UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended December 31,
2009,
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to .
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Commission File Number:
001-33337
COLEMAN CABLE, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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36-4410887
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer Identification
No.)
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1530 Shields Drive
Waukegan, Illinois 60085
(Address of principal executive
offices) (Zip Code)
Registrants telephone number, including area code:
(847) 672-2300
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Exchange on Which Registered
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Common Stock, par value $0.001 per share
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NASDAQ Global Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has
filed all reports to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirement for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data file required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 30, 2009 was
$30,862,722.
Common
shares outstanding as of February 28, 2010 16,889,798
DOCUMENTS
INCORPORATED BY REFERENCE
Part III of this Annual Report on
Form 10-K
incorporates by reference portions of the registrants
Proxy Statement for its 2010 Annual Meeting of Stockholders to
be held on April 30, 2010.
TABLE OF
CONTENTS
TRADEMARKS
Our trademarks, service marks and trade names referred to in
this report include American
Contractor®,
Barontm,
Booster-in-a-Bag®,
CCI®,
Clear Signaltm,
Coilex®,
Copperfield®,
Cool Colorstm,
Corra/Clad®,
Luma-Site®,
Maximum
Energy®,
Moonrays®,
Plencote®,
Polar-Flextm,
Polar-Rig 125(R), Polar
Solar®,
Power
Station®,
Push-Locktm,
Quadnector®,
Road
Power®,
Royal®,
Seoprene®,
Signal®,
Tri-Source®,
Trinector®,
Woods®
Yellow
Jacket®
and X-Treme Boxtm,
among others.
PART I
Cautionary
Note Regarding Forward-Looking Statements
Various statements contained in this report, including those
that express a belief, expectation or intention, as well as
those that are not statements of historical fact, are
forward-looking statements. These statements may be identified
by the use of forward-looking terminology such as
anticipate, believe,
continue, could, estimate,
expect, intend, may,
might, plan, potential,
predict, should, or the negative thereof
or other variations thereon or comparable terminology. In
particular, statements about our expectations, beliefs, plans,
objectives, assumptions or future events or performance
contained in this report, including certain statements contained
in Business, Risk Factors, and
Managements Discussion and Analysis of Financial
Condition and Results of Operations, are forward-looking
statements.
We have based these forward-looking statements on our current
expectations, assumptions, estimates and projections. While we
believe these expectations, assumptions, estimates and
projections are reasonable, such forward-looking statements are
only predictions and involve known and unknown risks and
uncertainties, many of which are beyond our control. These and
other important factors, including those discussed under
Risk Factors, and elsewhere in this report may cause
our actual results, performance or achievements to differ
materially from any future results, performance or achievements
expressed or implied by these forward-looking statements. Some
of the key factors that could cause actual results to differ
from our expectations include:
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fluctuations in the supply or price of copper and other raw
materials;
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increased competition from other wire and cable manufacturers,
including foreign manufacturers;
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pricing pressures causing margins to decrease;
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further adverse changes in general economic and capital market
conditions;
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changes in the demand for our products by key customers;
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additional impairment charges related to our goodwill and
long-lived assets;
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changes in the cost of labor or raw materials, including PVC and
fuel;
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failure of customers to make expected purchases, including
customers of acquired companies;
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failure to identify, finance or integrate acquisitions;
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failure to accomplish integration activities on a timely basis;
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failure to achieve expected efficiencies in our manufacturing
consolidations and integration activities;
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unforeseen developments or expenses with respect to our
acquisition, integration and consolidation efforts;
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increase in exposure to political and economic development,
crises, instability, terrorism, civil strife, expropriation, and
other risks of doing business in foreign markets;
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impact of foreign currency fluctuations and changes in interest
rates;
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impact of renegotiation of extension of labor
agreements; and
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other risks and uncertainties, including those described under
Risk Factors.
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Given these risks and uncertainties, we caution you not to place
undue reliance on these forward-looking statements. In addition,
any forward-looking statements represent our views only as of
today and should not be relied upon as representing our views as
of any subsequent date. We do not undertake and specifically
decline any obligation to update any of these statements or to
publicly announce the result of any revisions to any of these
statements to reflect future events or developments, therefore,
you should not rely on these forward-looking statements as
representing our views as on any date subsequent to today.
1
General
Coleman Cable, Inc. (the Company,
Coleman, we, us or
our) is a leading designer, developer, manufacturer
and supplier of electrical wire and cable products for consumer,
commercial and industrial applications, with operations
primarily in the United States (U.S.) and, to a
lesser degree, Canada. Our broad line of wire and cable products
enables us to offer our customers a single source for many of
their wire and cable product requirements. We sell our products
to more than 8,000 active customers in diverse end markets,
including a wide range of specialty distributors, retailers and
original equipment manufacturers (OEMs). Virtually
all of our products are sold to customers located in either the
U.S. or Canada.
Company
History
We were incorporated in Delaware in 1999. The majority of our
operations prior to our 2007 acquisitions, as discussed below,
came from Coleman Cable Systems, Inc., our predecessor company,
which was formed in 1970 and which we acquired in 2000. G. Gary
Yetman, our President and Chief Executive Officer, joined our
predecessor in 1986, and Richard N. Burger, our Executive Vice
President, Chief Financial Officer, Secretary and Treasurer,
joined our predecessor in 1996.
In March 2007, we registered 16.8 million shares of our
common stock pursuant to a registration rights agreement we had
executed in 2006 with our principal shareholders in connection
with a private placement of our common stock. Upon completion of
this registration in March 2007, our common stock became listed
on the NASDAQ Global Market under the symbol CCIX.
2007
Acquisitions
We made two significant acquisitions during 2007 (collectively,
the 2007 Acquisitions). In April 2007, we acquired
100% of the outstanding equity interests of Copperfield, LLC
(Copperfield) for $215.4 million, including
acquisition-related costs and working capital adjustments. At
the time of our acquisition, Copperfield was one of the largest
privately-owned manufacturers and suppliers of electrical wire
and cable products in the U.S., with annual sales in excess of
$500 million. Then in November 2007, we acquired the
electrical products business of Katy Industries, Inc.
(Katy), which operated in the U.S. as Woods
Industries, Inc. (Woods U.S.) and in Canada as Woods
Industries (Canada) Inc. (Woods Canada),
collectively referred to herein as Woods (Woods).
The principal business of Woods was the design and distribution
of consumer electrical cord products, sold principally to
national home improvement, mass merchant, hardware and other
retailers. We purchased certain assets of Woods U.S. and
all the stock of Woods Canada for $53.8 million, including
acquisition-related costs and working capital adjustments. The
acquisition of Woods, which at the time of our acquisition had
annual sales of approximately $200 million, both expanded
our U.S. business and enhanced our market presence and
penetration in Canada.
Results of operations for the 2007 Acquisitions have been
included in our consolidated financial statements since their
respective acquisition dates. Accordingly, our 2007 consolidated
operating results reflect approximately nine months of
Copperfield activity: April 2, 2007 to December 31,
2008, and one month of Woods activity: November 30, 2007 to
December 31, 2008. See further discussion within
Part II, Item 7 and in Note 2 of Notes to
Consolidated Financial Statements contained in Part II,
Item 8 of this document.
We financed the above acquisitions primarily with proceeds
received from the issuance of debt and borrowings under our
revolving credit facility, thereby significantly increasing our
total outstanding debt in 2007. See further discussion within
the Liquidity and Capital Resources section in
Part II, Item 7 of this document.
Business
Overview
We produce products across four primary product lines:
(1) industrial wire and cable, including portable cord,
machine tool wiring, welding and mining cable and other power
cord products; (2) electronic wire, including telephone,
security and coaxial cable, thermostat wire and irrigation
cable; (3) assembled wire and cable products, including
extension cords, booster and battery cable, lighting products
and surge and strip products; and (4) fabricated bare wire,
including stranded, bunched, and single-end copper, copper clad
steel and various copper alloy wire.
2
The core component of most of our products is copper wire which
we draw from copper rod into a variety of gauges of both solid
and stranded copper wires. We use a significant amount of the
copper wire that we produce as an input into the production of
our finished wire and cable products, while the remainder of our
copper wire production is sold in the form of bare copper wire
(in a variety of gauges) to external OEMs and wire and cable
producers. In the majority of our wire and cable products, a
thermoplastic or thermosetting insulation is extruded over the
bare wire (in a wide array of compounds, quantities, colors and
gauges) and then cabled (twisted) together with other insulated
wires. An outer jacket is then extruded over the cabled product.
This product is then coiled or spooled and packaged for sale or
processed further into a cable assembly.
Our business is organized into two reportable segments:
(1) Distribution, and (2) OEM. We sell products from
all of our four product lines across each of our business
segments. Within these two reportable segments, we sell our
products into multiple channels, including electrical
distribution, wire and cable distribution, OEM/government,
heating, ventilation, air conditioning and refrigeration
(HVAC/R), irrigation, industrial/contractor,
security/home automation, recreation/transportation, copper
fabrication, retail and automotive.
More detailed information regarding our primary product lines
and segments is set forth below within the Product
Overview and Segment Overview sections, as
well as within Note 16 of Notes to Consolidated Financial
Statements contained in Part II, Item 8 of this
document.
Industry
and Competitive Overview
The wire and cable industry is mature and though it has
experienced significant consolidation over the past few years,
it remains fragmented, characterized by a large number of
competitors. The market segments in which we compete are highly
competitive, with numerous competitors, many of whom are large,
well-established companies with greater financial resources.
Each of our product lines competes with at least one major
competitor; however, due to the diversity of our product
offering, most of our competitors do not offer the entire
spectrum of our product lines. Many of our products are made to
industry specifications and, therefore, may be interchangeable
with our competitors products. We compete with other
suppliers based on factors such as breadth of product offering,
inventory availability, delivery time, price, quality, customer
service and relationships, brand recognition and logistics
capabilities. We believe we can compete effectively on the basis
of each of these factors.
As noted above, copper comprises one of the major components for
cable and wire products. Cable and wire manufacturers are
generally able to pass through changes in the cost of copper to
customers. However, there can be timing delays of varying
lengths for implementing price changes depending on the type of
product, competitive conditions, particular customer
arrangements and inventory management. The cost of our products
typically comprises a relatively small component of the overall
cost of end products produced by customers in each of our end
markets. As a result, our customers are generally less sensitive
to marginal fluctuations in the price of copper as our products
make up a relatively small portion of their overall purchases.
However, when copper prices drop significantly over a relatively
short period of time, as was the case in late 2008, it becomes
more difficult to delay the impact of such declines on product
pricing. Additionally, when overall sales demand declines within
our end markets, as was also the case in late 2008 and into
2009, there can be incremental competitive pricing pressure due
to significant underutilized capacity within the supplier
industry.
Product
Overview
Net sales across our four major product lines were as follows:
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Net Sales by Groups of Products
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2009
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2008
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2007
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(In thousands)
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Industrial Wire and Cable
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$
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187,671
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$
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293,250
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$
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312,105
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Electronic Wire
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133,090
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381,227
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402,146
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Assembled Wire and Cable Products
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167,734
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261,313
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120,940
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Fabricated Bare Wire
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15,657
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37,178
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28,953
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Total
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$
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504,152
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$
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972,968
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$
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864,144
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3
Industrial
Wire and Cable
Our industrial wire and cable product line includes portable
cord, machine tool wiring, welding, mining, pump, control,
stage/lighting, diesel/locomotive and metal clad cables and
other power cord products. These are medium power supply cables
used for permanent or temporary connections between a power
source (such as a power panel, receptacle or transformer) and a
device (such as a motor, light, transformer or control panel).
These products are used in construction, industrial MRO and OEM
applications, such as airline support systems, wind turbines,
cranes, marinas, offshore drilling, fountains, car washes,
sports lighting, construction, food processing, forklifts,
mining and military applications. Our brands in this product
line include Royal, Seoprene, Corra/Clad and Polar-Rig 125.
Electronic
Wire
Our electronic wire product line includes telephone, security,
coaxial, industrial automation, twinaxial, fire alarm, plenum
and home automation cables. These cables permanently connect
devices, and they provide power, signal, voice, data or video
transmissions from a device (such as a camera, alarm or
terminal) to a source (such as a control panel, splice strip or
video recorder). These products are used in applications such as
telecommunication, security, fire detection, access control,
video monitoring, data transmission, intercom and home
automation systems. Our primary brands in this product line
include Signal, Plencote, Soundsational and Clear Signal.
Our electronic wire product line also includes low voltage cable
products comprised of thermostat wire and irrigation cables.
These cables permanently connect devices, and they provide low
levels of power between devices in a system (such as a
thermostat and the switch on a furnace, or a timer and a switch,
device or sensor). They are used in applications such as HVAC/R,
energy management, home sprinkler systems and golf course
irrigation. We sell many of our low voltage cables under the
Baron, BaroStat and BaroPak brand names.
Assembled
Wire and Cable Products
Our assembled wire and cable products include multiple types of
extension cords, as well as ground fault circuit interrupters,
portable lighting (incandescent, fluorescent and halogen),
retractable reels, holiday items, solar lighting, recreational
vehicle (RV) cords and adapters, and surge and strip
products. For the automotive aftermarket we offer booster
cables, battery cables and battery accessories. Our brands in
this area of our business include Polar Solar, Power Station,
American Contractor, Road Power, Woods, Moonrays,
Booster-in-a-Bag,
Tri-Source,
Trinector, Yellow Jacket, Quadnector, Luma-Site, Coilex, Stripes
and Cool Colors, as well as privately-labeled brands.
Fabricated
Bare Wire Products
Our fabricated bare wire products conduct power or signals and
include stranded, bunched and single-end copper, copper clad
steel and various copper alloy wire. In this area, we process
copper rod into stranding for use in our electronic and
electrical wire and cable products or for sale to others for use
in their products. We use most of our copper wire production to
produce our own finished products. Our primary brand in this
product line is Copperfield.
Segment
Overview
As noted above, we classify our business into two reportable
segments: (1) Distribution and (2) OEM. Our reportable
segments are a function of the customer type or end markets each
respective segment serves and how we are organized internally to
market to such customer groups and measure our financial
performance. The Distribution segment serves customers in
distribution businesses, who are resellers of our products,
while our OEM
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segment serves OEM customers, who generally purchase more
tailored products which are used as inputs into subassemblies of
manufactured finished goods. Financial data for our business
segments is as follows:
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Year Ended December 31,
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2009
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2008
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2007
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(In thousands)
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Net sales:
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Distribution
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$
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390,911
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$
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670,740
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$
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576,602
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OEM
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113,241
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302,228
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287,542
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Total
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$
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504,152
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$
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972,968
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$
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864,144
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Operating income (loss):
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Distribution
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$
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36,666
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$
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57,142
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$
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58,439
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OEM
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7,074
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(3,348
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8,323
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Total
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43,740
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53,794
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66,762
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Corporate
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(93,950
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(63,927
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(14,937
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Consolidated operating income (loss)
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$
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(50,210
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$
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(10,133
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$
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51,825
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Segment operating income represents income from continuing
operations before net interest expense, other income or expense,
and income taxes. Corporate consists of items not charged or
allocated to the segments, including costs for employee
relocation, discretionary bonuses, professional fees,
restructuring expenses, asset impairments, and intangible
amortization. The Companys segments have common production
processes, and manufacturing and distribution capacity.
Accordingly, we do not identify net assets to our segments.
During the first quarter of 2008, we changed our management
reporting structure and the manner in which we report financial
results internally. These changes resulted in recognition of the
above-noted reportable segments, as further discussed in
Part II, Item 7 of this document, as well as
Note 16 of Notes to Consolidated Financial Statements
contained in Part II, Item 8 of this document. We have
recast 2007 segment information to conform to the new segment
presentation.
Raw
Materials
Copper is the primary raw material used in the manufacture of
our products. Other significant raw materials are plastics, such
as polyethylene and polyvinyl chloride (PVC),
aluminum, linerboard and wood reels. There are a limited number
of domestic and foreign suppliers of copper and these other raw
materials. We typically have supplier agreements with terms of
one to two years under which we may make purchases at the
prevailing market price at time of purchase, with no minimum
purchase requirements. Our centralized procurement department
makes an ongoing effort to reduce and contain raw material
costs, and as noted above, we attempt to reflect raw material
price changes in the sale price of our products. From time to
time, we have and may continue to employ the use of derivatives,
including copper commodity contracts, including their usage in
managing our costs for such materials and matching our sales
terms with certain customers.
Foreign
Sales and Assets
For 2009, 2008 and 2007, our consolidated net sales included a
total of $36.6 million, $42.5 million, and
$3.4 million, respectively, in Canada, primarily as a
result of the 2007 Woods acquisition. In addition, we had a
total of approximately $0.4 million and $0.5 million
in tangible long-lived assets in Canada at December 31,
2009 and 2008, respectively. In addition, we did not have any
significant sales outside of the U.S. and Canada in 2009,
2008, or 2007.
Patents
and Trademarks
We own a number of U.S. and foreign patents covering
certain of our products. We also own a number of registered
trademarks. While we consider our patents and trademarks to be
valuable assets, we do not consider any
5
single patent or trademark to be of such material importance
that its absence would cause a material disruption of our
business. No patent or trademark is material to either
individual segment.
Seasonality
and Business Cycles
Our net sales follow general business cycles. We also have
experienced, and expect to continue to experience, certain
seasonal trends in net sales and cash flow. Net sales are
generally higher in the third and fourth quarters due to
increased customer demand in anticipation of, and during, the
winter months and holiday season.
Backlog
and Shipping
Our product lines have no significant order backlog because we
follow the industry practice of stocking finished goods to meet
customer demand on a
just-in-time
basis. We believe that the ability to fill orders in a timely
fashion is a competitive factor in the markets in which we
operate. As a result of historically higher demand for our
products during the late fall and early winter months, in past
years we have typically built up our inventory levels during the
third and early fourth quarters of the year. In both 2008 and
2009, we limited this
build-up in
light of prevailing economic conditions. In addition, trade
receivables arising from increased shipments made during the
late fall and early winter months are typically collected during
late fourth quarter and early first quarter of each year.
Employees
As of December 31, 2009, we had 934 employees, with
approximately 26% of our employees represented by one labor
union. Our current collective bargaining agreement expired
December 22, 2009, and has been extended through
March 19, 2010. We began collective bargaining negotiations
on January 14, 2010. We consider our labor relations to be
good, and we have not experienced any significant labor disputes.
Environmental,
Health and Safety Regulation
Many of our products are subject to the requirements of federal,
state and local or foreign regulatory authorities. We are
subject to federal, state, local and foreign environmental,
health and safety protection laws and regulations governing our
operations and the use, handling, disposal and remediation of
regulated materials currently or formerly used by us. A risk of
environmental liability is inherent in our current and former
manufacturing activities in the event of a release or discharge
of regulated materials generated by us. We are party to one
environmental claim, which is described below under the heading
Legal Proceedings. There can be no assurance that
the costs of complying with environmental, health and safety
laws and requirements in our current operations, or that the
potential liabilities arising from past releases of or exposure
to regulated materials, will not result in future expenditures
by us that could materially and adversely affect our financial
position, results of operations or cash flows.
The
current global recession and the downturn in our served markets
could continue to adversely affect our operating results and
stock price in a material manner.
In late 2008, we experienced significant declines in demand for
our products which greatly reduced our volumes and our sales
levels as a result of strong recessionary factors which
continued throughout 2009. Though we noted a level of volume
stability in 2009, any further deterioration in the
macro-economic environment could cause substantial reductions in
our revenue and results of operations. In addition, during
economic downturns like the current one, some competitors have
become increasingly aggressive in their pricing practices
particularly in light of excess industry capacity, which could
adversely impact our gross margins. These conditions also make
it difficult for our customers, our suppliers and us to
accurately forecast and plan future business activities.
6
Disruptions
in the supply of copper and other raw materials used in our
products could cause us to be unable to meet customer demand,
which could result in the loss of customers and net
sales.
Copper is the primary raw material that we use to manufacture
our products. Other significant raw materials that we use are
plastics, such as polyethylene and PVC, aluminum, linerboard and
wood reels. There are a limited number of domestic and foreign
suppliers of copper and these other raw materials. We typically
have supplier agreements with terms of one to two years for our
raw material needs that do not require us to purchase a minimum
amount of these raw materials. If we are unable to maintain good
relations with our suppliers or if there are any business
interruptions at our suppliers, we may not have access to a
sufficient supply of raw materials. If we lose one or more key
suppliers and are unable to locate an alternative supply, we may
not be able to meet customer demand, which could result in the
loss of customers and net sales.
Fluctuations
in the price of copper and other raw materials, as well as fuel
and energy, and increases in freight costs could increase our
cost of goods sold and affect our profitability.
