General Cable Corporation (BGC)
February 08, 2013 10:00 am ET
Len Texter - Director of Investor Relations
Brian J. Robinson - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer
Gregory B. Kenny - Chief Executive Officer, President and Director
Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division
Gary Farber - CL King & Associates, Inc., Research Division
Brent Thielman - D.A. Davidson & Co., Research Division
Richard Wesolowski - Sidoti & Company, LLC
Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division
Brett M. Levy - Jefferies & Company, Inc. Fixed Income Research
Yilma Abebe - JP Morgan Chase & Co, Research Division
Previous Statements by BGC
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Thank you. General Cable, you may begin your conference.
Good morning, everyone, and thank you for joining us for General Cable's fourth quarter update and initial view of 2013 conference call. I'm Len Texter, Director of Investor Relations at General Cable.
Joining me this morning are Greg Kenny, our President and Chief Executive Officer; and Brian Robinson, our Chief Financial Officer. Many of you have already seen a copy of our press release from last night. For those of you who have not, it's available on First Call and on our website at generalcable.com.
Today's call will be accompanied by a slide presentation, also available on our website. If you have not downloaded a copy, we recommend that you do so, as we will refer to the presentation throughout our prepared remarks today.
The format of today's call will first be an update by Brian Robinson on our expectations for the fourth quarter. Secondly, Greg Kenny will provide comments on the company's initial view of 2013 followed by a question-and-answer period. Please keep in mind the format of today's call is to provide additional information on the specific items expected to affect fourth quarter results, as well as our initial view of 2013.
The company will release its reported results for the fourth quarter on February 25 before the market opens, followed by its normal earnings conference call, which is scheduled to start at 10:00 a.m. Eastern the morning of February 25.
Before we get started, I wanted to call your attention to our Safe Harbor provision regarding forward-looking statements and company-defined non-GAAP financial measures as defined on Slide #2, as we will reference adjusted operating income in our call today.
To begin, please turn to Slide #5. With that, I'll turn the call over to Brian Robinson. Brian?
Brian J. Robinson
Thank you, Len. Good morning. We have a couple of items to get to, but first I wanted to let you know that our businesses in North America and ROW finished the year with a positive operating performance broadly consistent with expected seasonal trends. We are especially pleased with ROW, as this performance was in the context of a change in long-term regional management. We are equally encouraged by the stronger-than-expected performance of recent acquisitions, including Alcan Cable North America, Prestolite and Procables. Alcan Cable China is also off to a fast start; however, its earnings contribution for the fourth quarter was muted by purchase accounting inventory step-up adjustments.
Our businesses, on an adjusted basis, in Europe and Mediterranean, were collectively slightly weaker than expected, which was exacerbated in the fourth quarter by the absorption of $12 million of expenses related to the revised estimated profitability of certain submarine turnkey projects. As a result, the company now expects adjusted operating income for the fourth quarter in the range of $45 million to $47 million, excluding certain items.
On Slides 6 and 7, we have outlined certain items that we are excluding from our adjusted results, as these items relate to specific events and transactions experienced in the fourth quarter of 2012. These items are excluded from our adjusted results in order to present the business in a format consistent with how management reviews underlying business trends.
On Slide 6, the company expects to report onetime charges due to an equipment failure at its submarine power cable manufacturing facility in Germany that resulted in damaged cable and equipment repairs. While our team responded quickly to address the equipment failure, the machinery used in this business is massive, as you know, and when the equipment fails to function as intended, the impact can be pronounced. More broadly, the lack of regulatory clarity continues to hamper the offshore wind industry in Germany, as legislators recently postponed key decisions on renewable energy growth targets and electricity grid expansion plans into the latter part of the 2013.
As we've communicated throughout 2012, due to the ongoing regulatory uncertainty and the complexity of offshore construction, the timing of the company's submarine turnkey projects remains highly variable. While we anticipated some project scheduling changes as previously communicated to you in the third quarter, the level of project delays and deferrals experienced during the fourth quarter were unexpected, effectively pushing production and installation into late 2013, 2014 and 2015. The company has initiated steps to potentially recover certain costs that are expected to be incurred due to the project delays and deferrals through legal action and insurance coverage. Our initial view of 2013, which Greg will take you through shortly, does not incorporate any potential cost recovery.