General Cable Corporation (BGC)

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General Cable (BGC)

Q3 2010 Earnings Conference Call

November 4, 2010 08:30 am ET

Executives

Len Texter – Manager, IR

Greg Kenny – President and CEO

Brian Robinson – EVP, CFO and Treasurer

Analysts

Shawn Harrison – Longbow Research

Stuart Bush – RBC Capital Markets

Jack Stimac – BB&T Capital Markets

Jeff Beach – Stifel Nicholaus

Brent Thielman – D. A. Davidson

Tony Kure – Keybanc

J. Keith Johnson – Morgan Keegan & Co.

Michael Coleman – Sterne Agee

Presentation

Operator

Good morning. My name is Shaun, and I will be your conference facilitator. I would like to welcome everyone to General Cable Corporation's Third Quarter 2010 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. All participants have been placed on mute to prevent any background noise. (Operator instructions) Thank you. General Cable, you may begin your conference.

Len Texter

Good morning, everyone, and welcome to General Cable's third quarter 2010 earnings conference call. I'm Len Texter, Manager, Investor Relations at General Cable. Joining me this morning are Greg Kenny, our President and Chief Executive Officer; Brian Robinson, our Chief Financial Officer; and Greg Lampert, our President and Chief Executive Officer of General Cable North America.

Many of you have seen a copy of our press release from last night. For those of you who have not, it is available on First Call and our website at generalcable.com. I want to call your attention to our Safe Harbor provisions for forward-looking statements that can be found at the end of our press release. The Safe Harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward-looking statements. Our current form 10-K reports and other periodic filings on file with the SEC provide further detail about the risk factors related to our business.

During this call, we may refer to adjusted operating income and adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, plant rationalizations and other items. These non-GAAP company-defined measures are being provided because management believes these are useful in analyzing the operating performance and cash flow before the impact of various charges. A reconciliation of adjusted operating income and EBITDA to GAAP net income is available on the Investor Relations section of our website at generalcable.com.

The format for today's call will first be some discussion by Greg Kenny about the current business environment. Secondly, Brian Robinson will provide some financial details about the third quarter. And finally, Greg will provide some comments on the company's fourth quarter 2010 outlook and business trends, followed by a question-and-answer period.

We would like to remind everyone that effective January 1, 2010, the company changed its method of valuing all of its inventories that historically used the last-in/first-out method to the average cost method. The company applied this change in accounting principle, retrospectively, to all prior comparative periods discussed here today.

With that, I will now turn the call over to Greg Kenny.

Greg Kenny

Thank you, Len, and good morning. I'm very pleased to report a solid third quarter as demand patterns were better than expected across many parts of our business particularly in the rest of the world and North America segments where sequentially volume was up 16.8% and 8.5% respectively.

I have also encouraged by our expectations for the fourth quarter of 2010 were volumes anticipate to be up sequentially 5% to 8%. This sequentially improving volume would more than offset our normal seasonal demand patterns and that the fourth quarter volumes are typically below those on the third quarter. This fourth quarter result would also represent the first time in nearly two years that we will have reported volume improvement year-over-year in back to back quarters.

For the third quarter 2010, our reported revenues of $1.2 billion and adjusted earnings per share of $0.54 both of which were at the upper end of our expectations. These results include the impact of our planned seasonal reduction and inventory and a traditional summer holiday period in Europe partially offset by the benefit of foreign currency transaction gains in Venezuela, the benefit of cost reduction networks taken in Spain in the first half of the year as well as (accumulated) fact in benefit or our (inaudible) using (inaudible) manufacturing tools.

While demand patterns are encouraging, the frightened environment remains challenging as low levels of overall demand, well-capacity utilization rates in volatile and rising commodity prices persist. Despite the uncertainties surrounding the (inaudible) sustainability of the economic recovery in many developed countries, we are cautiously optimistic, the bottom is occurring in certain of our businesses as marketing conditions in North America improve the benefits of cost reduction efforts in Europe are realized and infrastructure spending in many emerging markets threatens. Also, while our capacity utilization rates remain at low levels, they have improved from the first half of this year and are currently in the range of 65% to 70% on average.

Brian will take you to the details of the financials in a bit. I thought I would spend some time talking about how I currently see our global business environment. Many of the positive trends we identified in the first half have continued into the third quarter particularly as it relates to the stabilization of demand for certain products in South America, Southeast Asia and the United States. We encourage while the ongoing investment and commitment to infrastructure development throughout our raw segment.

In Brazil, economic growth in the ongoing investment in the country’s infrastructure in which there have been billions of dollars of investments approved in additional power distribution and power generation projects continue to the strong phase. Also during the third quarter, all the necessary environmental permits were obtained where major Brazilian transmission project totaling more than 150 million which we are expected to begin shipping in the fourth quarter of this year as well as in 2011 and 2012.

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