The prices of copper and our other significant raw materials, as
well as fuel and energy costs, are subject to considerable
volatility; this volatility has affected our profitability and
we expect that it will continue to do so in the future. Our
agreements with our suppliers generally require us to pay market
price for raw materials at the time of purchase. As a result,
volatility in these prices, particularly copper prices, can
result in significant fluctuations in our cost of goods sold. If
the cost of raw materials increases and we are unable to
increase the prices of our products, or offset those cost
increases with cost savings in other parts of our business, our
profitability would be reduced. As a result, increases in the
price of copper and other raw materials may affect our
profitability if we cannot effectively pass these price
increases on to our customers. In addition, we pay the freight
costs on certain customer orders. In the event that freight
costs increase substantially, due to fuel surcharges or
otherwise, our profitability would decline.
The
markets for our products are highly competitive, and our
inability to compete with other manufacturers in the wire and
cable industry could harm our net sales and
profitability.
The markets for wire and cable products are highly competitive.
We compete with at least one major competitor in each of our
business lines. Many of our products are made to industry
specifications and may be considered fungible with our
competitors products. Accordingly, we are subject to
competition in many of our markets primarily on the basis of
price. We must also be competitive in terms of quality,
availability, payment terms and customer service. We are facing
increased competition from products manufactured in foreign
countries that in many cases are comparable in terms of quality
but are offered at lower prices. Unless we can produce our
products at competitive prices or purchase comparable products
from foreign sources on favorable terms, we may experience a
decrease in our net sales and profitability. Some of our
competitors have greater resources, financial and otherwise,
than we do and may be better positioned to invest in
manufacturing and supply chain efficiencies and product
development. We may not be able to compete successfully with our
existing competitors or with new competitors.
We are
dependent upon a number of key customers. If they were to cease
purchasing our products, our net sales and profitability would
likely decline.
We are dependent upon a number of key customers, although none
of our customers accounted for more than 10% of our net sales in
2009, 2008 or 2007. Our customers can cease buying our products
at any time and can also sell products that compete with our
products. The loss of one or more key customers, or a
significant decrease in the volume of products they purchase
from us, could result in a drop in our net sales and a decline
in our profitability. In addition, a disruption or a downturn in
the business of one or more key customers could reduce our sales
and could reduce our liquidity if we were unable to collect
amounts they owe us.
We face
pricing pressure in each of our markets, and our inability to
continue to achieve operating efficiency and productivity
improvements in response to pricing pressure may result in lower
margins.
We face pricing pressure in each of our markets as a result of
significant competition and industry over capacity, and price
levels for many of our products (after excluding price
adjustments related to the increased cost of
7
copper) have declined over the past few years. We expect pricing
pressure to continue for the foreseeable future. A component of
our business strategy is to continue to achieve operating
efficiencies and productivity improvements with a focus on
lowering purchasing, manufacturing and distribution costs. We
may not be successful in lowering our costs. In the event we are
unable to lower these costs in response to pricing pressure, we
may experience lower margins and decreased profitability.
We have
significant indebtedness outstanding and may incur additional
indebtedness that could negatively affect our
business.
We have a significant amount of indebtedness. On
December 31, 2009, we had approximately $236.9 million
of indebtedness, comprised of $226.6 million related to our
9.875% Senior Notes due 2012, including an unamortized debt
premium of $1.6 million (2012 Senior Notes),
$10.2 million of indebtedness under our credit facility,
and less than $0.1 million of capital leases. On
February 3, 2010, we refinanced the 2012 Senior Notes with
our 2018 Senior Notes. See Part II, Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operation Liquidity and
Capital Resources Refinancing of 9.875% Senior
Notes.
Our high level of indebtedness and dependence on indebtedness
could have important consequences to our shareholders, including
the following:
|
|
|
|
|
our ability to obtain additional financing for capital
expenditures, potential acquisition opportunities or general
corporate or other purposes may be impaired;
|
|
|
|
a substantial portion of our cash flow from operations must be
dedicated to the payment of principal and interest on our
indebtedness, reducing the funds available to us for other
purposes;
|
|
|
|
it may place us at a competitive disadvantage compared to our
competitors that have less debt or are less leveraged; and
|
|
|
|
we may be more vulnerable to economic downturns, may be limited
in our ability to respond to competitive pressures and may have
reduced flexibility in responding to changing business,
regulatory and economic conditions.
|
Our ability to satisfy our debt obligations will depend upon,
among other things, our future operating performance and our
ability to refinance indebtedness when necessary. Each of these
factors is, to a large extent, dependent on economic, financial,
competitive and other factors beyond our control. If, in the
future, we cannot generate sufficient cash from operations to
make scheduled payments on our debt obligations, we will need to
refinance our existing debt, issue additional equity securities
or securities convertible into equity securities, obtain
additional financing or sell assets. Our business may not be
able to generate cash flow or we may not be able to obtain
funding sufficient to satisfy our debt service requirements.
Growth
through acquisitions is a significant part of our strategy and
we may not be able to successfully identify, finance or
integrate acquisitions in order to grow our business.
Growth through acquisitions has been, and we expect it to
continue to be, a significant part of our strategy. We regularly
evaluate possible acquisition candidates. We may not be
successful in identifying, financing and closing acquisitions on
favorable terms. Potential acquisitions may require us to obtain
additional financing or issue additional equity securities or
securities convertible into equity securities, and any such
financing and issuance of equity may not be available on terms
acceptable to us or at all. If we finance acquisitions by
issuing equity securities or securities convertible into equity
securities, our existing shareholders could be diluted, which,
in turn, could adversely affect the market price of our stock.
If we finance an acquisition with debt, it could result in
higher leverage and interest costs. Further, we may not be
successful in integrating any such acquisitions that are
completed. Integration of any such acquisitions may require
substantial management, financial and other resources and may
pose risks with respect to production, customer service and
market share of existing operations. In addition, we may acquire
businesses that are subject to technological or competitive
risks, and we may not be able to realize the benefits expected
from such acquisitions.
8
If we are
unable to retain senior management and key employees, we may
experience operating inefficiencies and increased costs,
resulting in diminished profitability.
Our success has been largely dependent on the skills, experience
and efforts of our senior management and key employees. The loss
of any of our senior management or other key employees could
result in operational inefficiencies and increased costs. We may
be unable to find qualified replacements for these individuals
if their services were no longer available, and, if we do
identify replacements, the integration of those replacements may
be disruptive to our business.
Advancing
technologies, such as fiber optic and wireless technologies, may
make some of our products less competitive and reduce our net
sales.
Technological developments could cause our net sales to decline.
For example, a significant decrease in the cost and complexity
of installation of fiber optic systems or a significant increase
in the cost of copper-based systems could make fiber optic
systems superior on a price performance basis to copper systems
and could have a material adverse effect on our business. Also,
advancing wireless technologies, as they relate to network and
communication systems, may reduce the demand for our products by
reducing the need for premises wiring. Wireless communications
depend heavily on a fiber optic backbone and do not depend as
much on copper-based systems. An increase in the acceptance and
use of voice and wireless technology, or introduction of new
wireless or fiber-optic based technologies, may have a material
adverse effect on the marketability of our products and our
profitability. If wireless technology were to significantly
erode the markets for copper-based systems, our sales of copper
premise cables could face downward pressure.
We
recorded significant impairment charges in 2008 and 2009, and if
our goodwill or other intangible assets become further impaired,
we may be required to recognize additional charges that would
reduce our income.
We recorded significant impairment charges in 2008 and 2009
relative to our goodwill and other intangible assets. Under
accounting principles generally accepted in the U.S., goodwill
assets are not amortized but must be reviewed for possible
impairment annually, or more often in certain circumstances if
events indicate that the asset values are not recoverable. A
further deterioration in the macro-economic environment or other
factors could necessitate an earnings charge for the impairment
of goodwill or other intangible assets, which would reduce our
income without any change to our underlying cash flow.
We have
incurred restructuring charges in the past and will likely incur
additional restructuring charges in the future.
We have incurred significant restructuring costs in the past and
will likely incur additional restructuring charges in the
future. We may not be able to achieve the planned cash flows and
savings estimates associated with such restructuring activities
if we are unable to accomplish them in a timely manner, are
unable to achieve expected efficiencies or cost savings, or
unforeseen developments or expenses arise. As we respond to
changes in the market and fluctuations in demand levels, we may
be required to realign plant production or otherwise restructure
our operations, which may result in additional and potentially
significant restructuring charges.
Some of
our employees belong to a labor union and certain actions by
such employees, such as strikes or work stoppages, could disrupt
our operations or cause us to incur costs.
As of December 31, 2009, we employed 934 persons,
approximately 26% of whom are covered by a collective bargaining
agreement, which expired on December 22, 2009, and has been
extended through March 19, 2010. We began collective
bargaining negotiations on January 14, 2010. If unionized
employees were to engage in a concerted strike or other work
stoppage, if other employees were to become unionized, or if we
are unable to negotiate a new collective bargaining agreement
when the current one expires, we could experience a disruption
of operations, higher labor costs or both. A strike or other
disruption of operations or work stoppage could reduce our
ability to manufacture quality products for our customers in a
timely manner.
9
We may be
unable to raise additional capital to meet working capital and
capital expenditure needs if our operations do not generate
sufficient funds to do so.
Our business is expected to have continuing capital expenditure
needs. If our operations do not generate sufficient funds to
meet our capital expenditure needs for the foreseeable future,
we may not be able to gain access to additional capital, if
needed, particularly in view of competitive factors and industry
conditions. In addition, increases in the cost of copper
increase our working capital requirements. If we are unable to
obtain additional capital, or unable to obtain additional
capital on favorable terms, our liquidity may be diminished and
we may be unable to effectively operate our business.
We are
subject to environmental, health and safety and other laws and
regulations which could adversely effect our operations and
business.
We are subject to the environmental laws and regulations of each
jurisdiction where we do business. We are currently, and may in
the future be, held responsible for remedial investigations and
clean-up
costs of certain sites damaged by the discharge of regulated
materials, including sites that have never been owned or
operated by us but at which we have been identified as a
potentially responsible party under federal and state
environmental laws. Certain of these laws, including the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq.
(CERCLA), impose strict, and under certain
circumstances, joint and several, liability for investigation
and cleanup costs at contaminated sites on responsible parties,
as well as liability for damages to natural resources. We have
established reserves for such potential liability and believe
those reserves to be adequate; however, there is no guarantee
that such reserves will be adequate or that additional
liabilities will not arise. See Legal Proceedings.
Failure to comply with environmental laws can result in
substantial fines, orders to install pollution control equipment
and/or
claims for alleged personal injury and property damage. Changes
in environmental requirements in both domestic and foreign
jurisdictions and their enforcement could adversely affect our
operations due to increased costs of compliance and potential
liability for noncompliance.
Disruption
in the importation of our raw materials and products and the
risks associated with international operations could cause our
operating results to decline.
We source certain raw materials and products from foreign-based
suppliers. Foreign material purchases expose us to a number of
risks, including unexpected changes in regulatory requirements
and tariffs, possible difficulties in enforcing agreements,
exchange rate fluctuations, difficulties in obtaining import
licenses, economic or political instability, embargoes, exchange
controls or the adoption of other restrictions on foreign trade.
Although we currently manufacture the vast majority of our
products in the U.S., to the extent we decide to establish
foreign manufacturing facilities, our foreign manufacturing
sales would be subject to similar risks. Further, imports of raw
materials and products are subject to unanticipated
transportation delays that affect international commerce.
We have
risks associated with inventory.
Our business requires us to maintain substantial levels of
inventory. We must identify the right mix and quantity of
products to keep in our inventory to meet customer orders.
Failure to do so could adversely affect our sales and earnings.
However, if our inventory levels are too high, we are at risk
that an unexpected change in circumstances, such as a shift in
market demand, drop in prices, or default or loss of a customer,
could have a material adverse impact on the net realizable value
of our inventory.
Changes
in industry standards and regulatory requirements may adversely
affect our business.
As a manufacturer and distributor of wire and cable products, we
are subject to a number of industry standard setting
authorities, such as Underwriters Laboratories. In addition,
many of our products are subject to the requirements of federal,
state, local or foreign regulatory authorities. Changes in the
standards and requirements imposed by such authorities could
have an adverse effect on us. In the event that we are unable to
meet any such standards when adopted, our business could be
adversely affected.
10
Our
business is subject to the economic, political and other risks
of operating and selling products in foreign
countries.
Our foreign operations, including in Canada and China, are
subject to risks inherent in maintaining operations abroad, such
as economic and political destabilization, international
conflicts, restrictive actions by foreign governments,
nationalizations or expropriations, changes in regulatory
requirements, the difficulty of effectively managing diverse
global operations, adverse foreign tax laws and the threat posed
by potential pandemics in countries that do not have the
resources necessary to deal with such outbreaks. Over time, we
intend to continue expanding our foreign operations, which would
serve to increase the level of these risks relative to our
business operations and their potential effect on our financial
position and results of operations.
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ITEM 1B.
|
Unresolved
Staff Comments
|
None.
As of December 31, 2009, we owned or leased the following
primary facilities:
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Approximate
|
|
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Operating Facilities
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Type of Facility
|
|
Square Feet
|
|
|
Leased or Owned
|
|
Waukegan, Illinois
|
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Manufacturing
|
|
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212,530
|
|
|
Owned 77,394
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|
|
|
|
|
|
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Leased 135,136
|
Pleasant Prairie, Wisconsin
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Warehouse
|
|
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503,000
|
|
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Leased
|
Bremen, Indiana (Insulating)
|
|
Manufacturing
|
|
|
43,007
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|
|
Leased
|
Bremen, Indiana (Fabricating)
|
|
Manufacturing
|
|
|
124,160
|
|
|
Leased
|
Bremen, Indiana (East)
|
|
Manufacturing
|
|
|
106,200
|
|
|
Leased
|
Bremen, Indiana (Distribution Center)
|
|
Warehouse
|
|
|
48,000
|
|
|
Leased
|
North Chicago, Illinois
|
|
Manufacturing
|
|
|
23,277
|
|
|
Leased
|
Texarkana, Arkansas
|
|
Manufacturing, Warehouse
|
|
|
106,700
|
|
|
Owned
|
Hayesville, North Carolina
|
|
Manufacturing
|
|
|
104,000
|
|
|
Owned
|
El Paso, Texas (Hoover Rd.)
|
|
Manufacturing, Warehouse
|
|
|
401,400
|
|
|
Leased
|
Lafayette, Indiana
|
|
Manufacturing, Warehouse
|
|
|
337,256
|
|
|
Owned
|
Waukegan, Illinois
|
|
Offices
|
|
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30,175
|
|
|
Leased
|
Toronto, Ontario, Canada
|
|
Offices, Warehouse
|
|
|
200,000
|
|
|
Leased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
Closed Facilities
|
|
Closure Year
|
|
Square Feet
|
|
|
Leased or Owned
|
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Siler City, North Carolina
|
|
2006
|
|
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86,000
|
|
|
Owned
|
Nogales, Arizona*
|
|
2008
|
|
|
84,000
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|
|
Leased
|
El Paso, Texas (Zaragosa Rd.)*
|
|
2008
|
|
|
69,163
|
|
|
Owned
|
Avilla, Indiana
|
|
2008
|
|
|
119,000
|
|
|
Owned
|
Indianapolis, Indiana**
|
|
2008
|
|
|
257,600
|
|
|
Leased
|
Indianapolis, Indiana**
|
|
2008
|
|
|
90,400
|
|
|
Leased
|
Indianapolis, Indiana**
|
|
2008
|
|
|
23,107
|
|
|
Leased
|
East Longmeadow, Massachusetts***
|
|
2009
|
|
|
90,000
|
|
|
Leased
|
Oswego, New York ***
|
|
2009
|
|
|
115,000
|
|
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Owned
|
|
|
|
* |
|
These facilities, acquired as part of the Copperfield
acquisition in 2007, were closed in 2008 in connection with the
integration of multiple facilities into one modern facility in
El Paso, Texas, opened in 2008. |
11
|
|
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** |
|
These facilities, acquired as part of the Woods acquisition in
2007, were closed in 2008 and the distribution operations of
such facilities consolidated within a new modern distribution
center in Pleasant Prairie, Wisconsin, opened in 2008. |
|
*** |
|
These facilities were closed in 2009 in conjunction with our
efforts to align our manufacturing capacity with market demand.
Production has been transitioned to our facilities in Lafayette
and Bremen, Indiana, with backup capacity provided by our
Waukegan, Illinois and Texarkana, Arkansas facilities. |
We are currently marketing all of our closed facilities for
either sale or sublease.
Our operating properties are used to support both of our
business segments. We believe that our existing facilities are
adequate for our operations. We do not believe that any single
leased facility is material to our operations and, if necessary,
we could readily obtain a replacement facility. Our real estate
assets have been pledged as security for certain of our debt.
Our principal corporate offices are located at 1530 Shields
Drive, Waukegan, Illinois 60085.
|
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ITEM 3.
|
Legal
Proceedings
|
We are involved in legal proceedings and litigation arising in
the ordinary course of our business. In those cases where we are
the defendant, plaintiffs may seek to recover large and
sometimes unspecified amounts or other types of relief and some
matters may remain unresolved for several years. We believe that
none of the routine litigation that we now face, individually or
in the aggregate, will be material to our business. However, an
adverse determination could be material to our financial
position, results of operations or cash flows in any given
period. We maintain insurance coverage for litigation that
arises in the ordinary course of our business and believe such
coverage is adequate.
We are party to one environmental claim. The Leonard Chemical
Company Superfund site consists of approximately 7.1 acres
of land in an industrial area located a half mile east of
Catawba, York County, South Carolina. The Leonard Chemical
Company operated this site until the early 1980s for recycling
of waste solvents. These operations resulted in the
contamination of soils and groundwaters at the site with
hazardous substances. In 1984, the U.S. Environmental
Protection Agency listed this site on the National Priorities
List. Riblet Products Corporation, with which we merged in 2000,
was identified through documents as a company that sent solvents
to the site for recycling and was one of the companies receiving
a special notice letter from the Environmental Protection Agency
(EPA) identifying it as a party potentially liable
under the CERCLA
In 2004, along with other potentially responsible
parties (PRPs), we entered into a consent
decree with the EPA requiring the performance of a remedial
design and remedial action (RD/RA) for this site. We
have entered into a site participation agreement with other PRPs
for fulfillment of the requirements of the consent decree. Under
the site participation agreement, we are responsible for a 9.19%
share of the costs for the RD/RA. As of December 31, 2009,
we had a $0.4 million accrual recorded for this liability.
Although no assurances are possible, we believe that our
accruals related to environmental litigation and other claims
are sufficient and that these items and our rights to available
insurance and indemnity will be resolved without material
adverse effect on our financial position, results of operations
or cash flows.
Executive
Officers of the Company
|
|
|
|
|
|
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Name
|
|
Age
|
|
Position
|
|
G. Gary Yetman
|
|
|
55
|
|
|
President, Chief Executive Officer and Director
|
Richard N. Burger
|
|
|
59
|
|
|
Executive Vice President, Chief Financial Officer, Secretary and
Treasurer
|
Richard Carr
|
|
|
58
|
|
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Executive Vice President, Operations
|
Michael Frigo
|
|
|
55
|
|
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Executive Vice President, OEM Group
|
J. Kurt Hennelly
|
|
|
46
|
|
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Executive Vice President, Operations
|
Kenneth A. McAllister
|
|
|
64
|
|
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Executive Vice President, Distribution Group
|
Kathy Jo Van
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|
|
45
|
|
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Executive Vice President, Retail Group
|
12
Mr. Yetman joined our predecessor company in 1986
and has served as President and Chief Executive Officer and as a
director of the Company since December 1999. Prior to his
current role, Mr. Yetman held various senior management
positions with our predecessor company and within the electrical
industry. Mr. Yetmans employment agreement gives him
the right to one director seat on the Board of Directors of the
Company and each of its affiliates.
Mr. Burger was named Executive Vice President, Chief
Financial Officer, Secretary and Treasurer in December 1999.
Mr. Burger joined our predecessor company in July 1996 as
Chief Financial Officer. Prior to that time, Mr. Burger
served in senior level financial, administrative and
manufacturing operations positions at Burns Aerospace
Corporation, including as its President and Chief Executive
Officer.
Mr. Carr joined the Company as Chief Executive
Officer of Copperfield in 2007. In January 2008 he was named
Executive Vice President, Operations. Prior to that,
Mr. Carr was the President and Chief Executive Officer of
Copperfield since co-founding the company in 1990.
Mr. Frigo joined the Company as a Senior Vice
President and President of Copperfield in April 2007, and was
promoted to Executive Vice President, OEM Group in January 2008.
Prior to joining the Company, Mr. Frigo had been Chief
Operating Officer of Copperfield since 2005. Prior to that time,
Mr. Frigo served as Executive Vice President and Chief
Operations Officer of Therm-O-Link, Inc. for eight years.
Mr. Hennelly was named Executive Vice President,
Operations in January 2008. Previously Mr. Hennelly served
in variety of senior level positions within both our Consumer
Group and Global Sourcing Group since December of 2002, most
recently serving as the Vice President of Supply Chain.
