HIGHLAND HEIGHTS, Ky - Saturday, November 1st 2014 [ME NewsWire]
(BUSINESS
WIRE)-- General Cable Corporation (NYSE: BGC) today reported results
for the third quarter ended September 26, 2014 and announced actions to
refine its strategic focus, improve operational performance and address
management succession.
Strategic and Management Highlights
Company
to simplify global portfolio and reduce operational complexity by
focusing on core strategic operations in North America, Latin America
and Europe; plans to exit all of its Asia Pacific and African
manufacturing operations
Company to commence wide-ranging search for
successor to President and CEO Gregory B. Kenny; Mr. Kenny to continue
in role during search and is expected to become Chairman of the Board
upon appointment of new CEO
Board of Directors to add another operations-experienced independent director
Third Quarter Highlights
Adjusted earnings per share was $0.30 and adjusted operating income was $55 million
Reported loss per share was $2.55 and reported operating loss was $79 million
Strong
progress on restructuring program with approximately $60 million or 80%
of the initiatives to generate annual savings of $75 million announced
through the third quarter
Announcement of planned actions in Europe and Colombia anticipated to generate $48 million of annual savings
Company
maintains substantial global liquidity of $800 million (excluding
Venezuela), including $400 million of availability under the Company’s
North American and European based credit facility
Reconfirms adjusted operating cash flow guidance of $135 million for 2014
John
E. Welsh, III, Chairman, said, “The Board has concluded its extensive
review of the Company’s strategic alternatives and operational
structure, and has determined that the best way to maximize value to
shareholders in the current global environment is to simplify our
geographic portfolio, reduce operational complexity and focus on
delivering increased returns from our core strategic operations in North
America, Latin America and Europe. We believe these actions will
optimize the Company’s asset base and sharpen the Company’s strategic
focus on its core assets, while retaining a meaningful level of exposure
to developing economies that may offer future growth opportunities.”
Gregory
B. Kenny, President and Chief Executive Officer, said, “We are making
excellent progress on our previously announced restructuring program
but, given the persistently uneven global demand and pricing
environment, we have decided to accelerate and expand our efforts. As we
exit our manufacturing operations in Asia Pacific and Africa, we will
step up our efforts to improve returns from our businesses in North
America, Latin America and Europe where we maintain leading market
positions, economies of scale, breadth of product and technical
expertise. There are a number of global businesses centered in our core
footprint. We will continue to serve our international customers as we
have always done from these locations. We believe the fundamental
changes we are announcing today will better position the Company to
benefit from future energy, infrastructure and construction investment
in our core strategic markets.”
The Board was assisted in its
strategic review by its financial advisor J.P. Morgan. The Company is
developing a divestiture plan for its Asia Pacific and African assets
and Peter A. Campbell, Executive Vice President and Chief Executive
Officer of General Cable Asia Pacific, will direct these operations
during the divestiture process. The operations in Asia Pacific and
Africa represent annual revenue of approximately $1.0 billion on a
consolidated basis.
CEO transition plan General Cable also announced
that, consistent with its ongoing focus on succession planning, its
Board has formed a search committee to identify the Company’s next Chief
Executive Officer and has retained an executive search firm to assist
in the process. Current President and CEO, Gregory B. Kenny, will
continue during the search and is expected to become Chairman of the
Board upon the appointment of a new CEO.
Plans to expand Board of
Directors The Board has commenced a process to identify and appoint an
additional operations-experienced independent director. The Company has
engaged an executive search firm to assist in the process and has
already identified potential candidates with strong operational
experience in energy infrastructure, manufacturing and/or related
industries.
Significant progress on restructuring program The Company
has made significant progress on its restructuring program, including
the announcement of planned actions in Europe and Colombia which
together are expected to generate approximately $48 million of ongoing
annual savings and result in one-time pre-tax charges in the range of
$130 million, including $40 million of cash. The estimated costs of the
program are tracking according to plan with anticipated total pre-tax
costs of $180 million, or approximately 90% of the total estimated
pre-tax costs, announced through the third quarter. Overall the
restructuring program is also tracking according to plan with
approximately $60 million or 80% of the initiatives to generate annual
savings of $75 million announced through the third quarter. While
savings are beginning to be realized in the second half of 2014, the
Company expects approximately $30 to $40 million of incremental savings
to be realized in 2015 increasing to the full targeted annual savings of
$75 million beginning in 2016. The cash payback of the restructuring
program is expected to be 1.3 years.
“The announcement of planned
actions in Europe represents substantial progress as we plan to
consolidate and realign our businesses to drive the improvement of
underperforming assets. In Colombia, we are consolidating and
streamlining our assets, further strengthening our platform for future
success in one of the most attractive long-term growth markets in Latin
America. In addition, we are continuing our work on the previously
announced facility closures in India, Peru and North America which are
advancing according to plan. Production has ceased in India and Peru and
we are in the process of unwinding the capital employed,” Kenny said.
