency exchange rates, net sales for the third quarter decreased 21.5 percent. Volume based on metal pounds sold, without the impact of incremental volume from acquired businesses, decreased 20.5 percent in the third quarter of 2009 compared to 2008, and was down 7.3 percent compared to the second quarter of 2009.

Operating income before items was $49.4 million in the third quarter of 2009 compared to $121.4 million in the third quarter of 2008, a decrease of $72.0 million or 59.3 percent. The decrease in operating income was principally the result of a significant decline in prices in response to lower overall demand in many of the Company's end markets, lower capacity utilization, and the unfavorable impact of changes in foreign currency translation, partially offset by lower selling, general and administrative expenses resulting from continuous cost improvement efforts. Operating margin before items was 4.6 percent in the third quarter of 2009, a decrease of approximately 380 basis points from the operating margin of 8.4 percent in the third quarter of 2008 on a metal-adjusted basis.

Gregory B. Kenny, President and Chief Executive Officer of General Cable, said, "The Company is facing a demand environment in North America which is much worse than the last recession earlier this decade, while demand in Iberia is off nearly 50 percent. Despite the significant contraction in our end markets, the actions we have taken over the last few years to geographically diversify the business and expand our product portfolio have enabled us to continue to report positive earnings and cash flows. The strong performance of our ROW segment in the third quarter demonstrates the benefit of our strategy to grow disproportionately in countries now developing their infrastructure. We have dedicated significant resources focused on LEAN initiatives over the years which are helping the Company through this difficult period. Over the last year, we have accelerated the removal of fixed costs which we expect should provide strong operating leverage over the next cycle."

Liquidity and Share Repurchase

Despite a substantial increase in metal prices, net debt was $764.4 million at the end of the third quarter, down $187.3 million from the end of the second quarter of 2009. This decrease is principally the result of positive earnings coupled with reductions in working capital in each of the Company's geographic segments more than offsetting capital expenditures. The Company continues to maintain adequate liquidity to fund operations, which could include increased working capital requirements as a result of higher metal costs, internal growth, and continuing product and geographic expansion opportunities. During the third quarter of 2009, the Company made no common share repurchases.

Fourth Quarter 2009 Outlook and Macro Trends

Kenny said, "As we look forward, we expect the developing economies we serve to perform relatively better than the developed economies of the world. Business conditions in Latin America, Africa and Southeast Asia are being buoyed by commodities, mining and infrastructure investment, aided by somewhat better credit markets. In the U.S., we expect continuing declines in non-residential construction spending as well as a residential construction market that will recover slowly. These are direct or indirect end markets for many of our products. After over a decade of exceptional growth, Spain continues to suffer from a severe correction in their construction markets and nearly 20 percent unemployment. We do not expect that this market will return to growth quickly. Finally, with industrial companies in the United States using less electricity for the last two years, we do not expect electric utility spending on the distribution network to increase next year in any meaningful way. However, we do expect the U.S. transmission and wind farm segments to begin to improve as the Stimulus Bill begins to gain traction over the next year. The continuing impact of weak demand and rapidly increasing metal costs will further pressure earnings in the fourth quarter. As a result of these ongoing weak conditions, the Company will reduce production further in the fourth quarter. This also will negatively impact our earnings in the fourth quarter while at the same time position the Company to be able to benefit from upside earnings leverage when conditions improve in our end markets. We are encouraged, however, by early indicators of economic recovery beginning to be discussed by major industrial companies as recovery in the economy and construction markets should eventually lead to meaningful improvements in wire and cable demand. For the fourth quarter, the Company expects to report earnings before the impact of non-cash convertible interest expense in the range of $0.20 to $0.30 per share while revenues are expected to be approximately $1.05 to $1.10 billion," Kenny said.

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