Mr. Hennelly also previously held a variety of management
positions in manufacturing, engineering, materials management
and quality assurance since joining our predecessor company in
1987.
Mr. McAllister was named Executive Vice President,
Distribution Group in January 2008. Prior to that, he had served
as Group Vice President, Specialty Group since January 2005 and
Group Vice President of the Consumer Group since February 2007.
He joined the Company in October 2002 as Vice President, Wire
and Cable, and was also responsible for our OEM/Government sales
channel. Prior to joining the company, Mr. McAllister had
over 20 years experience in the wire and cable industry,
including a variety of senior level sales and management
positions at General Cable Corporation from 1994 to 2002.
Ms. Van was named Executive Vice President, Retail
Group in January 2008. She had served as Group Vice President,
Electrical Group since January 2005. Prior to that, Ms. Van
had been Vice President, Electrical Distribution since January
2003. Ms. Van joined the Company in 2000 having worked in
the electrical distribution industry for 13 years with
distributors of various sizes, including WESCO Distribution,
Englewood Electric and Midwest Electric.
ITEM 4.
Reserved
13
PART II
|
|
ITEM 5.
|
Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
Common
Stock
Our only authorized, issued and outstanding class of capital
stock is our common stock. Our common stock is listed on the
NASDAQ Global Market under the symbol CCIX. The
table below sets forth, for the calendar quarters indicated, the
reported high and low sales prices and amount of any cash
dividends declared:
|
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|
|
|
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|
|
|
|
|
|
|
|
|
2009
|
|
|
Sales Price
|
|
Cash
|
|
|
High
|
|
Low
|
|
Dividends
|
|
First Quarter
|
|
$
|
5.94
|
|
|
$
|
1.35
|
|
|
$
|
|
|
Second Quarter
|
|
$
|
3.51
|
|
|
$
|
2.17
|
|
|
$
|
|
|
Third Quarter
|
|
$
|
4.54
|
|
|
$
|
2.69
|
|
|
$
|
|
|
Fourth Quarter
|
|
$
|
4.58
|
|
|
$
|
3.04
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
Sales Price
|
|
Cash
|
|
|
High
|
|
Low
|
|
Dividends
|
|
First Quarter
|
|
$
|
12.06
|
|
|
$
|
7.84
|
|
|
$
|
|
|
Second Quarter
|
|
$
|
13.46
|
|
|
$
|
10.32
|
|
|
$
|
|
|
Third Quarter
|
|
$
|
13.06
|
|
|
$
|
8.98
|
|
|
$
|
|
|
Fourth Quarter
|
|
$
|
9.24
|
|
|
$
|
2.85
|
|
|
$
|
|
|
As of March 1, 2010, there were 62 record holders of our
common stock.
Dividends
and Distributions
We do not anticipate that we will pay any dividends on our
common stock in the foreseeable future as we intend to retain
any future earnings to fund the development and growth of our
business. Payment of future dividends, if any, will be at the
discretion of our board of directors and will depend on many
factors, including general economic and business conditions, our
strategic plans, our financial results and condition, legal
requirements and other factors that our board of directors deems
relevant. Our credit facility and the indenture governing our
2018 Senior Notes each contain restrictions on the payment of
dividends to our shareholders. See Part II, Item 6,
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Revolving Credit Facility.
and Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Refinancing of 9.875% Senior
Notes. In addition, our ability to pay dividends is
dependent on our receipt of cash dividends from our subsidiaries.
14
Equity
Compensation Plan Information
The following table presents securities authorized for issuance
under equity compensation plans at December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
Future Issuance Under Equity
|
|
|
Number of Securities to be
|
|
Weighted-Average
|
|
Compensation Plans
|
|
|
Issued Upon Exercise of
|
|
Exercise Price of
|
|
(Excluding Securities
|
|
|
Outstanding Options,
|
|
Outstanding Options,
|
|
Reflected in the
|
Plan Category
|
|
Warrants and Rights(1)
|
|
Warrants and Rights(2)
|
|
First Column)(3)
|
|
Equity Compensation Plans Approved by Security Holders
|
|
|
1,693,882
|
|
|
$
|
11.86
|
|
|
|
746,118
|
|
Equity Compensation Plans Not Approved by Security Holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,693,882
|
|
|
$
|
11.86
|
|
|
|
746,118
|
|
|
|
|
(1) |
|
Includes both grants of stock options and unvested share awards. |
|
(2) |
|
Includes weighted-average exercise price of outstanding stock
options only. |
|
(3) |
|
Represents shares of common stock that may be issued pursuant to
the Companys Long-Term Incentive Plan adopted in 2006, as
amended and restated in April 2008 (the Plan). Any
employee of the Company or a subsidiary, or any director of the
Company or a subsidiary, is eligible to receive awards under the
Plan. The maximum number of shares of our common stock that may
be delivered to participants and their beneficiaries under the
Plan is 2,440,000 shares. |
15
Performance
Graph
The graph below compares the change in cumulative shareholder
return on our common stock as compared to that for the Russell
2000 Index for the period of March,1 2007 through
December 31, 2009. This graph is being furnished as part of
this report solely in accordance with the requirement under
Rule 14a-3(b)(9)
to furnish our shareholders with such information, and
therefore, is not deemed to be filed or incorporated by
reference into any filings by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended.
Comparison
of Cumulative Return(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indexed Returns
|
|
|
|
|
|
|
March 1, 2007
|
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
|
December 31, 2009
|
Coleman Cable, Inc.
|
|
|
|
100
|
|
|
|
|
59.06
|
|
|
|
|
28.31
|
|
|
|
|
21.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell 2000
|
|
|
|
100
|
|
|
|
|
97.86
|
|
|
|
|
64.80
|
|
|
|
|
82.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes the value of the investment in our common stock and the
Russell 2000 Index was 100 on March 1, 2007, when our
common stock began to be publicly traded on the NASDAQ Global
Market, assuming reinvestment of all dividends. |
16
|
|
ITEM 6.
|
Selected
Consolidated Financial Data
|
The following table sets forth selected historical consolidated
financial information for the periods presented. The financial
data as of and for each of the five years in the period ended
December 31, 2009 has been derived from our audited
consolidated financial statements and notes thereto.
Prior to October 10, 2006, we were treated as an
S corporation for federal and state income tax purposes,
with the exception of our wholly-owned C corporation subsidiary,
CCI Enterprises, Inc. Accordingly, our shareholders were
responsible for federal and substantially all state income tax
liabilities arising out of our operations other than those
conducted by our C corporation subsidiary. On October 10,
2006, we ceased to be an S corporation and became a C
corporation and, as such, we are subject to federal and state
income tax. The unaudited pro forma statement of operations data
presents our pro forma provision for income taxes and pro forma
net income as if we had been a C corporation for all of 2005 and
2006. In addition, the selected historical consolidated
financial information and the pro forma statement of operations
data reflect the 312.6079 for 1 stock split that occurred on
October 10, 2006.
The results for 2007 include the results of operations of our
2007 Acquisitions beginning with their respective acquisition
dates. Accordingly, our 2007 results of operations include
approximately nine months of operating results for Copperfield
and one month of operating results for Woods.
Our consolidated financial statements have been prepared in
accordance with generally accepted accounting principles
(GAAP). Historical results are not necessarily
indicative of the results we expect in future periods. The data
presented below should be read in conjunction with, and are
qualified in their entirety by reference to,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements and the notes thereto included elsewhere in
this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands except for per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
346,181
|
|
|
$
|
423,358
|
|
|
$
|
864,144
|
|
|
$
|
972,968
|
|
|
$
|
504,152
|
|
Cost of goods sold
|
|
|
292,755
|
|
|
|
341,642
|
|
|
|
759,551
|
|
|
|
879,367
|
|
|
|
428,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
53,426
|
|
|
|
81,716
|
|
|
|
104,593
|
|
|
|
93,601
|
|
|
|
75,667
|
|
Selling, engineering, general and administrative expenses
|
|
|
25,654
|
|
|
|
31,760
|
|
|
|
44,258
|
|
|
|
52,227
|
|
|
|
40,821
|
|
Intangible asset amortization(1)
|
|
|
|
|
|
|
|
|
|
|
7,636
|
|
|
|
12,006
|
|
|
|
8,827
|
|
Asset impairments(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,276
|
|
|
|
70,761
|
|
Restructuring charges(3)
|
|
|
|
|
|
|
1,396
|
|
|
|
874
|
|
|
|
10,225
|
|
|
|
5,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
27,772
|
|
|
|
48,560
|
|
|
|
51,825
|
|
|
|
(10,133
|
)
|
|
|
(50,210
|
)
|
Interest expense
|
|
|
15,606
|
|
|
|
15,933
|
|
|
|
27,519
|
|
|
|
29,656
|
|
|
|
25,323
|
|
Gain on repurchase of 2012 Senior Notes(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,285
|
)
|
Other (income) loss, net(5)
|
|
|
(1,267
|
)
|
|
|
497
|
|
|
|
41
|
|
|
|
2,181
|
|
|
|
(1,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
13,433
|
|
|
|
32,130
|
|
|
|
24,265
|
|
|
|
(41,970
|
)
|
|
|
(71,053
|
)
|
Income tax expense (benefit)(6)
|
|
|
2,298
|
|
|
|
2,771
|
|
|
|
9,375
|
|
|
|
(13,709
|
)
|
|
|
(4,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,135
|
|
|
$
|
29,359
|
|
|
$
|
14,890
|
|
|
$
|
(28,261
|
)
|
|
$
|
(67,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share Data(7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.87
|
|
|
$
|
2.15
|
|
|
$
|
0.89
|
|
|
$
|
(1.68
|
)
|
|
$
|
(3.99
|
)
|
Diluted
|
|
|
0.87
|
|
|
|
2.15
|
|
|
|
0.88
|
|
|
$
|
(1.68
|
)
|
|
$
|
(3.99
|
)
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,749
|
|
|
|
13,637
|
|
|
|
16,787
|
|
|
|
16,787
|
|
|
|
16,809
|
|
Diluted
|
|
|
12,749
|
|
|
|
13,637
|
|
|
|
16,826
|
|
|
|
16,787
|
|
|
|
16,809
|
|
Pro Forma Statement of Operations Data with respect to S-Corp
Status(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
13,433
|
|
|
$
|
32,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma income tax expense(6)
|
|
|
5,351
|
|
|
|
12,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
|
8,082
|
|
|
|
19,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands except for per share data)
|
|
|
Pro Forma Per Common Share Data with respect to S-Corp
Status(6):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.63
|
|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
0.63
|
|
|
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(8)
|
|
$
|
33,883
|
|
|
$
|
53,497
|
|
|
$
|
72,260
|
|
|
$
|
16,280
|
|
|
$
|
(23,847
|
)
|
Capital expenditures
|
|
|
6,171
|
|
|
|
2,702
|
|
|
|
6,010
|
|
|
|
13,266
|
|
|
|
4,087
|
|
Cash interest expense
|
|
|
14,813
|
|
|
|
15,187
|
|
|
|
23,220
|
|
|
|
29,059
|
|
|
|
24,380
|
|
Depreciation and amortization expense(9)
|
|
|
4,844
|
|
|
|
5,434
|
|
|
|
20,476
|
|
|
|
28,594
|
|
|
|
21,883
|
|
Net cash provided by (used in) operating activities
|
|
|
(10,340
|
)
|
|
|
30,048
|
|
|
|
23,793
|
|
|
|
116,198
|
|
|
|
27,686
|
|
Net cash used in investing activities
|
|
|
(1,789
|
)
|
|
|
(2,578
|
)
|
|
|
(269,072
|
)
|
|
|
(13,799
|
)
|
|
|
(3,964
|
)
|
Net cash provided by (used in) financing activities
|
|
|
11,153
|
|
|
|
(12,794
|
)
|
|
|
239,398
|
|
|
|
(94,535
|
)
|
|
|
(32,798
|
)
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
58
|
|
|
$
|
14,734
|
|
|
$
|
8,877
|
|
|
$
|
16,328
|
|
|
$
|
7,599
|
|
Working capital
|
|
|
90,107
|
|
|
|
115,083
|
|
|
|
230,525
|
|
|
|
116,115
|
|
|
|
131,239
|
|
Total assets
|
|
|
221,388
|
|
|
|
235,745
|
|
|
|
575,652
|
|
|
|
411,966
|
|
|
|
290,107
|
|
Total debt(10)
|
|
|
169,300
|
|
|
|
122,507
|
|
|
|
364,861
|
|
|
|
270,462
|
|
|
|
235,236
|
|
Total shareholders equity
|
|
|
13,071
|
|
|
|
77,841
|
|
|
|
95,971
|
|
|
|
69,419
|
|
|
|
5,260
|
|
|
|
|
(1) |
|
Intangible asset amortization was $7.6 million, $12.0 million
and $8.8 million for 2007, 2008 and 2009, respectively, and
related to the amortization of intangible assets acquired in
connection with the 2007 Acquisitions. |
|
(2) |
|
Asset impairments included approximately: (1) $29.3 million
recorded in 2008 primarily reflecting impairment of goodwill,
other intangible assets and certain plant and equipment
associated with our OEM segment; (2) $70.8 million of impairment
charges consisting primarily of a non-cash goodwill impairment
recorded during the first quarter of 2009 across three of four
reporting units comprising our Distribution segment: Electrical
distribution, Wire and Cable distribution, and Industrial
distribution. This non-cash goodwill impairment resulted from a
combination of factors which were in existence at that time,
including a significant decline in our market capitalization, as
well as the recessionary economic environment and its then
estimated potential impact on our business. These impairment
charges are further discussed and detailed within Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations which follows. |
|
(3) |
|
Restructuring charges included: (1) costs of approximately $1.4
million in 2006 and $0.9 million in 2007 associated with the
closing of a leased facility in Miami Lakes, Florida and an
owned facility located in Siler City, North Carolina; (2) $10.2
million recorded in 2008, primarily recorded in connection with
the closure of certain facilities and the integration of our
2007 Acquisitions; and (3) approximately $5.5 million recorded
in 2009 related to the closure of our facilities in East Long
Meadow, MA and Oswego, NY, both of which were closed in 2009, as
well as holding costs associated with properties closed in 2008. |
|
(4) |
|
We recorded a gain of approximately $3.3 million in 2009
resulting from our repurchase of $15.0 million in par value of
our 2012 Senior Notes. |
|
(5) |
|
Other (income) loss included approximately (1) a $1.3 million
gain recorded in 2005 in connection with the sale of zero coupon
bonds that had been acquired as part of a 1999 business
acquisition; (2) an expense of $0.5 million in 2006 for
estimated costs accrued pursuant to the Tax Matters Agreement
(see Note 9: Commitments and Contingencies Tax
Matters Agreement); (3) a loss of $2.2 million in 2008
primarily due to unfavorable exchange rate fluctuations related
to our Canadian operations; and (4) a gain of $1.2 million in
2009 primarily due to favorable exchange rate fluctuations
related to our Canadian operations. |
|
(6) |
|
Prior to October 10, 2006, we were treated as an S corporation
for federal and state income tax purposes, with the exception of
our wholly-owned C corporation subsidiary. Accordingly, our
shareholders were responsible |
18
|
|
|
|
|
for federal and substantially all state income tax liabilities
arising out of our operations other than those conducted by our
C corporation subsidiary. On October 10, 2006, we ceased to be
an S corporation and became a C corporation and, as such, are
now subject to federal and state income tax. |
|
(7) |
|
The financial data for 2005 and 2006 reflects the retroactive
presentation of the 312.6079 for 1 stock split which occurred on
October 11, 2006. |
|
(8) |
|
In addition to net income (loss), as determined in accordance
with GAAP, we also use the non-GAAP measure net income before
interest, income taxes, depreciation and amortization expense
(EBITDA) as a means to evaluate the performance of
our business, including the preparation of annual operating
budgets and the determination of levels of operating and capital
investments. In particular, we believe EBITDA allows us to
readily view operating trends, perform analytical comparisons
and identify strategies to improve operating performance. For
example, we believe the inclusion of items such as taxes,
interest expense, and intangible asset amortization can make it
more difficult to identify and assess operating trends affecting
our business and industry. We also believe EBITDA is a
performance measure that provides investors, securities analysts
and other interested parties a measure of operating results
unaffected by differences in capital structures, business
acquisitions, capital investment cycles and ages of related
assets among otherwise comparable companies in our industry. |
|
|
|
EBITDAs usefulness as a performance measure is limited,
however by the fact that it excludes the impact of interest
expense, depreciation and amortization expense and taxes. We
borrow money in order to finance our operations; therefore,
interest expense is a necessary element of our costs and ability
to generate revenue. Similarly, our use of capital assets makes
depreciation and amortization expense a necessary element of our
costs and ability to generate income. Since we are subject to
state and federal income taxes, any measure that excludes tax
expense has material limitations. Due to these limitations, we
do not, and you should not, use EBITDA as the sole measure of
our performance. We also use, and recommend that you consider,
net income in accordance with GAAP as a measure of our
performance. |
|
|
|
The following is a reconciliation of net income(loss), as
determined in accordance with GAAP, to EBITDA. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Net income (loss)
|
|
$
|
11,135
|
|
|
$
|
29,359
|
|
|
$
|
14,890
|
|
|
$
|
(28,261
|
)
|
|
$
|
(67,019
|
)
|
Interest expense
|
|
|
15,606
|
|
|
|
15,933
|
|
|
|
27,519
|
|
|
|
29,656
|
|
|
|
25,323
|
|
Income tax expense (benefit)
|
|
|
2,298
|
|
|
|
2,771
|
|
|
|
9,375
|
|
|
|
(13,709
|
)
|
|
|
(4,034
|
)
|
Depreciation and amortization expense(9)
|
|
|
4,844
|
|
|
|
5,434
|
|
|
|
20,476
|
|
|
|
28,594
|
|
|
|
21,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
33,883
|
|
|
$
|
53,497
|
|
|
$
|
72,260
|
|
|
$
|
16,280
|
|
|
$
|
(23,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
|
Debt amortization costs are a component of interest expense per
the income statement, but included within depreciation and
amortization for operating cash flow presentation. Accordingly,
for the above presentations only, depreciation and amortization
expense does not include amortization of debt issuance costs,
which is included in interest expense. |
|
(10) |
|
Total debt includes the current portion of long-term debt and
excludes the unamortized premium of $3.0 million,
$2.4 million, and $1.6 million as of December 31,
2007, 2008, and 2009, respectively, related to the 2012 Senior
Notes. |
19
|
|
ITEM 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results may
differ materially from those anticipated in these
forward-looking statements as a result of a variety of risks and
uncertainties, including those described under
Item 1A, Risk Factors and elsewhere in this
report. We assume no obligation to update any of these
forward-looking statements. You should read the following
discussion in conjunction with our consolidated financial
statements and the notes thereto included in this report.
Overview
We are a leading designer, developer, manufacturer and supplier
of electrical wire and cable products for consumer, commercial
and industrial applications, with operations primarily in the
U.S. and, to a lesser degree, Canada. We manufacture and
supply a broad line of wire and cable products, which enables us
to offer our customers a single source of supply for many of
their wire and cable product requirements. We manufacture our
products in eight domestic manufacturing locations and
supplement our domestic production with both international and
domestic sourcing. We sell our products to a variety of
customers, including a wide range of specialty distributors,
retailers and original equipment manufacturers
(OEMs). Virtually all of our products are sold to
customers located in the U.S. and Canada.
During the first quarter of 2008, we changed our management
reporting structure and the manner in which we report our
financial results internally, including the integration of our
2007 Acquisitions for reporting purposes. The changes resulted
in a change in our reportable segments. Accordingly, we now have
two reportable business segments: (1) Distribution, and
(2) OEM. Our Distribution segment serves our customers in
distribution businesses, who are resellers of our products,
while our OEM segment serves our OEM customers, who generally
purchase more tailored products from us which are in turn used
as inputs into subassemblies of manufactured finished goods.
Where applicable, prior period amounts have been recast to
reflect the new reporting structure.
Our net sales follow general business cycles. Additionally, we
have experienced, and expect to continue to experience, certain
seasonal trends in net sales and cash flow. Historically, our
sales have been somewhat higher in the third and fourth quarters
relative to the first and second quarters due to increased
customer demand in anticipation of, and during, the winter
months and holiday season.
Current
Business Environment
Our business continues to face recessionary conditions which
first arose during the fourth quarter of 2008. Our sales volumes
declined significantly during the fourth quarter of 2008, as
compared to both the fourth quarter of 2007 and first three
quarters of 2008. We believe the rapid and significant declines
in demand experienced during the fourth quarter of 2008 were a
function of sizable inventory reductions made on the part of our
customers in the face of overall weakened demand and a very
uncertain and difficult economy in existence at that time. In
response to the recessionary conditions and lower market demand,
we made major adjustments to our production capacity late in
2008 and early 2009 to better match our capacity to lower
overall demand levels, as well as improve our operating
efficiency and lower our overall overhead costs. In this regard,
we closed our manufacturing facility in East Longmeadow,
Massachusetts in the second quarter of 2009 and our Oswego, New
York facility in the third quarter of 2009. These and other
cost-reduction efforts, along with our ability to timely and
effectively match our plant capacity to market demand levels,
have been, and will continue to be, key determinants of our
profitability.
