General Cable Corporation (BGC)

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General Cable (BGC)

Q1 2013 Earnings Call

May 01, 2013 8:30 am ET

Executives

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

Analysts

Richard Wesolowski - Sidoti & Company, LLC

Shawn M. Harrison - Longbow Research LLC

Matthew Schon McCall - BB&T Capital Markets, Research Division

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Brent Thielman - D.A. Davidson & Co., Research Division

Presentation

Operator

Good morning. My name is Kyle and I'll be your conference facilitator. I would like to welcome everyone to General Cable Corporation's First Quarter 2013 Earnings Conference Call. This conference call is being recorded at the request of General Cable. Should you have any objections, you may disconnect at this time. [Operator Instructions] Thank you. General Cable, you may begin your conference.

Len Texter

Good morning, everyone, and welcome to General Cable's First Quarter 2013 Earnings Conference Call. I'm Len Texter, Director, Investor Relations at General Cable. Joining me this morning are Greg Kenny, our President and Chief Executive Officer; Brian Robinson, our Chief Financial Officer; Greg Lampert, our President and Chief Executive Officer of the Americas; and Bob Siverd, our General Counsel.

Many of you have already seen a copy of our press release issued last night. For those of you who have not, it is 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 overview by Brian Robinson of our first quarter results, followed by comments on the company's outlook for the second quarter. Secondly, Greg Kenny will provide additional comments on our 2013 full year outlook and business trends, followed by a question-and-answer period.

Before we get started, I wanted to call your attention to our Safe Harbor provisions regarding forward-looking statements and company-defined non-GAAP financial measures, as defined on Slide #2, as we may refer to adjusted operating income and adjusted EBITDA in today's call. To begin, please turn to Slide #5, where we have included a reconciliation of our previously communicated outlook.

With that, I will now turn the call over to Brian Robinson. Brian?

Brian J. Robinson

Thank you, Len. Good morning. We are pleased to report that all 3 of our segments performed about as expected during the first quarter. Consistent with seasonal demand expectations, net sales and global unit volume declined 4% sequentially, as weather-related limitations on construction and project activity and typical holidays throughout many Latin American countries curbed demand in the first quarter. Adjusted operating income of $46.2 million was above the midpoint of our range of expectations, principally due to strong contributions from acquisitions and solid results in our base businesses in North America. The momentum of our recent acquisitions continued in the first quarter as these businesses again exceeded our expectations for a second consecutive quarter. Adjusted EPS near the low end of our communicated range of $0.23 per share reflects the additional impact of foreign currency transaction losses and a higher-than-expected effective tax rate.

Due to the mechanics of the quarterly computation under applicable tax accounting rules, a tax benefit was recognized in the first quarter on a GAAP basis. We have removed this tax benefit so as to present the first quarter at an adjusted effective tax rate of approximately 36.5%. For 2013, the company now expects its full year adjusted effective tax rate to be in the range of 40%, excluding the impact of the currency devaluation in Venezuela. The company's effective tax rate for the full year has increased from prior expectations due to the relative greater mix of forecasted full year earnings and higher tax jurisdictions and forecasted full year tax losses in certain countries including Germany, Spain and India. On a full year basis, our cash tax rate is estimated to be in the range of 25% for 2013.

Next on Slide 6, we provided a reconciliation of the items excluded from adjusted operating income for the first quarter. The company recorded $3.5 million of expenses related to its submarine cable business, which includes $2 million for damaged cables on 2 separate power cable projects and $1.5 million related to the legal settlement of a warranty dispute in its offshore cable supply business. The company also incurred restatement and forensic investigation costs in Brazil of $5.4 million and further severance-related charges in Europe of $2.7 million during the first quarter.

Lastly, the company closed a small manufacturing facility in its electronics business in North America and moved the production to other facilities within the region. This facility closure is expected to result in annual savings in the range of $500,000 to $1 million.

Moving to Slide 7. Net sales decreased 5% on a metal adjusted basis principally due to typical seasonal declines in global unit volume, which declined 4% sequentially. Adjusted operating income for the first quarter of 2013 was also down 4% or $2 million compared to $48.2 million in the fourth quarter of 2012. Other expense reflects the $40.9 million impact of the currency devaluation in Venezuela as the company remeasured its global balance sheet in the first quarter. Also reflected in other expense are the movements of mark-to-market economic hedges of $9.2 million and foreign currency transaction losses of $2.6 million. On the next 3 slides, we've outlined some of the key metrics for each of our reportable segments.

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