ADJUSTED OPERATING INCOME OF $47 MILLION EXCEEDS GUIDANCE
HIGHLAND HEIGHTS, Ky.–(BUSINESS WIRE)–Nov. 4, 2015– General Cable Corporation (NYSE: BGC)reported today results for the third quarter ended October 2, 2015. For the quarter, the Company generated adjusted earnings per share from continuing operations of $0.26 and adjusted operating income from continuing operations of $47 million. Reported earnings per share from continuing operations for the quarter were $(0.69) and reported operating income from continuing operations was $17 million. See page 3 of this press release for the reconciliation of reported to adjusted results and related disclosures.
Highlights
- Reported third quarter adjusted operating income from continuing operations of $47 million, exceeding guidance range of $25 – $40 million, and adjusted EPS from continuing operations of $0.26 driven primarily by the performance of the submarine turnkey project business in Europe
- Delivered restructuring savings of $10 million in the third quarter, on track with annual savings target of $90 million in 2016
- Generated cash of $50 million through the first nine months of 2015 due to the continued strong management of working capital in North America, Latin America and Europe, consistent with management’s expectations
- Reduced net debt by $79 million from the second quarter and by $205 million from year end 2014
- Completed the sale of Thailand for cash consideration of $88 million, bringing total cash proceeds from divestitures to $176 million
Michael T. McDonnell, President and Chief Executive Officer, said, “We are pleased with our adjusted operating income in the third quarter, which was ahead of our guidance range. This reflects the strong performance of our subsea power business in Europe as well as our operations in North America driven by our electric utility and communications businesses. We remain focused on optimizing the performance of our businesses in North America, Europe and Latin America, building a leading cost position, and continuing to execute on our restructuring and divestiture programs to create a more streamlined, and nimble organization. We are encouraged by our progress and are on the right path toward generating long-term value for shareholders but realize we have more to accomplish. To that end, we look forward to sharing our strategic roadmap in the early part of next year. We believe continued execution of our current plans, coupled with the implementation and execution of our strategic roadmap, will put us on course to achieve industry leading margins in the markets we serve.”
Segment Demand
North America – unit volume through the first nine months of the year was up 5% year over year primarily due to demand for electric utility, communications and rod and strip products. For the third quarter, unit volume was up 2% year over year driven by demand for electric utility cables for aerial transmission and grid reinforcement projects. Sequentially, unit volume was flat as demand for utility cables helped to offset lower demand for industrial and specialty products.
Europe – excluding the impact of restructuring activity including the exit from certain low value add end markets in 2015, unit volume through the first nine months of the year and for the third quarter was down year over year 12% and 10%, respectively, principally due to lower demand for industrial and construction products. Demand for electric utility cables was stable during the third quarter including land and submarine turnkey projects. The Company’s turnkey project backlog was $215 million as of the end of the third quarter. Sequential unit volume was down due to seasonal demand patterns.
Latin America (excluding Venezuela) – excluding metal intensive products such as copper rod and aerial transmission cables, unit volume through the first nine months of the year was down 15% year over year as end market demand remains under pressure throughout Latin America due to the ongoing difficult economic conditions and reduced government spending.
Other Expense
Other expense of $27 million for the third quarter consisted of mark-to-market losses of $8 million on derivative instruments accounted for as economic hedges and foreign currency transactions losses of $19 million, of which $13 million relates to non-core operations in Africa.
Net Debt – Excluding Venezuela
Net debt was $1,014 million at the end of the third quarter of 2015, a decrease of $79 million and $205 million from the end of the second quarter of 2015 and the end of 2014, respectively. The decrease in net debt is principally due to continued efficient management of working capital and cash proceeds generated from divestitures.
Other Matters
As of October 2, 2015, the Company concluded that, due to the increasingly restrictive exchange-control regime that has limited access to US dollars in Venezuela, combined with government imposed limitations on its ability to import raw material into Venezuela and otherwise exert operational control over the business there, the Company no longer meets the accounting criteria for operational control over its wholly-owned operations in Venezuela. Therefore, in accordance with applicable accounting standards, the Company deconsolidated its Venezuelan subsidiary and, beginning in the fourth quarter of 2015, will account for its investment using the cost method. The Company made this change effective October 2, 2015, and fully impaired its cost investment to fair value by recording a charge of $12 million which is reflected in SG&A on the income statement.
Fourth Quarter 2015 Outlook for continuing operations including North America, Latin America and Europe (excluding Asia Pacific and Africa)
Revenues in the fourth quarter are expected to be in the range of $900 to $950 million. Unit volume is anticipated to be down mid-single digits sequentially principally due to seasonal demand patterns, weak industrial and specialty end-markets in North America and pressure throughout end markets in Latin America. Adjusted operating income is anticipated to be in the range of $25 to $40 million for the fourth quarter principally due to the lower activity in the Company’s submarine turnkey project business in Europe. Adjusted earnings per share are expected to be in the range of $0.02 to $0.22 per share for the fourth quarter. The Company’s fourth quarter outlook assumes copper (COMEX) and aluminum (LME) prices of $2.33 and $0.67, respectively, and constant foreign currency exchange rates. The fourth quarter outlook does not include operating results from Asia Pacific and Africa.
Non-GAAP Financial Measures
Adjusted operating income from continuing operations (defined as operating income from continuing operations before extraordinary, nonrecurring or unusual charges and other certain items), adjusted earnings per share from continuing operations (defined as diluted earnings per share from continuing operations 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. Metal adjusted revenues, adjusted operating income and return on metal-adjusted sales on a segment basis, 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. Adjusted results 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. Effective as of the end of the third quarter 2015, we deconsolidated our Venezuelan subsidiary and began accounting for our investment in our Venezuelan subsidiary using the cost method of accounting. Net debt and certain historical results of our Venezuela operations on a standalone basis are disclosed in the Third Quarter 2015 Investor Presentation available on the Company’s website. Adjusted results and the fourth quarter 2015 guidance remove the operating results from continuing operations in Asia Pacific andAfrica as we are in the process of divesting these operations and therefore cannot predict the amounts of any future operating income or expenses we may incur. For accounting purposes, the continuing operations in Asia Pacific and Africa (which consists primarily of businesses located in Africa) do not meet the requirements to be presented as discontinued operations.
With respect to the Company’s fourth quarter 2015 guidance, the Company is not able to provide a reconciliation of the non-GAAP financial measures to GAAP because it does not provide specific guidance for the various extraordinary, nonrecurring or unusual charges and other certain 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.