Additionally, in contrast to the significant demand contraction
experienced during the fourth quarter of 2008 and first quarter
of 2009, we experienced certain levels of demand stabilization
during the last nine months of 2009. We are encouraged by this
demand stabilization, as well as by the positive impact
generated from our recent cost-reduction and capacity
adjustments. We remain concerned, however, with industry pricing
given reduced levels of overall demand and excess industry
capacity. These factors, as well as any further increases in the
price of copper, which increased 13.9% to an average per pound
price of $3.04 on the COMEX during the fourth quarter of 2009,
as compared to an average of $2.67 per pound for the third
quarter of 2009, will likely continue to present challenges to
our financial performance and operating cash flows in the near
term. We continue to manage our business with caution in view of
these factors. We are continually adjusting plans and production
schedules in light of sales trends, the
20
macro-economic environment and other demand indicators, and the
possibility exists that we may determine further plant shutdowns
or closings, restructurings and workforce reductions are
necessary, some of which may be significant.
Acquisitions
From time to time, we consider acquisition opportunities that
have the potential to materially increase the size of our
business operation or provide us with some other strategic
advantage. We made two such acquisitions during 2007.
On April 2, 2007, we acquired 100% of the outstanding
equity interests of Copperfield for $215.4 million,
including acquisition-related costs and working capital
adjustments. The acquisition of Copperfield, which at the time
of our acquisition was one of the largest privately-owned
manufacturers and suppliers of electrical wire and cable
products in the United States with annual sales in excess of
$500 million, increased our scale, diversified and expanded
our customer base and we believe has strengthened our
competitive position in the industry.
On November 30, 2007, we acquired the electrical products
business of Katy, which operated in the U.S. as Woods
Industries Inc. (Woods U.S.) and in Canada as Woods
Industries (Canada) Inc. (Woods Canada, and together
with Woods U.S., Woods). Woods was principally
focused on the design and distribution of consumer electrical
cord products, sold primarily to national home improvement, mass
merchant, hardware and other retailers. We purchased certain
assets of Woods U.S. and all the stock of Woods Canada for
$53.8 million, including acquisition-related costs and
working capital adjustments. The acquisition of Woods has
expanded our U.S. business while enhancing our market
presence and penetration in Canada.
Results of operations for the 2007 Acquisitions have been
included in our consolidated financial statements since their
respective acquisition dates. Accordingly, our 2007 consolidated
operating results reflect approximately nine months of
Copperfield activity: April 2, 2007 to December 31,
2007, and one month of Woods activity: November 30, 2007 to
December 31, 2007.
We financed the above acquisitions primarily with proceeds
received from the issuance of debt and borrowings under our
Revolving Credit Facility, thereby significantly increasing our
total outstanding debt in 2007.
Production
Costs Overview and Impact of Copper Prices
Raw materials, primarily copper, comprise the primary component
of our cost of goods sold. For 2009, copper costs have been
estimated by us (based on the average COMEX price) to account
for over 55% of our total cost of goods sold. As the price of
copper is particularly volatile, price fluctuations can
significantly affect of our sales and profitability. We
generally attempt to pass along changes in the price of copper
and other raw materials to our customers. However, this has
proven difficult recently given lower overall demand and excess
capacity existing in the wire and cable industry. During 2009,
the average price of copper cathode on the COMEX was $2.37 per
pound, a decline of $0.76 per pound, or 24.3%, from the average
price of $3.13 per pound for 2008.
In addition to the above-noted factors, other factors affecting
product pricing include the type of product involved,
competitive conditions, including the extent of underutilized
manufacturing capacity existing in the industry, and particular
customer arrangements.
Recent
Developments
In February 2010, we completed a private placement of
$235.0 million of unsecured senior notes due in 2018 (the
2018 Senior Notes) which we undertook to capitalize on
what we believe were favorable conditions in the bond market at
the time and to extend the maturity of our senior notes from
2012 to 2018, while reducing our annual cash interest
requirement from 9.875% on the 2012 Notes to 9.0% on the 2018
Notes. We repurchased 88.6% of the approximately
$225.0 million aggregate principal amount of our then
outstanding senior notes due 2012 (the 2012 Senior
Notes) by means of a tender offer and consent
solicitation. Following the completion of the tender offer and
consent solicitation, we gave notice of the redemption of the
remaining outstanding 2012 Senior Notes which we will redeem on
March 22, 2010.
In connection with the issuance of the 2018 Senior Notes, on
January 19, 2010, we amended our revolving credit facility
to permit the sale of the 2018 Senior Notes, to enhance our
ability to create and finance foreign subsidiaries, and to
liberalize key covenants to increase operating flexibility.
21
Consolidated
Results of Operations
The following table sets forth, for the years indicated, our
consolidated statement of operations data in thousands of
dollars and as a percentage of net sales. Our results for 2009
and 2008 reflect the full-year impact of our above-noted 2007
Acquisitions, whereas the results for 2007 do not include the
entire impact of the 2007 Acquisitions, which occurred during
the course of that year. As noted above, Copperfield was
acquired April 2, 2007 and Woods was acquired
November 30, 2007. Accordingly, our 2007 results of
operations include approximately nine months of operating
results for Copperfield and one month of operating results for
Woods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
504,152
|
|
|
|
100.0
|
%
|
|
$
|
972,968
|
|
|
|
100.0
|
%
|
|
$
|
864,144
|
|
|
|
100.0
|
%
|
Gross profit
|
|
|
75,667
|
|
|
|
15.0
|
|
|
|
93,601
|
|
|
|
9.6
|
|
|
|
104,593
|
|
|
|
12.1
|
|
Selling, engineering, general and administrative expenses
|
|
|
40,821
|
|
|
|
8.1
|
|
|
|
52,227
|
|
|
|
5.4
|
|
|
|
44,258
|
|
|
|
5.1
|
|
Intangible asset amortization
|
|
|
8,827
|
|
|
|
1.8
|
|
|
|
12,006
|
|
|
|
1.2
|
|
|
|
7,636
|
|
|
|
0.9
|
|
Asset impairments
|
|
|
70,761
|
|
|
|
14.0
|
|
|
|
29,276
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
5,468
|
|
|
|
1.1
|
|
|
|
10,225
|
|
|
|
1.1
|
|
|
|
874
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(50,210
|
)
|
|
|
(10.0
|
)
|
|
|
(10,133
|
)
|
|
|
(1.0
|
)
|
|
|
51,825
|
|
|
|
6.0
|
|
Interest expense
|
|
|
25,323
|
|
|
|
5.0
|
|
|
|
29,656
|
|
|
|
3.0
|
|
|
|
27,519
|
|
|
|
3.2
|
|
Gain on Repurchase of 2012 Senior Notes
|
|
|
(3,285
|
)
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) loss, net
|
|
|
(1,195
|
)
|
|
|
(0.2
|
)
|
|
|
2,181
|
|
|
|
0.2
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(71,053
|
)
|
|
|
(14.1
|
)
|
|
|
(41,970
|
)
|
|
|
(4.3
|
)
|
|
|
24,265
|
|
|
|
2.8
|
|
Income tax expense (benefit)
|
|
|
(4,034
|
)
|
|
|
(0.8
|
)
|
|
|
(13,709
|
)
|
|
|
(1.4
|
)
|
|
|
9,375
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(67,019
|
)
|
|
|
(13.3
|
)
|
|
$
|
(28,261
|
)
|
|
|
(2.9
|
)
|
|
$
|
14,890
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(3.99
|
)
|
|
|
|
|
|
$
|
(1.68
|
)
|
|
|
|
|
|
$
|
0.88
|
|
|
|
|
|
In addition to net income determined in accordance with GAAP, we
use certain non-GAAP measures in assessing our operating
performance. These non-GAAP measures used by management include:
(1) EBITDA, which we define as net income before net
interest, income taxes, depreciation and amortization expense
(EBITDA), (2) Adjusted EBITDA, which is our
measure of EBITDA adjusted to exclude the impact of certain
specifically identified items (Adjusted EBITDA), and
(3) Adjusted earnings per share, which we calculate as
diluted earnings per share adjusted to exclude the estimated per
share impact of the same specifically identified items used to
calculate Adjusted EBITDA (Adjusted EPS). For the
periods presented in this report, the specifically identified
items include asset impairments and restructuring charges, gains
on our repurchase of our 2012 Senior Notes in 2009, foreign
currency transaction gains and losses recorded at our Canadian
subsidiary, and an inventory insurance allowance recorded in
2008 in relation to a theft that occurred in 2005.
We believe both EBITDA and Adjusted EBITDA serve as appropriate
measures to be used in evaluating the performance of our
business. We employ the use of these measures in the preparation
of our annual operating budgets and in determining our
respective levels of operating and capital investments. We
believe both EBITDA and Adjusted EBITDA allow us to readily view
operating trends, perform analytical comparisons and identify
strategies to improve operating performance. For example, we
believe the inclusion of items such as taxes, interest expense
and intangible asset amortization can make it more difficult to
identify and assess operating trends affecting our business and
industry. We also believe both EBITDA and Adjusted EBITDA are
performance measures that provide investors, securities analysts
and other interested parties a measure of operating results
unaffected by differences in capital structures, business
acquisitions, capital investment cycles and ages of related
assets among otherwise comparable companies in our industry.
However, the usefulness of both EBITDA and Adjusted EBITDA as
performance measures are limited by the fact that they both
exclude the impact of interest expense, depreciation and
amortization expense, and taxes. We borrow money in order to
finance our operations; therefore, interest expense is a
necessary element of our costs and ability to generate revenue.
Similarly, our use of capital assets makes depreciation and
amortization expense a necessary element of our costs and
ability to generate income. Since we are subject to state and
federal income taxes, any measure that excludes tax expense has
material limitations. Due to
22
these limitations, we do not, and you should not, use either
EBITDA or Adjusted EBITDA as the only measures of our
performance. We also use, and recommend that you consider, net
income in accordance with GAAP as a measure of our performance.
Finally, other companies may define EBITDA and Adjusted EBITDA
differently and, as a result, our measure of EBITDA and Adjusted
EBITDA may not be directly comparable to EBITDA and Adjusted
EBITDA measures of other companies.
Similarly, we believe our use of Adjusted EPS provides an
appropriate measure to use in assessing our performance across
periods given that this measure provides an adjustment for
certain significant items, the magnitude of which may vary
significantly from period to period and, thereby, have a
disproportionate effect on the earnings reported for a given
period. However, we do not, and do not recommend that you,
solely use Adjusted EPS to assess our financial and earnings
performance. We also use, and recommend that you use, diluted
earnings per share in addition to Adjusted EPS in assessing our
earnings performance.
The following tables, which reconcile our measure of Adjusted
EPS to diluted earnings per share, and Adjusted EBITDA to net
income, respectively, should be used along with the above
statements of operations for the periods presented, in
conjunction with the results of operations review that follows.
Diluted
earnings per share, as determined in accordance with GAAP, to
Adjusted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(3.99
|
)
|
|
$
|
(1.68
|
)
|
|
$
|
0.88
|
|
Asset impairments(1)
|
|
|
3.93
|
|
|
|
1.18
|
|
|
|
|
|
Restructuring charges(2)
|
|
|
0.20
|
|
|
|
0.43
|
|
|
|
0.03
|
|
Gains on debt repurchases(3)
|
|
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
Foreign currency transaction loss (gain)(4)
|
|
|
(0.04
|
)
|
|
|
0.09
|
|
|
|
|
|
Insurance-related recovery reserve(5)
|
|
|
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
0.08
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income, as determined in accordance with GAAP, to EBITDA and
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net income (loss)
|
|
$
|
(67,019
|
)
|
|
$
|
(28,261
|
)
|
|
$
|
14,890
|
|
Interest expense(a)
|
|
|
25,323
|
|
|
|
29,656
|
|
|
|
27,519
|
|
Income tax expense (benefit)
|
|
|
(4,034
|
)
|
|
|
(13,709
|
)
|
|
|
9,375
|
|
Depreciation and amortization expense(a)
|
|
|
21,883
|
|
|
|
28,594
|
|
|
|
20,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
(23,847
|
)
|
|
$
|
16,280
|
|
|
$
|
72,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments(1)
|
|
|
70,761
|
|
|
|
29,276
|
|
|
|
|
|
Restructuring charges(2)
|
|
|
5,468
|
|
|
|
10,225
|
|
|
|
874
|
|
Gains on debt repurchases(3)
|
|
|
(3,285
|
)
|
|
|
|
|
|
|
|
|
Foreign currency transaction loss (gain)(4)
|
|
|
(1,195
|
)
|
|
|
2,250
|
|
|
|
|
|
Insurance-related reserve(5)
|
|
|
|
|
|
|
1,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
47,902
|
|
|
$
|
59,619
|
|
|
$
|
73,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Depreciation and amortization expense shown in the above
schedule excludes amortization of debt issuance costs, which are
included as a component of interest expense. |
23
The nature of each individual item shown in the table above
which has been excluded from EBITDA in order to arrive at our
measure of Adjusted EBITDA for each of the periods presented is
detailed in the analysis of operating results that follows.
Earnings
and Performance Summary
We recorded a net loss of $67.0 million (or a loss of $3.99
per diluted share) in 2009, as compared to net loss of
$28.3 million (or a loss of $1.68 per diluted share) for
2008, and net income of $14.9 million ($0.88 per diluted
share) for 2007. For 2009, we recorded EBITDA of
$(23.8) million, as compared to EBITDA of
$16.3 million and $72.3 million in 2008 and 2007,
respectively. As set forth below, results for these periods were
impacted by certain significant items, the magnitude of which
may vary significantly from period to period and, thereby, have
a disproportionate effect on the earnings reported for any given
period. The income-statement review below contains further
detail regarding each of these items.
|
|
(1)
|
Asset impairments: Our results for 2009 were significantly
impacted by non-cash asset impairments of $70.8 million
($66.1 million after tax, or $3.93 per diluted share),
primarily as a result of a non-cash goodwill impairment charge
recorded during the first quarter of 2009 relative to our
Distribution segment. For 2008, we recorded $29.3 million
($19.7 million after tax, or $1.18 per diluted share) in
non-cash asset impairments which were recorded in the fourth
quarter of 2008 and primarily related to our OEM segment.
|
|
(2)
|
Restructuring charges: Our results for 2009, 2008 and 2007
included $5.5 million ($3.4 million after tax or $0.20
per diluted share), $10.2 million ($7.3 million after
tax or $0.43 per diluted share), and $0.9 million
($0.6 million after tax or $0.03 per diluted share),
respectively, in restructuring charges primarily incurred in
connection with the integration of our 2007 Acquisitions, as
well as our two 2009 plant closures.
|
|
(3)
|
Gains on repurchase of 2012 Senior Notes: In 2009, we
repurchased approximately $15.0 million in aggregate par
value of our 2012 Senior Notes and recorded an associated gain
of $3.3 million ($2.0 million after tax, or $0.12 per
diluted share).
|
|
(4)
|
Foreign currency transaction loss (gain): We recorded a foreign
currency transaction gain of $1.2 million
($0.7 million after tax, or $0.04 per diluted share) in
2009 and a foreign currency transaction loss of
$2.2 million ($1.6 million after tax, or $0.09 per
diluted share) in 2008 related to the impact of exchange rate
fluctuations on our Canadian subsidiary.
|
|
(5)
|
Insurance-related reserve: In 2008, we recorded an allowance of
$1.6 million ($1.1 million after tax, or $0.06 per
diluted share) in relation to an insurance receivable for an
inventory theft that occurred in 2005 at a since-closed facility.
|
Further details regarding each of the above-noted items is
described in the below operations review.
Excluding the impact of the above-noted items, our results for
2009 as compared to 2008, primarily reflect the impact of
significantly lower overall demand levels given the recessionary
conditions throughout 2009, and the impact of this declined
demand on our profitability, primarily in the form of lower
overall gross profit. We were, however, able to partially
mitigate the impact of the decline in demand through our
cost-cutting and production right-sizing efforts, as well as
improved results in our OEM segment.
For 2009, our total sales volume (measured in total pounds
shipped) decreased 37.8% compared to 2008. This decline in
overall volumes, coupled with the impact of lower average copper
prices, were major factors in our 2009 revenues decreasing 48.2%
compared to 2008 levels. However, despite the 48.2% sales
decline, our Adjusted EBITDA for 2009 declined at a slower rate
in comparison to sales, a decrease of 19.7% compared to 2008
levels, reflecting the favorable impact of major efforts made in
2009 to lower our overhead costs, and right-size our production
and distribution capacity. In addition, we derived a benefit
from significant improvement in our OEM segment, where operating
income increased from an operating loss of $3.3 million
recorded in 2008 to operating income of $7.1 million
realized in 2009. This improvement came despite significantly
lower OEM sales and reflected the favorable impact of our 2008
OEM customer rationalization efforts, as further explained in
the segment results section for OEM. We believe our
management of costs and production capacity in 2009 has
24
improved our operating leverage and that we are well positioned
to benefit from any recovery in the overall economy and
accompanying increase in market demand levels in the future.
Other significant events, actions and accomplishments included:
|
|
|
|
|
Continued to improve our capital structure. We reduced our total
outstanding debt by $36.0 million in 2009, with this
reduction being in addition to a $95.0 million reduction
during 2008 in significant part as a result of concerted efforts
across all of our production facilities to manage our working
capital, particularly our inventory levels, to reflect lower
demand and our customer-rationalization within our OEM segment,
as further discussed in our operating results review below. The
$36.0 million reduction in 2009 included the repurchase of
approximately $15.0 million in aggregate principal amount
of our 2012 Senior Notes, which were purchased at a discount
generating a $3.3 million gain and lowering our interest
expense. Please refer to the above Recent
Developments section for information regarding the
refinancing of our 2012 Senior Notes which occurred in February
2010;
|
|
|
|
Fully integrated our Copperfield acquisition, allowing us to
achieve the production-related and synergistic merger benefits
associated with this acquisition and permitting us to operate
with a single, company-wide set of production and back-office
systems, thereby enhancing the efficiency and effectiveness of
operations;
|
|
|
|
Closed facilities and consolidated the related operations of our
East Longmeadow, MA and Oswego, NY facilities as part of our
efforts to align manufacturing capacity with market demand. In
addition, our headcount at the end of 2009 totaled
934 employees, which was down 246 employees from
December 31, 2008, including a number of support and
indirect labor positions. We believe our rightsizing and
cost-reduction efforts have lowered our overall fixed costs,
which will further enhance our profitability if and when overall
demand levels increase in the future.
|
Year
Ended December 31, 2009 Compared with Year Ended
December 31, 2008
Net sales Our net sales for 2009 were
$504.2 million compared to $973.0 million for 2008, a
decrease of $468.8 million, or 48.2%. The decline in net
sales reflected both lower sales volumes and lower average
copper prices for 2009 as compared to 2008. Our total sales
volume (measured in total pounds shipped) decreased 37.8% for
2009 compared to 2008, with volumes declining 31.4% in our
Distribution segment and 49.5% in our OEM segment. The overall
volume decline was primarily a function of significant
contraction in demand across our business in the face of the
recessionary conditions that were prevalent throughout 2009. The
more significant sales volume decline noted within our OEM
segment reflected both the impact of recessionary conditions, as
well as the impact of planned sales reductions within this
segment resulting from our OEM customer rationalization efforts,
which are further discussed within our OEM segment-level
analysis. The magnitude of our overall
year-over-year
sales declines moderated somewhat in the fourth quarter of 2009,
given the significant decline in sales volumes experienced
during the fourth quarter of 2008. For the fourth quarter of
2009, our sales volumes declined 25.5% compared to the same
quarter last year. While volume levels remained well below 2008
levels, we did experience certain levels of demand stabilization
in the last three quarters of 2009, with such demand
stabilization contrasting with the significant contraction in
demand experienced during the fourth quarter of 2008 and first
quarter of 2009. We are encouraged by the demand stabilization
we experienced during the last three quarters of 2009. If such
trends continue, we would expect 2010 volumes to be at or above
our 2009 volume levels. However, we remain concerned with the
potential for additional pricing pressures in the wire and cable
industry given reduced overall levels of demand and excess
industry capacity. In addition to volume declines, our 2009
sales results as compared to 2008 reflected lower average daily
selling price of copper cathode on the COMEX, which averaged
$2.37 per pound during 2009, as compared to an average of $3.13
per pound for the 2008.
Gross profit Lower overall demand in
2009 as compared to 2008, was the primary reason we generated
$75.7 million in total gross profit for 2009, as compared
to $93.6 million for 2008, which represented a decline of
$17.9 million, or a decline of 19.1%. We did, however,
significantly improve our gross profit as a percentage of net
sales (gross profit margin) in 2009 compared to
2008, primarily as a result of reducing costs and rightsizing
our plant production and distribution platforms. For 2009, our
gross profit margin improved to 15.0% compared to 9.6% for 2008.