Summary financial results third quarter
Year
over year Q3 2014 versus Q3 2013 Net sales for the third quarter of
2014 of $1,472 million were down 6% as compared to the third quarter of
2013. Excluding shipments of aerial transmission cables in North America
and Brazil, global unit volume for the third quarter of 2014 was flat
year over year as demand in North America and ROW helped to offset the
impact of demand weakness throughout Europe including Spain. Adjusted
operating income for the third quarter of 2014 of $55 million increased
$11 million or 25% from $44 million in the third quarter of 2013
(excluding Venezuela from both periods) principally due to results in
the Company’s North American electric utility, electrical infrastructure
and rod mill and strip aluminum businesses as well as the Company’s
restructuring/cost out initiatives. Q3 2014 versus Q2 2014 Net sales for
the third quarter of 2014 decreased 4% as compared to the second
quarter of 2014. Excluding aerial transmission cables in North America
and ROW, global unit volume decreased 3% principally due to seasonal
demand patterns and weaker demand in Europe. Excluding Venezuela from
both periods, adjusted operating income for the third quarter of 2014
was down $2 million or 4% from the second quarter of 2014 as the
performance of the Company’s North American businesses and the benefit
of restructuring activity in ROW helped to partially offset the impact
of lower production and installation activity of submarine turnkey
projects in the third quarter. Other income / expense Other expense was
$17 million in the third quarter of 2014, which principally reflects
losses of $16 million due to the remeasurement of the local balance
sheet in Venezuela as the SICAD I rate depreciated during the third
quarter. Mark to market gains of $2 million on derivative instruments
accounted for as economic hedges that are used to manage currency and
commodity risk (principally on the Company’s project business globally)
were offset by foreign currency transaction losses of $3 million.
Liquidity
- Excluding Venezuela Net debt was $1,359 million at the end of the
third quarter of 2014, a decrease of $14 million from the end of the
second quarter of 2014. 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 substantial availability of $400 million
under its North American and European based credit facility with an
additional $400 million of liquidity around the world to fund operations
and support the Company’s restructuring program, quarterly dividend and
the anticipated retirement of the $125 million senior floating rate
notes due in April 2015. In addition, the Company recently received $20
million for the settlement of disputed claims principally in connection
with its submarine turnkey project business, $15 million of which was
received subsequent to the third quarter.
Fourth Quarter and Full
Year 2014 Outlook (excluding Venezuela) Revenues in the fourth quarter
are expected to be in the range of $1.425 to $1.475 billion. Global unit
volume is anticipated to be flat to up low single digits sequentially
principally due to aerial transmission cable shipments in North America
and Brazil. The Company anticipates adjusted operating income to be in
the range of $40 to $55 million for the fourth quarter. Adjusted
earnings per share are expected to be in the range of $0.15 to $0.30 per
share for the fourth quarter. The fourth quarter outlook does not
include the impact of Venezuela. The Company’s fourth quarter outlook
assumes copper (COMEX) and aluminum (LME) prices of $3.11 and $0.90,
respectively. Given the fourth quarter outlook, the Company expects
adjusted operating income in the range of $175 to $190 million for the
full year 2014. The Company continues to target adjusted operating cash
flow of $135 million for the full year 2014.
“Overall, our third
quarter results and fourth quarter outlook reflect the continuing uneven
global demand and challenging pricing environment. Putting aside fourth
quarter seasonality, we are beginning to see some signs of improvement
in North America which continues to be a source of relative stability.
We are highly focused on our restructuring program execution and
delivering our cash flow targets as we tightly manage our inventory over
the final quarter of 2014 and into the new year,” Kenny concluded.
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), adjusted operating cash flow (defined as operating
cash flows 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, other
than cash and cash equivalents held in Venezuela) are “non-GAAP
financial measures” as defined under the rules of the Securities and
Exchange Commission.
These Company-defined non-GAAP financial
measures 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 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. Adjusted results
and guidance reflect the removal of the impact of our Venezuelan
operations on a standalone basis due to the ongoing economic and
political uncertainty in that country, principally driven by the foreign
currency exchange system, government-imposed profit caps/limitations
and limited access to U.S. dollars for the import of raw materials.
However, we expect ongoing operations in Venezuela to continue, and we
cannot predict the amounts of any future income or expenses we may incur
relating to our Venezuelan operations. Certain historical results of
our Venezuelan operations on a standalone basis are provided in the
Third Quarter 2014 Investor Presentation available on the Company’s
website.
A reconciliation of adjusted operating income to reported
operating income and adjusted earnings per share to reported earnings
per share for the third quarter of 2014 and 2013 and the second quarter
of 2014 is set forth in the table below. With respect to the Company’s
expected fourth quarter and full year 2014 adjusted operating income,
fourth quarter adjusted earnings per share and full year 2014 adjusted
operating cash flow, the Company is not able to provide a reconciliation
of these non-GAAP financial measures to GAAP because it does not
provide specific guidance for the various extraordinary, nonrecurring or
unusual charges and other items. These items have not yet occurred, are
out of the Company’s control and/or cannot be reasonably predicted. As a
result, reconciliation of the non-GAAP guidance measures to GAAP is not
available without unreasonable effort and the Company is unable to
address the probable significance of the unavailable information.
To view the full report and tables please click here.
Contacts
General Cable Corporation
Len Texter, Vice President,
Investor Relations,
859-572-8684
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