Our gross profit margin in 2008 reflected the impact of a severe
decline in sales demand which occurred during the fourth quarter
of 2008. In response, we reduced our workforce and plant
production, closing our
25
production facilities for an extended period during the fourth
quarter of 2008. These actions, while lowering our variable
labor and overhead costs, were not enough to offset the
unfavorable impact of increased unfavorable overhead variances
given the rapid nature of the sales demand decline and resulting
lower production levels. As a result, we generated a gross
margin rate of 3.6% in the fourth quarter of 2008, which lowered
our annual gross margin rate for 2008 to 9.6%. In 2009, we
focused efforts on effectively reducing costs and adjusting
plant capacity, including the closure and consolidation of two
plants. These efforts were a key factor in our ability to reduce
unfavorable plant and overhead variances in 2009 and improve our
operating leverage, thereby increasing our gross profit margin.
Additionally, we believe our 2009 efforts in this regard also
have us well positioned for any meaningful future improvement in
demand levels, which we believe would further improve our gross
margin rate and overall profitability. As further discussed in
the segment-level analysis that follows, our OEM segment gross
profit and overall profitability also improved significantly
from 2008 as the result of the above-noted rightsizing efforts,
as well as, our OEM customer rationalization efforts undertaken
late in 2008, which greatly improved
year-over-year
results in both OEM and, thus, our consolidated results. To a
lesser degree, our consolidated gross profit margin in 2009 as
compared to 2008 was also favorably impacted by lower average
copper prices in 2009 as compared to 2008.
Selling, engineering, general and administrative
(SEG&A) expense We incurred
total SEG&A expense of $40.8 million for 2009, as
compared to $52.2 million for 2008, which represented a
decline of $11.4 million, or 21.8%. As noted above, our
SEG&A expense for 2008 included a $1.6 million
non-cash charge recorded relative to an insurance receivable for
a 2005 inventory theft. The remaining $9.8 million decrease
in SEG&A during 2009, as compared to the same period last
year, primarily reflects the impact of (1) lower commission
expense which accounted for $2.9 million of the decrease;
(2) lower payroll-related expense as a result of lower
total headcounts which accounted for $1.9 million of the
total decrease; (3) the favorable impact of resolving
certain customer-related collection and other matters which
accounted for $1.1 million of the decrease; and
(4) lower spending across a number of general and
administrative expense areas which accounted for the remaining
$3.9 million of the overall decrease. Our SEG&A as a
percentage of total net sales increased to 8.1% for 2009, as
compared to 5.4% for 2008, reflecting the impact of lower
expense leverage as our fixed costs were spread over a lower net
sales base.
Intangible amortization expense Intangible
amortization expense for 2009 was $8.8 million as compared
to $12.0 million for 2008, with the expense in both
periods arising from the amortization of intangible assets
recorded in relation to our 2007 Acquisitions. The lower
amortization expense in 2009 reflects the impact of an
impairment charge we recorded during the fourth quarter of 2008
against our then-existing balance in intangible assets and the
accelerated amortization methodology used to amortize intangible
assets.
Asset impairments As noted above, for 2009,
we recorded a total of $70.8 million in asset impairments
as compared to $29.3 million in 2008. During the first
quarter of 2009, we concluded that there were sufficient
indicators to require us to perform an interim goodwill
impairment analysis based on a combination of factors which were
in existence at that time, including a significant decline in
our market capitalization during the first quarter of 2009, as
well as the recessionary economic environment in existence and
its then estimated potential impact on our business. As a result
of performing the related impairment test during the first
quarter of 2009, we recorded a non-cash goodwill impairment
charge of $69.5 million, which represented impairment
losses incurred within three of the four reporting units within
our Distribution segment: Electrical distribution, Wire and
Cable distribution and Industrial distribution. Further goodwill
impairment charges may be recognized in future periods to the
extent changes in factors or circumstances occur, including
further deterioration in the macro-economic environment or in
the equity markets, including the market value of our common
shares, deterioration in our performance or our future
projections, or changes in our plans for our businesses. The
remaining $1.3 million in asset impairment charges recorded
in 2009 related to closed properties currently being marketed
for sale. The resulting adjusted carrying value for each of
these closed properties represents our estimate of each
propertys fair value determined by management after
considering the best information available and the likely
assumptions market participants would use in valuing the assets.
For 2008, we recorded $29.3 million in non-cash asset
impairments which were primarily related to our OEM segment. The
impairments, recognized in the fourth quarter of 2008, primarily
reflect the impact of our decision during that quarter to
significantly downsize our sales projections for, and capacity
within, the OEM segment after having been unsuccessful in
securing necessary price increases with certain OEM
26
customers. These facts, as well as the impact that the declining
economy was having on customers within the OEM segment at that
time, were all factors which gave rise to the 2008 asset
impairments.
Restructuring charges Restructuring charges
for 2009 were $5.5 million, as compared to
$10.2 million for 2008. For 2009, these expenses were
primarily incurred in connection with severance for headcount
reductions and for lease and holding costs incurred relative to
those facilities closed during 2008 and 2009. We closed our East
Long Meadow, Massachusetts and Oswego, New York facilities in
March and August of 2009, respectively.
For 2008, restructuring charges primarily reflected costs
incurred in connection with the integration of our 2007
Acquisitions. In addition, during the second half of 2008, we
announced and executed a series of separately planned workforce
reduction initiatives, including (1) a headcount reduction
at our Oswego, New York manufacturing facility, and
(2) workforce reductions at our El Paso, Texas
facilities and within our corporate offices in Waukegan,
Illinois. The Oswego reductions were made as the result of a
decision to transition copper fabrication activities from the
Oswego plant to our Bremen, Indiana facility. The El Paso
and corporate reductions were in part a function of our
integration efforts, as well as in response to the deterioration
of economic conditions during the fourth quarter of 2008. In
total, we reduced our headcount by approximately
200 employees during the fourth quarter of 2008 as a result
of these actions.
We currently have nine closed facilities, five of which are
leased for various lengths of time through 2015, and four of
which are owned, for which we are obligated to pay holding
costs. We anticipate paying between approximately
$1.5 million and $2.5 million in such costs in 2010
without giving effect to our successfully negotiating any
potential sales, subleases, or lease buy-outs in relation to one
or more of these properties. We do not currently have any new
significant restructuring initiatives planned for 2010; however,
management is continually adjusting plans and production
schedules in light of sales trends, the macro-economic
environment and other demand indicators, and the possibility
exists that we may determine further plant closings,
restructurings and workforce reductions are necessary, some of
which may be significant.
Interest expense We incurred
$25.3 million in interest expense for 2009, as compared to
$29.7 million for 2008. The decrease in interest expense
was due primarily to lower average outstanding borrowings in
2009 as compared to the same time period last year.
Gain on repurchase of 2012 Senior Notes We
recorded a $3.3 million gain during 2009 resulting from our
repurchase of $15.0 million in aggregate par value of our
2012 Senior Notes.
Other (income) loss We recorded other income
of $1.2 million in 2009 as compared to a loss of
$2.2 million in 2008, with both years amounts
reflecting the impact of exchange rate changes on our Canadian
subsidiary.
Income tax expense (benefit) We recorded an
income tax benefit of $4.0 million 2009, compared to an
income tax benefit of $13.7 million for 2008. Our effective
tax rate for 2009 was 5.7% compared to an effective tax rate of
32.7% for the same period last year. This decline in our
effective tax benefit rate primarily reflects the
$69.5 million pre-tax, non-cash goodwill impairment charge
recorded during 2009. A significant amount of the related
goodwill did not have a corresponding tax basis, thereby
reducing the associated tax benefit for the pre-tax charge. We
would expect our 2010 tax rate to increase in the absence of
further non-deductible impairment charges and more closely
approximate the statutory tax rate.
Year
Ended December 31, 2008 Compared with Year Ended
December 31, 2007
Net sales Our net sales for 2008 were
$973.0 million compared to $864.1 million for 2007, an
increase of $108.9 million, or 12.6%. Our total sales
volume (measured in total pounds shipped) increased 12.7% for
2008 compared to 2007. These full-year increases, due primarily
to the expansion of our customer base as a result of our 2007
Acquisitions, occurred during the first three quarters of the
year and were not indicative of trends which existed at the end
of 2008.
During the fourth quarter of 2008, we experienced a significant
contraction in demand across our business in the face of
recessionary conditions. Volumes declined throughout the quarter
as compared to volumes during the first three quarters of 2008,
with the rate of decline accelerating toward the end of 2008 and
into 2009. For the fourth quarter of 2008, our total sales
volume declined 21.3% as compared to the same quarter in 2007,
reflecting volume
27
declines of 7.5% and 43.5% within our Distribution and OEM
segments, respectively. The decline in Distribution segment
volume was mitigated somewhat by the impact of 2007
Acquisitions, as the fourth quarter of 2008 included the full
benefit of the Woods acquisition, whereas the fourth quarter of
2007 included only one month of Woods sales. The significant
fourth quarter volume declines were coupled with a sharp drop in
the price of copper, reducing our fourth quarter sales to
$182.2 million, a decline of $72.1 million, or 28.4%,
from the same quarter in 2007. During the fourth quarter of
2008, copper averaged $1.75 per pound, representing a 49.3%
decline compared to an average of $3.45 per pound for the third
quarter of 2008, and a 46.2% decline from an average price of
$3.25 per pound for the fourth quarter of 2007. This sharp
fourth quarter decline in copper prices mitigated the impact of
significant increases in copper prices noted during the first
nine months of 2008. Thus, for the year, the daily selling price
of copper cathode on the COMEX averaged $3.13 per pound in 2008,
representing a 3.1% decline from 2007.
Gross profit We generated $93.6 million
in total gross profit in 2008 compared to $104.6 million in
2007, a decline of $11.0 million. Our gross profit margin
for 2008 was 9.6% compared to 12.1% for 2007. Both the decline
in gross profit dollars and gross profit margin for 2008
reflected poor gross profit performance within the OEM segment
throughout most of 2008, as well as a significant decline in
fourth quarter gross profit across both the OEM and Distribution
segments. Our total gross profit increased $13.0 million in
aggregate through the first three quarters of 2008 as the impact
of our 2007 Acquisitions more than offset declined margin within
the OEM segment. This increase in margin recorded for the first
three quarters of 2008, however, was more than offset by a
$24.0 million decline in margin for the fourth quarter of
2008, as compared to the same quarter in 2007. In response to
the severe decline in sales demand during the fourth quarter of
2008, we reduced our workforce and plant production, closing our
production facilities for an extended period during the fourth
quarter of 2008 to control stock levels given lower demand
levels. These actions lowered our variable labor and overhead
costs, but were not enough to offset the unfavorable impact of
increased unfavorable overhead variances given the rapid nature
of the sales demand decline and resulting lower production
levels. These unfavorable variances were a significant factor in
both the fourth quarter and full-year 2008 gross profit
declines as compared to the same periods in 2007.
In addition, our margins were negatively impacted by a sharp
drop in copper prices during the fourth quarter of 2008, as we
believe many competing suppliers lowered prices further and more
rapidly in the face of the lowered overall demand and excess
industry capacity than would be expected in the context of more
normal market conditions. In this regard, our 2008 gross
profit included the unfavorable impact of a $4.8 million
charge recorded during the fourth quarter of 2008 to reflect a
lower of cost or market adjustment for our on-hand inventory as
of December 31, 2008. This charge reflected the impact of
the above-noted severe decline in copper prices during late 2008
coupled with weakened sales demand which created downward
pricing pressure in the market, reducing the market value for
certain of our inventory below its first in, first out
(FIFO) carrying value and requiring an adjustment to
reflect such inventory at the lower of cost or market at
December 31, 2008.
Selling, engineering, general and
administrative We incurred SEG&A expense of
$52.2 million in 2008 compared to $44.3 million for
2007, an increase of $7.9 million. As a percentage of net
sales, SEG&A expense was 5.4% in 2008, as compared to 5.1%
in 2007. As noted above, SEG&A expense for 2008 included a
non-cash charge of $1.6 million for an allowance
established during 2008 for an insurance claim we filed for
thefts which occurred in 2005 at our manufacturing facility in
Miami Lakes, Florida, which we have since closed. During the
third quarter of 2008, as a result of failing to secure
satisfactory settlement of the matter with our insurers, we
commenced legal action in regard to this matter and recorded an
allowance for the related insurance receivable. Excluding the
impact of this non-cash charge, SEG&A expense for 2008 was
$50.6 million, or 5.2% of total net sales for 2008. The
remaining $6.3 million increase in SEG&A expense for
2008 as compared to 2007 included a $1.2 million increase
in payroll-related expenses, as reduced incentive-based payroll
expense was more than offset by the impact of headcount
increases occurring during the first half of 2008. These
increases were largely as a result of employees added from our
2007 Acquisitions. We significantly reduced our headcount in the
second half of 2008, in part due to the integration of the 2007
Acquisitions, as well as in response to the sharp decline in
sales demand experienced late in 2008, as noted above. The
remaining $5.1 million increase in SEG&A expense from
2007 occurred across a number of general expense categories,
most notably professional fees and information technology
expenses associated primarily with our integration efforts.
Intangible amortization expense We recorded a
total of $12.0 million and $7.6 million in
amortization expense for 2008 and 2007, respectively, in
connection with intangible assets recognized as part of our 2007
28
Acquisitions, with the increased expense recorded in 2008 mainly
attributable to the fact that 2008 reflected a full year of
intangible amortization expense.
Asset impairments We recorded a total of
$29.3 million in non-cash asset impairments in 2008. The
charges were primarily related to our OEM segment as discussed
above in the comparison of 2009 and 2008 consolidated operating
results.
Restructuring charges Restructuring charges
of $10.2 million were recorded in 2008 compared to
$0.9 million in 2007. For 2008, these expenses were
primarily incurred in connection with the integration of our
2007 Acquisitions.
Interest expense We incurred
$29.7 million in interest expense in 2008, compared to
$27.5 million in 2007, an increase of $2.2 million.
The increase was due primarily to additional expense related to
the 2007 Notes and increased borrowings under our Revolving
Credit Facility during 2008. During the course of 2007, we
increased our total debt level significantly to fund our
acquisition activities, including the acquisition of Copperfield
in April of 2007 and Woods in November 2007. These increased
debt levels increased our interest expense for 2008, as compared
to 2007, which did not contain a full-year impact of the higher
borrowing levels brought about by the 2007 Acquisitions. We did,
however reduce our debt levels during the second half of 2008,
and at December 31, 2008, our total debt was
$272.8 million, down from total debt of $367.8 million
outstanding at December 31, 2007.
Other (income) loss As noted above, other
loss for 2008 primarily reflects the unfavorable impact of
exchange rates on our Canadian subsidiary.
Income tax expense (benefit) We recorded an
income tax benefit of $13.7 million in 2008 compared to
income tax expense of $9.4 million for the year ended
December 31, 2007, with the decline reflecting the pre-tax
loss in 2008.
Segment
Results
The following table sets forth, for the periods indicated,
statements of operations data by segment in thousands of
dollars, segment net sales as a percentage of total net sales
and segment operating income as a percentage of segment net
sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Amount
|
|
|
Percent of Total
|
|
|
Amount
|
|
|
Percent of Total
|
|
|
Amount
|
|
|
Percent of Total
|
|
|
|
(In thousands)
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
$
|
390,911
|
|
|
|
77.5
|
%
|
|
$
|
670,740
|
|
|
|
68.9
|
%
|
|
$
|
576,602
|
|
|
|
66.7
|
%
|
OEM
|
|
|
113,241
|
|
|
|
22.5
|
|
|
|
302,228
|
|
|
|
31.1
|
|
|
|
287,542
|
|
|
|
33.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
504,152
|
|
|
|
100.0
|
%
|
|
$
|
972,968
|
|
|
|
100.0
|
%
|
|
$
|
864,144
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
Segment
|
|
|
|
|
|
Segment
|
|
|
|
|
|
Segment
|
|
|
|
Amount
|
|
|
Net Sales
|
|
|
Amount
|
|
|
Net Sales
|
|
|
Amount
|
|
|
Net Sales
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
$
|
36,666
|
|
|
|
9.4
|
%
|
|
$
|
57,142
|
|
|
|
8.5
|
%
|
|
$
|
58,439
|
|
|
|
10.1
|
%
|
OEM
|
|
|
7,074
|
|
|
|
6.2
|
%
|
|
|
(3,348
|
)
|
|
|
(1.1
|
)%
|
|
|
8,323
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
43,740
|
|
|
|
|
|
|
|
53,794
|
|
|
|
|
|
|
|
66,762
|
|
|
|
|
|
Corporate
|
|
|
(93,950
|
)
|
|
|
|
|
|
|
(63,927
|
)
|
|
|
|
|
|
|
(14,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Operating Income (Loss)
|
|
$
|
(50,210
|
)
|
|
|
|
|
|
$
|
(10,133
|
)
|
|
|
|
|
|
$
|
51,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income represents income from continuing
operations before net interest expense, other income or expense,
and income taxes. Corporate consists of items not charged or
allocated to the segments,
29
including costs for employee relocation, discretionary bonuses,
professional fees, restructuring expenses, asset impairments and
intangible amortization. The Companys segments have common
production processes, and manufacturing and distribution
capacity. Accordingly, we do not identify net assets to our
segments. The accounting policies of the segments are the same
as those described in Note 1 of Notes to Consolidated
Financial Statements contained in Part II, Item 8 of
this document.
Distribution
Segment
For 2009, net sales were $390.9 million, as compared to
$670.7 million for 2008, a decrease of $279.8 million,
or 41.7%. As noted above in our discussion of consolidated
results, this decrease was due primarily to a decline in sales
volumes and copper prices as compared to 2008. For 2009, our
Distribution segment sales volume (measured in total pounds
shipped) decreased 31.4% compared to 2008.
Operating income was $36.7 million for 2009, as compared to
$57.1 million for 2008, a decline of $20.4 million,
primarily reflecting the above-noted impact on gross profit of
decreased sales volumes in 2009, partially offset by an improved
gross margin rate and lower SEG&A expense. Our segment
operating income rate was 9.4% for 2009, as compared to 8.5% for
2008. The improvement in the operating income rate in 2009 was
primarily due to the favorable impact in 2009 of cost
rationalization efforts and the unfavorable impact on 2008
results that arose from significant unfavorable overhead
variances recorded during the fourth quarter of that year due to
a rapid and significant decline in volume levels during the
fourth quarter of 2008.
In 2008, net sales increased $94.1 million, from
$576.6 million to $670.7 million, or 16.3%, compared
to 2007. This increase was due primarily to an increase in our
sales in this segment during the first three quarters of 2008,
partially offset by a significant decline in volume during the
fourth quarter of 2008. Our sales increased in this segment
during the first three quarters of 2008 due both to increased
copper prices and more notably an increase in our customer base
as a result of our 2007 Acquisitions which occurred during the
course of 2007. As noted above in our review of consolidated
results, during the fourth quarter of 2008 we experienced a
significant contraction in demand across our business. Our total
sales volume declined 7.5% within our Distribution segment
during the fourth quarter of 2008 compared to the same quarter
of 2007, with the decline mitigated somewhat by the impact of
2007 Acquisitions, as the fourth quarter of 2008 included the
full benefit of the Woods acquisition, whereas the fourth
quarter of 2007 included only one month of Woods sales. These
significant fourth quarter volume declines were coupled with a
sharp drop in the price of copper, reducing our total
Distribution net sales for the quarter to $141.9 million, a
decline of $24.5 million, or 14.7%, from the fourth quarter
of 2007.
Operating income was $57.1 million in 2008 compared to
$58.4 million for 2007, a decrease of $1.3 million, or
2.2%. This decrease was a function of a significant decline in
operating income recorded during the fourth quarter of 2008, as
compared to prior quarters in 2008, as well as 2007. As noted
above, the recessionary conditions existing during the fourth
quarter of 2008 caused a significant and rapid decline in our
volumes. Given this rapid decline, our profitability decreased
for the same period, as we were not able to offset the impact of
the decline with cost savings associated with reduced production
levels. As a result, we experienced a significant increase in
unfavorable overhead variances during the quarter.
OEM
Segment
For 2009, net sales were $113.2 million, as compared to
$302.2 million for 2008, a decrease of $189.0 million,
or 62.5%. As noted above in our discussion of consolidated
results, this decrease was due to a decline in sales volumes and
copper prices as compared to 2008. For 2009, our OEM segment
sales volume (measured in total pounds shipped) decreased 49.5%
compared to 2008. In addition to the impact of recessionary
conditions prevalent throughout 2009, the decline in volume also
reflected the impact of our customer rationalization efforts
within OEM. In late 2008, we decided to reduce the extent of our
sales to many customers within this segment as a result of
failing to secure adequate pricing for our products from such
customers. We determined these actions were necessary to improve
the overall financial performance of the Company. As our OEM
customer rationalization was completed in late 2008, we do not
anticipate any further impact to our OEM revenues from such
rationalization efforts.
30
Operating income was $7.1 million for 2009, as compared to
an operating loss of $3.3 million for 2008, an increase of
$10.4 million. Our segment operating income rate was 6.2%
for 2009, as compared to (1.1)% for 2008. Both the increase in
operating income and the improvement in operating income rate
during 2009, as compared to 2008, primarily reflected the
favorable impact of the above-noted OEM customer and cost
rationalization efforts as discussed in our above review of
consolidated results.
For 2008, net sales were $302.2 million compared to
$287.5 million for 2007, an increase of $14.7 million,
or 5.1%. As noted above, this increase was due primarily to
increased sales recorded during the first half of 2008 as a
result of an increase in our customer base resulting from our
2007 Acquisitions that occurred after the first quarter of 2007.
OEM segment sales declined during the second half of 2008, with
a significant decline during the fourth quarter of 2008 in the
face of recessionary conditions. For the fourth quarter of 2008,
our total sales volume declined 43.5% within our OEM segment, as
compared to the fourth quarter of 2007, reflecting decreased
demand from existing customers which were particularly affected
by the then-existing economic circumstances.
We recorded an operating loss of $3.3 million in 2008
compared to operating income of $8.3 million for 2007, a
decline of $11.6 million. The OEM operating loss for 2008
excludes the impact of asset impairment charges, which we record
as a component of corporate-related expenses. In addition to the
impact of a severe decline in 2008 fourth quarter sales and
profits as a result of recessionary conditions prevalent during
that quarter, our OEM results for 2008 were also negatively
impacted by our inability to timely pass on inflationary raw
material cost increases to our customers within this segment
during 2008.
Net
Sales by Groups of Products
Net sales across our four major product lines were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales by Groups of Products
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Industrial Wire and Cable
|
|
$
|
187,671
|
|
|
$
|
293,250
|
|
|
$
|
312,105
|
|
Electronic Wire
|
|
|
133,090
|
|
|
|
381,227
|
|
|
|
402,146
|
|
Assembled Wire and Cable Products
|
|
|
167,734
|
|
|
|
261,313
|
|
|
|
120,940
|
|
Fabricated Bare Wire
|
|
|
15,657
|
|
|
|
37,178
|
|
|
|
28,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
504,152
|
|
|
$
|
972,968
|
|
|
$
|
864,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As noted above, we are organized internally according to the
customers we serve, which is reflected in the structure of our
reportable segments: OEM and Distribution. Therefore, we do not
focus internally on the operating performance or profitability
of our business by product grouping, as shown in the above
table. In relation to the data presented above, however, we note
that, while all product categories experienced net sales
declines in 2009 as compared to 2008 that are primarily
reflective of the general recessionary conditions existing
throughout 2009, product sales in our electronic wire grouping
declined at a more significant level. While we do not have
visibility to the specific end markets into which our products
are ultimately sold, based on the nature of, and general
applications for, such products, we believe the relatively more
significant decline within the electronic wire grouping is
reflective of the fact that many of the products within this
category, such as thermostat, irrigation, security and telephone
wire, are used in residential and commercial construction. We
would not expect any significant increase in sales in 2010
within this category given the current condition of these
markets. The decline in fabricated bare wire sales for 2009 as
compared to 2008 reflects the above-noted impact of recessionary
condition existing throughout 2009 and, to a lesser degree, our
decision, upon closing our Oswego, New York facility, to exit
some specially fabricated bare wire production: Also of note is
the sharp increase in the level of sales within the Assembled
Wire and Cable Products category between 2008 and 2007. This
increase was reflective of the addition of Woods in late 2007,
which increased our sales levels within this category.
31
Liquidity
and Capital Resources
Debt
Our outstanding debt (including capital lease obligations) was
as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Revolving Credit Facility expiring April 2, 2012
|
|
$
|
10,239
|
|
|
$
|
30,000
|
|
9.875% Senior Notes due October 1, 2012, including
unamortized premium of $1,617 and $2,352, respectively
|
|
|
226,597
|
|
|
|
242,352
|
|
Capital lease obligations
|
|
|
17
|
|
|
|
462
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
236,853
|
|
|
$
|
272,814
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, we had $7.6 million in cash
and cash equivalents, as compared to $16.3 million as of
December 31, 2008. We also had approximately
$80.8 million in remaining excess availability under our
Revolving Credit Facility at December 31, 2009, as compared
to $74.2 million of excess availability at
December 31, 2008.
Refinancing
of 9.875% Senior Notes due October 1, 2012 (the
2012 Senior Notes) with 9.0% Senior Notes due
February 15, 2018 (the 2018 Senior
Notes)
At December 31, 2009, we had approximately
$225.0 million in aggregate principal amount outstanding of
our 2012 Senior Notes, all of which were scheduled to mature on
October 1, 2012. On February 3, 2010, we completed a
private placement offering of $235.0 million aggregate
principal amount of our 2018 Senior Notes to refinance our 2012
Senior Notes (the Private Placement). The 2018
Senior Notes mature on February 15, 2018 and interest on
these notes will accrue at a rate of 9.0% per annum and be
payable semi-annually on each February 15 and August 15,
commencing August 15, 2010. The gross proceeds from the
Private Placement, approximately $231.7 million which
reflects a discounted issue price of 98.597% of the principal
amount, were used, together with other available funds, for
payment of consideration and costs relating to a cash tender
offer and consent solicitation for our 2012 Senior Notes. A
total of $199.4 million aggregate principal amount of the
2012 Senior Notes were tendered, which represented approximately
88.6% of the approximately $225.0 million aggregate
principal amount of the 2012 Senior Notes outstanding.
Consequently, as of March 3, 2010, approximately
$25.6 million of the 2012 Senior Notes remain outstanding.
We will redeem the $25.6 million in remaining outstanding
2012 Senior Notes on March 22, 2010 at a price of 102.4688%
of the principal amount of such 2012 Senior Notes, which,
excluding accrued and unpaid interest, will equate to a total
redemption amount of approximately $26.2 million.
We undertook the above-described refinancing of our 2012 Senior
Notes to take advantage of what we believe were favorable
conditions within the related financial markets at the time. The
refinancing also allowed us to liberalize our bond covenants,
extend the maturity of such debt from 2012 to 2018, while at the
same time reducing our annual cash interest requirements given
the lower coupon rate on the 2018 Senior Notes, partially offset
by an increase in the total aggregate principal amount
outstanding. We expect to record a loss of between approximately
$8.5 million and $9.0 million in the first quarter of
2010 on the early extinguishment of our 2012 Senior Notes. This
amount includes the write-off of approximately $1.9 million
of unamortized debt issuance costs related to the 2012 Senior
Notes, as well as the impact of the call and tender premiums,
and other costs paid in connection with the refinancing.
The 2018 Senior Notes are non-callable for the first four years
subsequent to issuance. Thereafter, the 2018 Senior Notes are
callable at a price equal to par plus one-half the coupon rate,
declining ratably to par by the end of the sixth year. In
addition, the 2018 Senior Notes have a provision allowing us to
redeem up to 35% of the principal amount outstanding at any time
during the first three years subsequent to issuance with the use
of proceeds generated by one or more possible future equity
offerings. As with the indenture that governed the 2012 Senior
Notes, the indenture for the 2018 Senior Notes contains
covenants that, among other things, limit our ability to incur
additional indebtedness, make restricted payments, create liens,
pay dividends, sell substantially all of our assets, enter into
sale and leaseback transactions, and enter into transactions
with affiliates of the Company. In addition, the
32
2018 Senior Notes were issued with registrations rights, whereby
we are obligated to use our commercially reasonable efforts to
register with the SEC an exchange offering of new notes, having
terms substantially identical to those of the 2018 Senior Notes,
except that the new notes will be freely tradeable. This SEC
registration and exchange offering is planned for 2010.
Revolving
Credit Facility
Our Revolving Credit Facility is a senior secured facility that
provides for aggregate borrowings of up to $200.0 million,
subject to certain limitations as discussed below. The proceeds
from the Revolving Credit Facility are available for working
capital and other general corporate purposes, including merger
and acquisition activity. At December 31, 2009, we had
approximately $80.8 million in remaining excess
availability under the Revolving Credit Facility.
Our Revolving Credit Facility was amended on June 18, 2009
in connection with the above-noted 2012 Senior Notes repurchases
to permit us to spend up to $30.0 million to redeem, retire
or repurchase our 2012 Senior Notes so long as (i) no
default or event of default existed at the time of the
repurchase or would result from the repurchase and
(ii) excess availability under the Revolving Credit
Facility after giving effect to the repurchase remained above
$40 million. Prior to this amendment, we were prohibited
from making prepayments on or repurchases of the 2012 Senior
Notes. The amendment required us to pay an upfront amendment fee
of $1.0 million, and also increased the applicable interest
rate margins by 1.25% and the unused line fee increased by
0.25%. Accordingly, subsequent to the amendment, interest is
payable, at our option, at the agents prime rate plus a
range of 1.25% to 1.75% or the Eurodollar rate plus a range of
2.50% to 3.00%, in each case based on quarterly average excess
availability under the Revolving Credit Facility.
We further amended our Revolving Credit Facility on
January 19, 2010, in connection with the issuance of the
2018 Senior Notes (i) to permit the sale of the 2018 Senior
Notes (ii) to enhance our ability to create and finance
foreign subsidiaries, (iii) to liberalize key covenants and
make other changes to increase operating flexibility. Pursuant
to this amendment, borrowing availability under the Revolving
Credit Facility for foreign subsidiaries is limited to the
greater of (i) the sum of 85% of the aggregate book value
of accounts receivable of such foreign subsidiaries plus 60% of
the aggregate book value of the inventory of such foreign
subsidiaries and (ii) $25 million (excluding permitted
intercompany indebtedness of such foreign subsidiaries).
Pursuant to the terms of the Revolving Credit Facility, we are
required to maintain a minimum of $10 million in excess
availability under the Revolving Credit Facility at all times.
Borrowing availability under the Revolving Credit Facility is
limited to the lesser of (i) $200 million or
(ii) the sum of 85% of eligible accounts receivable, 55% of
eligible inventory and an advance rate to be determined of
certain appraised fixed assets, with a $10 million sublimit
for letters of credit.
The Revolving Credit Facility is guaranteed by our domestic
subsidiary and is secured by substantially all of our assets and
the assets of our domestic subsidiary, including accounts
receivable, inventory and any other tangible and intangible
assets (including real estate, machinery and equipment and
intellectual property) as well as by a pledge of all the capital
stock of our domestic subsidiary and 65% of the capital stock of
our Canadian foreign subsidiary, but not our Chinese 100%-owned
entity.
The Revolving Credit Facility contains financial and other
covenants that limit or restrict our ability to pay dividends,
incur indebtedness, permit liens on property, make investments,
provide guarantees, enter into mergers, acquisitions or
consolidations, conduct asset sales, enter into leases or sale
and lease back transactions, and enter into transactions with
affiliates. In addition to maintaining a minimum of
$10 million in excess availability under the Revolving
Credit Facility at all times, the financial covenants in the
Revolving Credit Facility require us to maintain a fixed charge
coverage ratio of not less than 1.1 to 1.0 for any month during
which our excess availability under the Revolving Credit
Facility falls below $30 million. We maintained greater
than $30 million of monthly excess availability during 2009.
As of December 31, 2009, we were in compliance with all of
the covenants on our Revolving Credit Facility.
Current
and Future Liquidity
In general, we require cash to fund working capital, capital
expenditures, debt repayment and to pay interest costs related
to our debt. Our working capital requirements tend to increase
when we experience significant
33
increased demand for products or significant copper price
increases. Conversely, when demand declines or copper prices
fall, our working capital requirements generally decline as
well. We may be required to increase our borrowings under our
Revolving Credit Facility in the future if, among a number of
other potential factors, the price of copper further increases,
thereby further increasing our working capital requirements.
Our management assesses the future cash needs of our business by
considering a number of factors, including: (1) historical
earnings and cash flow performance, (2) future working
capital needs, (3) current and projected debt service
expenses, (4) planned capital expenditures, and
(5) our ability to borrow additional funds under the terms
of our Revolving Credit Facility.
Based on the foregoing, we believe that our operating cash flows
and borrowing capacity under the Revolving Credit Facility will
be sufficient to fund our operations, debt service and capital
expenditures for the foreseeable future. At December 31,
2009, we had $10.2 million in outstanding borrowings
against our $200.0 million Revolving Credit Facility and
had $7.6 million in cash on hand, as well as
$80.8 million in excess availability.
If we experience a deficiency in earnings with respect to our
fixed charges in the future, we would need to fund the fixed
charges through a combination of cash flows from operations and
borrowings under the Revolving Credit Facility. If cash flows
generated from our operations, together with borrowings under
our Revolving Credit Facility, are not sufficient to fund our
operations, debt service and capital expenditures and we need to
seek additional sources of capital, the limitations on our
ability to incur debt contained in the Revolving Credit Facility
and the Indenture relating to our 2018 Senior Notes could
prevent us from securing additional capital through the issuance
of debt. In that case, we would need to secure additional
capital through other means, such as the issuance of equity. In
addition, we may not be able to obtain additional debt or equity
financing on terms acceptable to us, or at all. If we were not
able to secure additional capital, we could be required to delay
or forego capital spending or other corporate initiatives, such
as the development of products, or acquisition opportunities.
Our Revolving Credit Facility permits us to redeem, retire or
repurchase our 2018 Senior Notes subject to certain limitations.
We may repurchase 2018 Senior Notes in the future but whether we
do so will depend on a number of factors and there can be no
assurance that we will repurchase any amounts of our 2018 Senior
Notes.
Cash
Flow Summary
A summary of our cash flows for 2009, 2008 and 2007 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net (Loss) Income
|
|
$
|
(67,019
|
)
|
|
$
|
(28,261
|
)
|
|
$
|
14,890
|
|
Non-cash items
|
|
|
88,225
|
|
|
|
51,804
|
|
|
|
21,692
|
|
Changes in working capital assets and liabilities
|
|
|
6,480
|
|
|
|
92,655
|
|
|
|
(12,789
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
|
|
27,686
|
|
|
|
116,198
|
|
|
|
23,793
|
|
Net cash from investing activities
|
|
|
(3,964
|
)
|
|
|
(13,799
|
)
|
|
|
(269,072
|
)
|
Net cash from financing activities
|
|
|
(32,798
|
)
|
|
|
(94,535
|
)
|
|
|
239,398
|
|
Effects of exchange rate changes on cash and cash equivalents
|
|
|
347
|
|
|
|
(413
|
)
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(8,729
|
)
|
|
|
7,451
|
|
|
|
(5,857
|
)
|
Cash and equivalents at beginning of year
|
|
|
16,328
|
|
|
|
8,877
|
|
|
|
14,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at end of year
|
|
$
|
7,599
|
|
|
$
|
16,328
|
|
|
$
|
8,877
|
|
Operating
activities
Net cash provided by operating activities was
$27.7 million, $116.2 million, and $23.8 million
for 2009, 2008 and 2007, respectively. The $88.5 million
decline in cash provided by operating activities for 2009 as
compared to 2008 was largely a result of the impact of changes
in working capital items, primarily changes in inventory,
accounts receivable, and accounts payable. Lower consolidated
inventory levels at December 31, 2009, compared to levels
at December 31, 2008, generated approximately
$7.0 million in operating cash flows in 2009. This 2009
improvement
34
was in addition to a $58.2 million increase in operating
cash flows generated in 2008 relative to inventories, as a sharp
decline in copper prices during the fourth quarter of 2008, as
well as a reduction in inventory levels given a significant
reduction in demand at that same time and the impact of our OEM
customer rationalization efforts, significantly lowered our
required working capital investment in inventory at
December 31, 2008, as compared to December 31, 2007.
Similarly, we generated $10.2 million in operating cash
flows from accounts receivable during 2009 as a result of lower
outstanding receivable levels at December 31, 2009 compared
to December 31, 2008, which primarily reflected the impact
of lower overall demand levels in 2009. This improvement in 2009
was in addition to a $60.1 million increase in operating
cash flows generated in 2008 relative to accounts receivable, as
a sharp decline in copper prices during the fourth quarter of
2008, as well as a reduction in receivable levels given a
significant reduction in demand at that same time, significantly
lowered our required working capital investment in accounts
receivable at December 31, 2008, as compared to
December 31, 2007. These significant improvements in
operating cash flows generated from inventories and accounts
receivable realized in 2008 create unfavorable
year-over-year
comparisons when 2009 is compared with 2008. The impact of such
items on
year-over-year
cash flows was partially offset, however, by changes in our
accounts payable levels over the same periods. For 2009, we
recorded a use of $9.7 million in operating cash flows
relative to accounts payable compared to a use of
$19.9 million in 2008. This change reflects a significant
reduction in accounts payable levels at the end of 2008 given
the above-noted sharp decline in copper prices and demand levels
that occurred in the fourth quarter of 2008, which lowered our
overall level of accounts payable at that time. The
$92.4 million increase in cash provided by operating
activities for 2008 as compared to 2007 primarily reflects the
above-described changes in working capital requirements brought
about by a sharp decline in copper prices and demand levels at
the end of 2008, partially offset by lower levels of income in
2008 as compared to 2007.
Investing
activities
Net cash utilized for investing activities was
$4.0 million, $13.8 million and $269.1 million in
2009, 2008 and 2007, respectively. The $9.8 million decline
in cash utilized for investing activities between 2009 and 2008,
primarily reflects $13.3 million in capital expenditures in
2008, primarily associated with our new facilities in Pleasant
Prairie, Wisconsin and El Paso, Texas, both of which were
opened that year. The $269.1 million in cash used in
investing activities in 2007 primarily was attributable to the
acquisition of both Copperfield and Woods in that year, which
accounted for $263.1 million of the total. We would expect
our 2010 capital expenditures to approximate 2009 levels.
Financing
activities
Net cash used by financing activities was $32.8 million and
$94.5 million in 2009 and 2008, respectively. Net cash
provided by financing activities was $239.4 million in
2007. The $32.8 million used in financing activities for
2009 included $19.8 million in net repayments made under
our Revolving Credit Facility during 2009 due to a reduction in
debt primarily brought about by efforts to reduce our levels of
working capital, $12.0 million used to repurchase a portion
of our 2012 Senior Notes, and $1.0 million paid to amend
our Revolving Credit Facility.
Net cash used by financing activities was $94.5 million in
2008 compared to net cash provided from financing activities of
$239.4 million in 2007. The $94.5 million in cash used
in financing activities in 2008 was due to a reduction in debt
brought about both by a decline in the price of copper and,
thus, our working capital needs, as well as efforts to reduce
our overall working capital, including our inventory levels. The
$239.4 million provided in 2007 was primarily a function of
acquisition-related borrowing activities. As noted above, during
2007 we issued the $120.0 million 2007 Senior Notes,
generating total proceeds of $119.4 million (net of
issuance costs), and increased our borrowings under our
Revolving Credit Facility, which were $123.4 million at
December 31, 2007.
Seasonality
We have experienced, and expect to continue to experience,
certain seasonal trends in our sales and cash flow. We generally
require increased levels of cash during the second and third
quarters of the year to build inventories in anticipation of
higher demand during the late fall and early winter months. In
general, the trade receivables generated from these periods of
relatively higher sales is subsequently collected during the
late fourth and early first quarter of the year.
35
Contractual
Obligations
The following table sets forth information about our contractual
obligations and commercial commitments as of December 31,
2009:
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|
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Payments Due by Period
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Less Than
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After
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Total
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1 Year
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1-3 Years
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3-5 Years
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5 Years
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(Dollars in thousands)
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|
Long-term debt obligations (including current portion and
interest)(1)
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$
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297,352
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|
|
$
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22,678
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|
|
$
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274,674
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|
|
$
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|
|
|
$
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|
|
Capital lease obligations (including interest)
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|
|
18
|
|
|
|
15
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|
|
|
3
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|
Operating lease obligations
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|
42,347
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|
|
8,188
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|
13,345
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|
9,578
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|
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11,236
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Purchase obligations
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39,283
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39,283
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Total
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$
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379,000
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$
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70,164
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|
|
$
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288,022
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|
|
$
|
9,578
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|
|
$
|
11,236
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|
|
|
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(1) |
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On February 3, 2010, we refinanced the 2012 Senior Notes
with our 2018 Senior Notes. See Part II, Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operation Liquidity and
Capital Resources Refinancing of 9.875% Senior
Notes. |
Long-term debt obligations include $10.2 million of
borrowings outstanding under our Revolving Credit Facility which
has a maturity of 2012. Interest obligations on our variable
rate debt, primarily our borrowings under the Revolving Credit
Facility, have been calculated based on the prevailing interest
rate at December 31, 2009. Amounts of future interest
payments made on such variable rate borrowings will depend on
prevailing variable interest rates in future periods and the
amount of outstanding borrowings under our Revolving Credit
Facility for such periods.
Purchase obligations primarily consist of purchase orders and
other contractual arrangements for inventory and raw materials.
We anticipate being able to meet our obligations as they come
due.
Off-Balance
Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical
Accounting Policies
The preparation of financial statements in conformity with
accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. While our significant accounting
policies are described in more detail in the notes to our
consolidated financial statements included elsewhere in this
report, we believe the following accounting policies to be
critical to the judgments and estimates used in the preparation
of our financial statements.
Revenue
Recognition
We recognize sales of our products when the products are shipped
to customers and title passes to the customer in accordance with
the terms of sale. We provide incentive allowances to our
customers, with the amount of such promotional allowances being
tied primarily to the particular customers level of
purchasing activity during a specified time period or periods.
We record an accrual for such promotional allowances and reflect
the expenses as a reduction of our net sales when we determine
that it is probable the allowances will be earned by the
customer and the amount of the allowances are reasonably
estimated. We base our accruals primarily on sales activity and
our historical experience with each customer.
36
Allowance
for Uncollectible Accounts
We record an allowance for uncollectible accounts to reflect
managements best estimate of losses inherent in our
receivables as of the balance sheet date given the facts
available to us at the time the allowance is recorded. As was
the case in 2008, which included the full-year impact of
significant acquisitions made during the course of 2007, our
write-off activity and allowance will generally increase with
increases in the overall scale of our business. Establishing
this allowance involves considerable judgment. In calculating
the necessary allowance for uncollectible accounts, we perform
ongoing credit evaluations of our customers. We consider both
the current financial condition of individual customers and
historical write-off patterns in establishing our allowance.
When we become aware that, due to deterioration of their
financial condition or for some other reason, a particular
customer is unable or unwilling to pay an amount owed to us, we
record a specific allowance for receivables related to that
customer to reflect our best estimate of the realizability of
amounts owed. During the fourth quarter of 2008, in response to
a general and significant deterioration in economic conditions
and their impact on the financial condition of certain specific
customers, including negative trends in the past due accounts of
such customers, we determined it necessary to increase our
write-offs and allowance for uncollectible accounts well above
the companys historical averages of recent years. In 2009,
our bad debt experience improved, and we benefited from the
resolution of certain customer-related collection matters.
Actual future collections of receivables could differ
significantly from our estimates as a function of future,
unforeseen changes in general, industry and specific
customers financial conditions. In addition, we reserve
for customer credits and discounts expected to be issued
relative to our accounts receivable balance. These reserves are
intended to reflect an estimate of future credits and discounts
that are probable of issuance in relation to the existing
accounts receivable balance, and these estimates are based on
historical experience.
Inventories
Inventories include material, labor and overhead costs and are
recorded at the lower of cost or market using the
first-in
first-out (FIFO) method. In applying FIFO, we
evaluate the realizability of our inventory on a
product-by-product
basis. In circumstances where inventory levels are in excess of
anticipated market demand, where inventory is deemed
technologically obsolete or not saleable due to its condition or
where the inventory cost for an item exceeds its net realizable
value, we record a charge to cost of goods sold and reduce the
inventory to its net realizable value. Copper constitutes our
primary inventory component. During the fourth quarter of 2008,
copper cathode on the COMEX averaged $1.75 per pound,
representing a 49.3% decline compared to an average of $3.45 per
pound for the third quarter of 2008. As a result of this sharp
decline in copper prices coupled with the impact of
significantly lower overall market demand on market pricing, we
recognized a charge of $4.8 million in the fourth quarter
of 2008 to write our inventories down to their lower of cost or
market values. Though copper prices have increased since
December 31, 2008, averaging $2.37 and $3.04 per pound for
the full-year and fourth quarter of 2009, respectively, any
significant future decline in copper prices at current or lower
levels of market demand, would likely necessitate additional
lower of cost or market adjustments, the magnitude of which
would be a function of such price declines and overall market
demand.
Plant
and Equipment and other Long-Lived Assets
Plant and equipment are carried at cost and are depreciated over
their estimated useful lives, ranging from three to twenty
years, using principally the straight-line method for financial
reporting purposes and accelerated methods for tax reporting
purposes. Our other long-lived assets consist primarily of
customer-related intangible assets recorded in connection with
our 2007 Acquisitions. These intangible assets are amortized
over their estimated useful lives using an accelerated
amortization methodology which reflects our estimate of the
pattern in which the economic benefit derived from such assets
is to be consumed. The carrying value of all long-lived assets
is evaluated periodically to determine if adjustment to the
depreciation period or the carrying value is warranted. When
events and circumstances indicate that our long-lived assets
should be reviewed for possible impairment, we test for the
existence of impairment by developing and utilizing projections
of future cash flows expected to be generated from the use and
eventual disposition of the assets or asset groups in question.
Our asset groups reflect the shared nature of our facilities and
manufacturing capacity. Expected cash flows are projected on an
undiscounted basis over the remaining life of the assets or
asset groups in question to determine whether such cash flows
are expected to exceed the recorded carrying amount of the
assets involved. If we identify the existence of impairment as a
result of employing this test, we determine the amount of the
impairment loss by the extent to which the carrying value of the
37
impaired assets exceed their fair values as determined by
valuation techniques including, as appropriate, the use of
discounted cash flows to measure estimated fair value.
During the fourth quarter of 2008, we recorded
$17.6 million in long-lived asset impairments related to
our plant and equipment and other long-lived assets. Given our
revised plans and projections for future performance of the OEM
segment in light of our customer rationalization efforts and our
failure to secure necessary future price increases with
significant OEM customers, as well as the impact the declining
economy appears to have had on such customers, we determined it
necessary to test our OEM-related long-lived assets for
potential impairment during the fourth quarter of 2008, and
recorded the above-noted impairment charges as a result of such
analysis.
The long-lived asset impairment test uses significant
assumptions, estimates and judgments, and is subject to inherent
uncertainties and subjectivity. Estimating projected cash flows
associated with our asset groups involved the use of significant
assumptions, estimates and judgments with respect to numerous
factors, including future sales, gross profit, selling,
engineering, general and administrative expense rates, discount
rates and cash flows. These estimates were based on our revised
business plans and forecasts in light of the above-noted facts
and circumstances.
The use of different assumptions, estimates or judgments, such
as the estimated future undiscounted cash flows or in the
discount rate used to discount such cash flows could have
significantly increased or decreased the related impairment
charge. For example, as of December 31, 2008, (1) a 5%
increase or decrease in the aggregate estimated undiscounted
cash flows associated with the associated asset groups (without
any change in the discount rate) would have resulted in an
increase or decrease of approximately $1.0 million in the
impairment charge recorded as of such date, and (2) a
100 basis point increase or decrease in the discount rate
used (without any change in the aggregate estimated undiscounted
cash flows) would have resulted in a decrease or increase of
approximately $0.3 million in the impairment charge
recorded as of such date. The above-described sensitivities are
presented solely to illustrate the effects that a hypothetical
change in one or more key variables might have on the outcomes
produced by the impairment testing process. Further impairment
charges may be recognized in future periods to the extent
changes in a number of factors or circumstances occur, including
but not limited to further deterioration in the performance of
and future projections relative to, or changes in our plans for
one or more of our long-lived asset groups or facilities.
Goodwill
and Other Intangible Assets
Under goodwill accounting rules, we are required to assess
goodwill for impairment annually, or more frequently if events
or circumstances indicate impairment may have occurred. The
goodwill impairment test is performed at the reporting unit
level. We perform our annual test for potential goodwill
impairment as of December 31st of each year. The test
requires that a fair value estimate be made at the reporting
unit level as of the test date. Potential impairment exists if
the carrying amount of net assets of a particular reporting
unit, including goodwill, as of the test date exceeds the then
estimated fair value of the reporting unit. We have determined
that our operating segments appropriately serve as reporting
units, as defined by the accounting rules governing, and for
purposes of applying, our goodwill impairment tests. Determining
the carrying value, or the net assets for an individual
reporting unit, requires the use of estimation and allocation
methodologies given the shared nature of many of our assets and
liabilities. To the extent possible, we identify assets, such as
trade receivables, and liabilities specific to each specific
reporting unit, however, given our use of primarily shared
production facilities and resources, assets such as inventory,
fixed assets and accounts payable have to be allocated on a
basis reflective of our best estimate of their relative usage by
each reporting unit. Then, in performing the above-described
test, if it is determined that the carrying value of a
particular reporting unit exceeds its estimated fair value, the
implied fair value of the segments goodwill must next be
determined. If the carrying amount of the reporting units
goodwill exceeds its implied fair value, an impairment of
goodwill is deemed to have taken place and a loss is recorded
equal to the amount of the excess.
During the first quarter of 2009, we concluded that there were
sufficient indicators to require us to perform an interim
goodwill impairment analysis based on a combination of factors
which were in existence at that time, including a significant
decline in our market capitalization, as well as the
recessionary economic environment and its then estimated
potential impact on our business. Accordingly, we recorded a
non-cash goodwill impairment charge of approximately
$69.5 million, representing our best estimate of the
impairment loss incurred within three
38
of the four reporting units within our Distribution segment:
Electrical distribution, Wire and Cable distribution and
Industrial distribution. At the March 31, 2009 test date,
no indication of impairment under the goodwill impairment test
existed relative to our Retail distribution reporting unit, and
we did not have any goodwill recorded within our OEM segment.
For the purposes of the goodwill impairment analysis, our
estimates of fair value were based primarily on estimates
generated using the income approach, which estimates the fair
value of our reporting units based on their projected future
discounted cash flows. As of December 31, 2009, management
determined that the fair values of all reporting units which
carry goodwill, substantially exceeded their respective carrying
values.
The goodwill impairment testing process involves the use of
significant assumptions, estimates and judgments, and is subject
to inherent uncertainties and subjectivity. Estimating a
reporting units projected cash flows involves the use of
significant assumptions, estimates and judgments with respect to
numerous factors, including future sales, gross profit, selling,
engineering, general and administrative expense rates, capital
expenditures, and cash flows. These estimates are based on our
business plans and forecasts. These estimates are then
discounted, which necessitates the selection of an appropriate
discount rate. The discount rate used reflects market-based
estimates of the risks associated with the projected cash flows
of the reporting unit. The allocation of the estimated fair
value of our reporting units to the estimated fair value of
their net assets required under the second step of the goodwill
impairment test also involves the use of significant
assumptions, estimates and judgments.
The use of different assumptions, estimates or judgments in
either step of the goodwill impairment testing process, such as
the estimated future cash flows of our reporting units, the
discount rate used to discount such cash flows, or the estimated
fair value of the reporting units tangible and intangible
assets and liabilities, could significantly increase or decrease
the estimated fair value of a reporting unit or its net assets,
and therefore, impact the related impairment charge. For
example, as of March 31, 2009, (1) a 5% increase or
decrease in the aggregate estimated undiscounted cash flows of
our reporting units (without any change in the discount rate
used in the first step of its goodwill impairment test as of
such date) would have resulted in an increase or decrease of
approximately $14.0 million in the aggregate estimated fair
value of our reporting units as of such date, (2) a
100 basis point increase or decrease in the discount rate
used to discount the aggregate estimated cash flows of our
reporting units to their net present value (without any change
in the aggregate estimated cash flows of our reporting units
used in the first step of its goodwill impairment test as of
such date) would have resulted in a decrease or increase of
approximately $18.0 million in the aggregate estimated fair
value of our reporting units as of such date, and (3) a 1%
increase or decrease in the estimated sales growth rate without
a change in the discount rate of each reporting unit would have
resulted in an increase or decrease of approximately
$7.0 million in the aggregate estimated fair value of our
reporting units as of such date. The goodwill impairment testing
process is complex, and can be affected by the
inter-relationship between certain assumptions, estimates and
judgments that may apply to both the first and second steps of
the process and the fact that the maximum potential impairment
of the goodwill of any reporting unit is limited to the carrying
value of the goodwill of that reporting unit. Accordingly, the
above-described sensitivities around changes in the aggregate
estimated fair values of our reporting units would not
necessarily have a
dollar-for-dollar
impact on the amount of goodwill impairment we recognized as a
result of our analysis. These sensitivities are presented solely
to illustrate the effects that a hypothetical change in one or
more key variables affecting a reporting units fair value
might have on the outcomes produced by the goodwill impairment
testing process.
In addition to the above-noted interim goodwill impairment test
performed during the first quarter of 2009, we performed our
annual goodwill impairment test as of December 31, 2009,
with no indication of potential impairment. The estimated fair
value of each reporting unit with recorded goodwill as of
December 31, 2009 was significantly in excess of its
related carrying value, with no such reporting unit having an
excess of fair value less than 30% of its carrying value. As
stated above, the use of different assumptions, estimates or
judgments in the goodwill impairment testing process may
significantly increase or decrease the estimated fair value of a
reporting unit or its net assets. However, as of the
December 31, 2009 annual impairment test date, the
above-noted conclusion, that no indication of goodwill
impairment existed as of the test date, would not have changed
had the test been conducted assuming: 1) a 5% decrease in
the aggregate estimated undiscounted cash flows of our reporting
units (without any change in the discount rate), 2) a
100 basis point increase in the discount rate used to
discount the aggregate estimated cash flows of our reporting
units to their net present value in determining their estimated
fair
39
values (without any change in the aggregate estimated cash flows
of our reporting units), or 3) 1% decrease in the estimated
sales growth rate without a change in the discount rate of each
reporting unit.
Goodwill impairment charges may be recognized in future periods
in one or more of the Distribution reporting units to the extent
changes in factors or circumstances occur, including further
deterioration in the macro-economic environment or in the equity
markets, including the market value of our common shares,
deterioration in our performance or our future projections, or
changes in our plans for one or more reporting units.
Our other intangible assets primarily consist of acquired
customer relationships and trademarks and trade names, all of
which have finite or determinable useful lives. Accordingly,
these finite-lived assets are amortized to reflect the estimated
pattern of economic benefit consumed, either on a straight-line
or accelerated basis over the estimated periods benefited. See
Note 3 for information regarding our asset impairment
analyses.
Income
Taxes
We use the asset and liability approach in accounting for income
taxes. Under this approach, deferred tax assets and liabilities
are determined based on temporary differences between the
financial statement and tax basis of assets and liabilities
using enacted tax rates. A provision for income tax expense is
recognized for income taxes payable for the current period, plus
the net changes in deferred tax amounts. We periodically assess
the reliability of deferred tax assets and the adequacy of
deferred tax liabilities, including the results of local, state
or federal statutory tax audits.
New
Accounting Pronouncements
Other than as described below, no new accounting pronouncement
issued or effective during the fiscal year has had or is
expected to have a material impact on the Consolidated Financial
Statements.
Disclosures
about Derivatives Instruments
In March 2008, the FASB issued new accounting guidance on
disclosures about derivative instruments and hedging activities.
The new guidance expands the disclosure requirements for
derivative instruments and hedging activities. This guidance
specifically requires entities to provide enhanced disclosures
addressing the following: how and why an entity uses derivative
instruments; how derivative instruments and related hedged items
are accounted for; and how derivative instruments and related
hedged items affect an entitys financial position,
financial performance, and cash flows. We adopted the new
guidance in the first quarter of 2009. The required disclosures
have been set forth in Note 10 to the consolidated
financial statements.
Fair
Value Measurements and Disclosures
In August 2009, the FASB issued an accounting update on fair
value measurements and disclosures. This update provides
additional guidance clarifying the measurement of liabilities at
fair value. It clarifies how the price of a traded debt security
should be considered in estimating the fair value of the
issuers liability. We adopted this accounting update in
the fourth quarter of 2009, and its adoption did not have any
significant impact on our financial statements.
Postretirement
Benefit Plan Assets
In December 2008, the FASB issued guidance on employers
disclosure about postretirement benefit plan assets. The
accounting guidance provides additional guidance on
employers disclosures about the plan assets of defined
benefit pension or other postretirement plans. The guidance
requires disclosures about how investment allocation decisions
are made, the fair value of each major category of plan assets,
valuation techniques used to develop fair value measurements of
plan assets, the impact of measurements on changes in plan
assets when using significant unobservable inputs and
significant concentrations of risk in the plan assets. These
disclosures are required for fiscal years ending after
December 15, 2009. We adopted this guidance for the period
ending December 31, 2009 (see Note 15).
40
Participating
Securities
In June 2008, the FASB issued new accounting guidance on
determining whether instruments granted in share-based payment
transactions are participating securities. This accounting
guidance addresses whether instruments granted in share-based
payment transactions are participating securities prior to
vesting and, therefore, need to be included in the allocation in
computing earnings per share under the two-class method. The
guidance concluded that all outstanding unvested share-based
payment awards that contain rights to non-forfeitable dividends
participate in undistributed earnings with common shareholders.
If awards are considered participating securities, we are
required to apply the two-class method of computing basic and
diluted earnings per share. We have determined that our
outstanding unvested shares are participating securities.
Effective January 1, 2009, we adopted this standard.
Accordingly, earnings per common share are computed using the
two-class method prescribed by the accounting guidance. All
previously reported earnings per common share data has been
retrospectively adjusted to conform to the new computation
method (see Note 11).
Variable
Interest Entity
In June 2009, the FASB issued an update to the accounting
guidance for consolidation. Accordingly, new accounting
standards concerning the treatment of variable interest entities
were issued. This guidance addresses the effects on certain
provisions of consolidation of variable interest entities as a
result of the elimination of the qualifying special-purpose
entity concept. This guidance also addresses the ability to
provide timely and useful information about an enterprises
involvement in a variable interest entity. The accounting update
is effective for each reporting entitys first annual
reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period and
for interim and annual reporting periods thereafter. We do not
anticipate this guidance will have a material impact on our
financial condition or operating results.
|
|
ITEM 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Our principal market risks are exposure to changes in commodity
prices, primarily copper prices, interest rates on borrowings,
and exchange rate risk relative to our operations in Canada.
Commodity Risk. Certain raw materials used in
our products are subject to price volatility, most notably
copper, which is the primary raw material used in our products.
The price of copper is particularly volatile and can affect our
net sales and profitability. We purchase copper at prevailing
market prices and, through multiple pricing strategies,
generally attempt to pass along to our customers changes in the
price of copper and other raw materials. From
time-to-time,
we enter into derivative contracts, including copper futures
contracts, to mitigate the potential impact of fluctuations in
the price of copper on our pricing terms with certain customers.
We do not speculate on copper prices. All of our copper futures
contracts are tied to the COMEX copper market index and the
value of our futures contracts varies directly with underlying
changes in the related COMEX copper futures prices. We record
these derivative contracts at fair value on our consolidated
balance sheet as either an asset or liability. At
December 31, 2009, we had contracts with a net aggregate
fair value of $0.1 million, consisting of contracts to sell
625,000 pounds of copper in March 2010. A hypothetical adverse
movement of 10% in the price of copper at December 31,
2009, with all other variables held constant, would have
resulted in an aggregate loss in the fair value of our commodity
futures contracts of approximately $0.2 million as of
December 31, 2009.
Interest Rate Risk. We have exposure to
changes in interest rates on a portion of our debt obligations.
As of December 31, 2009, approximately 4% of our debt was
variable rate, primarily our borrowings under our Revolving
Credit Facility for which interest costs are based on either the
lenders prime rate or a LIBOR-based rate. Based on the
amount of our variable rate borrowings at December 31,
2009, which totaled approximately $10.2 million, an
immediate one percentage point change in LIBOR would change our
annual interest expense by approximately $0.1 million. This
estimate assumes that the amount of variable rate borrowings
remains constant for an annual period and that the interest rate
change occurs at the beginning of the period.
Foreign Currency Exchange Rate Risk. We have
exposure to changes in foreign currency exchange rates related
to our Canadian operations. Currently, we do not manage our
foreign currency exchange rate risk using any financial or
derivative instruments, such as foreign currency forward
contracts or hedging activities. The
41
strengthening of the Canadian dollar relative to the U.S.dollar
had a positive impact on our Canadian results in 2009. In 2009,
we recorded an aggregate pre-tax gain of approximately
$1.2 million related to exchange rate fluctuations between
the U.S. dollar and Canadian dollar.
|
|
ITEM 8.
|
Financial
Statements and Supplementary Data
|
Our consolidated financial statements, including the Notes
thereto, and other information are included in this report
beginning on
page F-1.
|
|
ITEM 9.
|
Changes
in and Disagreements With Accountants on Accounting and
Financial Disclosure
|
None.
|
|
ITEM 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
Our management, including our Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the
effectiveness of disclosure controls and procedures (as defined
in Exchange Act
Rules 13a-15(b)
and
15d-15(e)),
as of December 31, 2009. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective.
Managements
Report on Internal Control over Financial
Reporting
The Companys management is responsible for establishing
and maintaining adequate internal control over financial
reporting, as defined in Exchange Act
Rule 13a-15(d)
and
15d-15(f).
The Companys internal control over financial reporting is
a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America. The Companys management, including its principal
executive officer and principal financial officer, conducted an
assessment of the Companys internal control over financial
reporting based on the framework established by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal
Control Integrated Framework. Based on this
assessment, the Companys management has concluded that, as
of December 31, 2009, the Companys internal control
over financial reporting is effective. Because of its inherent
limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
The Companys independent registered public accounting
firm, Deloitte & Touche LLP, has issued an audit
report on the Companys internal control over financial
reporting and their report is included herein.
Changes
in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting (as defined in Exchange Act
Rules 13a-15(d)
and
15d-15(f)
during the quarter ended December 31, 2009 that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
42
PART III
|
|
ITEM 10.
|
Directors
and Executive Officers of the Registrant
|
This item is incorporated by reference to the sections entitled
Proposal No. 1: Election of Directors,
Corporate Governance Compliance with Section 16(a)
Beneficial Ownership Reporting in 2009, Corporate
Governance How are Directors Nominated?
and Corporate Governance The Committees
of the Board The Audit Committee of the
definitive proxy statement for the Annual Meeting of
Stockholders to be held on April 30, 2010, which will be
filed with the SEC not later than 120 days after the close
of the fiscal year pursuant to regulation 14A.
Code of
Ethics
Our board of directors has adopted a code of ethics applicable
to all of our directors, officers and employees. We have posted
this code of ethics on our internet site (colemancable.com under
Investors). We will disclose on our internet site
any amendments to, or waivers from, our code of ethics that are
required to be publicly disclosed pursuant to the rules of the
SEC or NASDAQ.
|
|
ITEM 11.
|
Executive
Compensation
|
This item is incorporated by reference to the to the sections
entitled Executive Compensation and Corporate
Governance Compensation Committee Interlocks
and Insider Participation of the definitive proxy
statement for the Annual Meeting of Stockholders to be held on
April 30, 2010, which will be filed with the SEC not later
than 120 days after the close of the fiscal year pursuant
to regulation 14A.
|
|
ITEM 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
This item is incorporated by reference to the section entitled
Information About Our Common Share Ownership and
Proposal No. 2: Approval of an Amendment and
Restatement to the Companys Long-Term Incentive Plan
of the definitive proxy statement for the Annual Meeting of
Stockholders to be held on April 30, 2010, which will be
filed with the SEC not later than 120 days after the close
of the fiscal year pursuant to regulation 14A.
|
|
ITEM 13.
|
Certain
Relationships and Related Transactions
|
This item is incorporated by reference to the sections entitled
Corporate Governance Director
Independence, Corporate Governance
What is our Related party Transactions
Approval Policy and What Procedures Do We Use To Implement
It? and Corporate Governance What
Related Person Transactions Do We Have? of the definitive
proxy statement for the Annual Meeting of Stockholders to be
held on April 30, 2010, which will be filed with the SEC
not later than 120 days after the close of the fiscal year
pursuant to regulation 14A.
|
|
ITEM 14.
|
Principal
Accountant Fees and Services
|
This item is incorporated by reference to the section entitled
Proposal No. 3: Ratification of Appointment of
Independent Auditors Independent Auditor Fee
Information of the definitive proxy statement for the
Annual Meeting of Stockholders to be held on April 30,
2010, which will be filed with the SEC not later than
120 days after the close of the fiscal year pursuant to
regulation 14A.
43
|
|
ITEM 15
|
Exhibits
and Financial Statement Schedules
|
(1) Financial Statements
Reference is made to the Index to Consolidated Financial
Statements appearing in Item 8, which is incorporated
herein by reference.
(2) Financial Statement Schedules
None.
(3) Exhibits
See index to exhibits.
44
Coleman
Cable, Inc. and Subsidiaries
December 31,
2009
All Schedules are omitted because they are not applicable, not
required or because the required information is included in the
Consolidated Financial Statements or Notes thereto.
F-1
To the Board
of Directors and Shareholders of Coleman Cable, Inc.
Coleman Cable, Inc.
Waukegan, Illinois
We have audited the accompanying consolidated balance sheets of
Coleman Cable, Inc. and subsidiaries (the Company)
as of December 31, 2009 and 2008, and the related
consolidated statements of operations, shareholders
equity, and cash flows for each of the three years in the period
ended December 31, 2009. We also have audited the
Companys internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Controls over Financial Reporting. Our responsibility
is to express an opinion on these financial statements and an
opinion on the Companys internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Coleman Cable, Inc. and subsidiaries as of
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2009, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2009, based on the criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
/s/ DELOITTE &
TOUCHE LLP
March 3, 2010
Chicago, Illinois
F-2
COLEMAN
CABLE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Thousands, except per share data)
|
|
|
NET SALES
|
|
$
|
504,152
|
|
|
$
|
972,968
|
|
|
$
|
864,144
|
|
COST OF GOODS SOLD
|
|
|
428,485
|
|
|
|
879,367
|
|
|
|
759,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
75,667
|
|
|
|
93,601
|
|
|
|
104,593
|
|
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
40,821
|
|
|
|
52,227
|
|
|
|
44,258
|
|
INTANGIBLE ASSET AMORTIZATION
|
|
|
8,827
|
|
|
|
12,006
|
|
|
|
7,636
|
|
ASSET IMPAIRMENTS
|
|
|
70,761
|
|
|
|
29,276
|
|
|
|
|
|
RESTRUCTURING CHARGES
|
|
|
5,468
|
|
|
|
10,225
|
|
|
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
(50,210
|
)
|
|
|
(10,133
|
)
|
|
|
51,825
|
|
INTEREST EXPENSE
|
|
|
25,323
|
|
|
|
29,656
|
|
|
|
27,519
|
|
GAIN ON REPURCHASE OF SENIOR NOTES
|
|
|
(3,285
|
)
|
|
|
|
|
|
|
|
|
OTHER (INCOME) LOSS, NET
|
|
|
(1,195
|
)
|
|
|
2,181
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(71,053
|
)
|
|
|
(41,970
|
)
|
|
|
24,265
|
|
INCOME TAX EXPENSE (BENEFIT)
|
|
|
(4,034
|
)
|
|
|
(13,709
|
)
|
|
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(67,019
|
)
|
|
$
|
(28,261
|
)
|
|
$
|
14,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER COMMON SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(3.99
|
)
|
|
$
|
(1.68
|
)
|
|
$
|
0.89
|
|
Diluted
|
|
|
(3.99
|
)
|
|
|
(1.68
|
)
|
|
|
0.88
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,809
|
|
|
|
16,787
|
|
|
|
16,787
|
|
Diluted
|
|
|
16,809
|
|
|
|
16,787
|
|
|
|
16,826
|
|
See notes to consolidated financial statements.
F-3
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Thousands except per share data)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,599
|
|
|
$
|
16,328
|
|
Accounts receivable, net of allowances of $2,565 and $3,020,
respectively
|
|
|
86,393
|
|
|
|
97,038
|
|
Inventories
|
|
|
66,222
|
|
|
|
73,368
|
|
Deferred income taxes
|
|
|
3,129
|
|
|
|
4,202
|
|
Assets held for sale
|
|
|
3,624
|
|
|
|
3,535
|
|
Prepaid expenses and other current assets
|
|
|
5,959
|
|
|
|
10,688
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
172,926
|
|
|
|
205,159
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Land
|
|
|
1,179
|
|
|
|
1,675
|
|
Buildings and leasehold improvements
|
|
|
13,131
|
|
|
|
14,915
|
|
Machinery, fixtures and equipment
|
|
|
91,815
|
|
|
|
93,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,125
|
|
|
|
110,265
|
|
Less accumulated depreciation and amortization
|
|
|
(57,190
|
)
|
|
|
(50,098
|
)
|
Construction in progress
|
|
|
1,731
|
|
|
|
1,276
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
50,666
|
|
|
|
61,443
|
|
GOODWILL
|
|
|
29,064
|
|
|
|
98,354
|
|
INTANGIBLE ASSETS
|
|
|
30,584
|
|
|
|
39,385
|
|
DEFERRED INCOME TAXES
|
|
|
434
|
|
|
|
|
|
OTHER ASSETS
|
|
|
6,433
|
|
|
|
7,625
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
290,107
|
|
|
$
|
411,966
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
14
|
|
|
$
|
30,445
|
|
Accounts payable
|
|
|
17,693
|
|
|
|
27,408
|
|
Accrued liabilities
|
|
|
23,980
|
|
|
|
31,191
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
41,687
|
|
|
|
89,044
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
236,839
|
|
|
|
242,369
|
|
LONG-TERM LIABILITIES
|
|
|
3,823
|
|
|
|
4,046
|
|
DEFERRED INCOME TAXES
|
|
|
2,498
|
|
|
|
7,088
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Common stock, par value $0.001; 75,000 shares authorized;
16,809 and 16,787 shares issued and outstanding on
December 31, 2009 and 2008
|
|
|
17
|
|
|
|
17
|
|
Additional paid-in capital
|
|
|
88,475
|
|
|
|
86,135
|
|
Accumulated deficit
|
|
|
(82,987
|
)
|
|
|
(15,968
|
)
|
Accumulated other comprehensive loss
|
|
|
(245
|
)
|
|
|
(765
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
5,260
|
|
|
|
69,419
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
290,107
|
|
|
$
|
411,966
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
COLEMAN
CABLE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Thousands)
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(67,019
|
)
|
|
$
|
(28,261
|
)
|
|
$
|
14,890
|
|
Adjustments to reconcile net income (loss) to net cash flow from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
23,331
|
|
|
|
30,015
|
|
|
|
21,662
|
|
Stock-based compensation
|
|
|
2,340
|
|
|
|
2,426
|
|
|
|
3,739
|
|
Inventory theft insurance receivable allowance
|
|
|
|
|
|
|
1,588
|
|
|
|
|
|
Foreign currency transaction loss (gain)
|
|
|
(1,195
|
)
|
|
|
2,250
|
|
|
|
|
|
Provision for inventories
|
|
|
|
|
|
|
4,800
|
|
|
|
|
|
Asset impairments
|
|
|
70,761
|
|
|
|
29,276
|
|
|
|
|
|
Deferred taxes
|
|
|
(4,211
|
)
|
|
|
(15,164
|
)
|
|
|
(3,689
|
)
|
(Gain) loss on disposal of fixed assets
|
|
|
484
|
|
|
|
284
|
|
|
|
(20
|
)
|
Gain on repurchase of senior notes
|
|
|
(3,285
|
)
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities (net of
acquisitions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
10,162
|
|
|
|
60,065
|
|
|
|
(4,606
|
)
|
Inventories
|
|
|
6,953
|
|
|
|
58,224
|
|
|
|
(2,894
|
)
|
Prepaid expenses and other assets
|
|
|
5,177
|
|
|
|
(4,055
|
)
|
|
|
(4,967
|
)
|
Accounts payable
|
|
|
(9,672
|
)
|
|
|
(19,862
|
)
|
|
|
(6,377
|
)
|
Accrued liabilities
|
|
|
(6,140
|
)
|
|
|
(5,388
|
)
|
|
|
6,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities
|
|
|
27,686
|
|
|
|
116,198
|
|
|
|
23,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(4,087
|
)
|
|
|
(13,266
|
)
|
|
|
(6,010
|
)
|
Acquisition of businesses, net of cash acquired
|
|
|
|
|
|
|
(708
|
)
|
|
|
(263,138
|
)
|
Proceeds from the disposal of fixed assets
|
|
|
123
|
|
|
|
175
|
|
|
|
17
|
|
Proceeds from sale of investment
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from investing activities
|
|
|
(3,964
|
)
|
|
|
(13,799
|
)
|
|
|
(269,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under revolving loan facilities to fund acquisitions,
including issuance costs
|
|
|
|
|
|
|
|
|
|
|
127,080
|
|
Net borrowings (repayments) under revolving loan facilities
|
|
|
(19,761
|
)
|
|
|
(93,438
|
)
|
|
|
(5,450
|
)
|
Debt amendment fee
|
|
|
(1,012
|
)
|
|
|
|
|
|
|
|
|
Proceeds of issuance of common stock, net of issuance costs
|
|
|
|
|
|
|
|
|
|
|
(451
|
)
|
Issuance of senior notes, net of issuance costs
|
|
|
|
|
|
|
|
|
|
|
119,352
|
|
Repayment of long-term debt
|
|
|
(12,025
|
)
|
|
|
(1,097
|
)
|
|
|
(1,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities
|
|
|
(32,798
|
)
|
|
|
(94,535
|
)
|
|
|
239,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
347
|
|
|
|
(413
|
)
|
|
|
24
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(8,729
|
)
|
|
|
7,451
|
|
|
|
(5,857
|
)
|
CASH AND CASH EQUIVALENTS Beginning of year
|
|
|
16,328
|
|
|
|
8,877
|
|
|
|
14,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS End of year
|
|
$
|
7,599
|
|
|
$
|
16,328
|
|
|
$
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH ACTIVITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligation
|
|
$
|
|
|
|
$
|
135
|
|
|
$
|
50
|
|
Unpaid capital expenditures
|
|
|
162
|
|
|
|
135
|
|
|
|
1,453
|
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid (refunded)
|
|
$
|
(4,256
|
)
|
|
$
|
4,848
|
|
|
$
|
18,709
|
|
Cash interest paid
|
|
|
24,380
|
|
|
|
29,059
|
|
|
|
23,220
|
|
See notes to consolidated financial statements.
F-5
COLEMAN
CABLE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
Additional
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
Stock
|
|
|
Common
|
|
|
Paid-in
|
|
|
(Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Outstanding
|
|
|
Stock
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
(Thousands)
|
|
|
BALANCE December 31, 2006
|
|
|
16,787
|
|
|
$
|
17
|
|
|
$
|
80,421
|
|
|
$
|
(2,597
|
)
|
|
$
|
|
|
|
$
|
77,841
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,890
|
|
|
|
|
|
|
|
14,890
|
|
Cumulative translation, net of tax benefit of $35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(48
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,842
|
|
Common stock issuance costs
|
|
|
|
|
|
|
|
|
|
|
(451
|
)
|
|
|
|
|
|
|
|
|
|
|
(451
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2007
|
|
|
16,787
|
|
|
|
17
|
|
|
|
83,709
|
|
|
|
12,293
|
|
|
|
(48
|
)
|
|
|
95,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,261
|
)
|
|
|
|
|
|
|
(28,261
|
)
|
Cumulative translation, net of tax benefit of $429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(580
|
)
|
|
|
(580
|
)
|
Derivative losses, net of tax benefit of $90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,978
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
2,426
|
|
|
|
|
|
|
|
|
|
|
|
2,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2008
|
|
|
16,787
|
|
|
|
17
|
|
|
|
86,135
|
|
|
|
(15,968
|
)
|
|
|
(765
|
)
|
|
|
69,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67,019
|
)
|
|
|
|
|
|
|
(67,019
|
)
|
Cumulative translation, net of tax provision of $129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251
|
|
|
|
251
|
|
Derivative gains, net of tax provision of $90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
|
|
137
|
|
Pension adjustments, net of tax provision of $81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66,499
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2009
|
|
|
16,809
|
|
|
$
|
17
|
|
|
$
|
88,475
|
|
|
$
|
(82,987
|
)
|
|
$
|
(245
|
)
|
|
$
|
5,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
COLEMAN
CABLE, INC. AND SUBSIDIARIES
(Thousands, except per share data)
|
|
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Nature
of Operations, Principles of Consolidation and Basis of
Presentation
The consolidated financial statements include the accounts of
Coleman Cable, Inc. and its wholly-owned subsidiaries (the
Company, Coleman, we,
us or our). We are a manufacturer and
supplier of electrical wire and cable products for consumer,
commercial and industrial applications, with operations
primarily in the United States and, to a lesser degree, Canada.
During the first quarter of 2008, we changed our management
reporting structure and the manner in which we report our
financial results internally, including the integration of our
2007 Acquisitions (defined in Note 2) for reporting
purposes. The changes resulted in a change in our reportable
segments. Accordingly, we now have two reportable business
segments: (1) Distribution, and (2) Original Equipment
Manufacturers (OEM). Our Distribution segment serves
our customers in distribution businesses, who are resellers of
our products, while our OEM segment serves our OEM customers,
who generally purchase more tailored products from us which are
in turn used as inputs into subassemblies of manufactured
finished goods. Where applicable, prior period amounts have been
recast to reflect the new reporting structure (see Note 16).
All intercompany accounts and transactions have been eliminated
in consolidation.
Accounting
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Estimates are required
for several matters, including inventory valuation; determining
the allowance for uncollectible accounts and accruals for sales
returns, allowances and incentives; depreciation and
amortization; accounting for purchase business combinations; the
recoverability of goodwill and long-lived assets; as well as,
establishing restructuring, self-insurance, legal, environmental
and tax accruals. Actual results could differ from those
estimates. Summarized below is the activity for our accounts
receivable allowance account:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Balance January 1
|
|
$
|
3,020
|
|
|
$
|
4,601
|
|
|
$
|
2,092
|
|
Provisions
|
|
|
221
|
|
|
|
2,973
|
|
|
|
625
|
|
Acquisition and purchase accounting adjustments
|
|
|
|
|
|
|
(65
|
)
|
|
|
2,944
|
|
Write-offs and credit allowances, net of recovery
|
|
|
(715
|
)
|
|
|
(4,348
|
)
|
|
|
(1,060
|
)
|
Foreign currency translation adjustment
|
|
|
39
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31
|
|
$
|
2,565
|
|
|
$
|
3,020
|
|
|
$
|
4,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
Recognition
Our sales represent sales of our product inventory. We generally
recognize sales when products are shipped to customers and the
title and risk of loss pass to the customer in accordance with
the terms of sale, pricing is fixed and determinable, and
collection is reasonably assured. Billings for shipping and
handling costs are recorded as sales and related costs are
included in cost of goods sold. Provisions for payment
discounts, product returns and customer incentives and
allowances, which reduce revenue, are estimated based upon
historical experience and other relevant factors and are
recorded within the same period that the revenue is recognized
as a reduction of sales.
F-7
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cost
of Goods Sold
Cost of goods sold is primarily comprised of direct materials,
labor and overhead costs (including depreciation expense)
consumed in the manufacture of goods sold. Cost of goods sold
also includes the cost of direct sourced merchandise sold, as
well as our distribution costs, including the cost of inbound
freight, internal transfers, warehousing and shipping and
handling.
Foreign
Currency Translation
Assets and liabilities of our Canadian subsidiary are translated
to U.S. dollars at fiscal year-end exchange rates. The
resulting translation adjustments are recorded as a component of
shareholders equity. Income and expense items are
translated at exchange rates prevailing throughout the year.
Gains and losses from foreign currency transactions are included
in net income.
Cash
and Cash Equivalents
Cash equivalents include all highly liquid investments with a
maturity of three months or less when purchased. The fair value
of cash and cash equivalents approximates their carrying
amounts. All of our cash and cash equivalents qualify as
Level 1 fair values under the fair value hierarchy. We
classify outstanding checks in excess of funds on deposit within
accounts payable and reduce cash and cash equivalents when these
checks clear the bank on which they were drawn. We had no
outstanding checks in excess of funds on deposit included in
accounts payable at either December 31, 2009 or 2008.
Inventories
Inventories include material, labor and overhead costs and are
recorded at the lower of cost or market on the
first-in,
first-out (FIFO) basis. We estimate losses for
excess and obsolete inventory through an assessment of its net
realizable value based on the aging of the inventory and an
evaluation of the likelihood of recovering the inventory costs
based on anticipated demand and selling price.
Assets
Held for Sale
Assets held for sale consists of property related to closed
facilities that are currently being marketed for disposal.
Assets held for sale are reported at the lower of carrying value
or estimated fair value less costs to sell.
Property,
Plant and Equipment
Property, plant and equipment are carried at cost reduced by
accumulated depreciation. Depreciation expense is recognized
over the assets estimated useful lives, ranging from 3 to
20 years, using the straight-line method for financial
reporting purposes and accelerated methods for tax reporting
purposes. The estimated useful lives of buildings range from 9
to 20 years; leasehold improvements have a useful life
equal to the shorter of the useful life of the asset or the
lease term; and the estimated useful lives of machinery,
fixtures and equipment range from 3 to 8 years.
Goodwill
and Other Intangible Assets
Under goodwill accounting rules, we are required to assess
goodwill for impairment annually, or more frequently if events
or circumstances indicate impairment may have occurred. Our
annual evaluation for potential goodwill impairment is performed
as of December 31st of each year. Our other intangible
assets primarily consist of acquired customer relationships and
trademarks and trade names, all of which have finite or
determinable useful lives. Accordingly, these finite-lived
assets are amortized to reflect the estimated pattern of
economic benefit consumed, either on a straight-line or
accelerated basis over the estimated periods benefited. See
Note 3 for information regarding our asset impairment
analyses.
F-8
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impairment
of Long-Lived Assets
We test the carrying amount of our long-lived assets, including
finite-lived intangible assets and property, plant and
equipment, for recoverability whenever events or circumstances
indicate that the carrying amount of such assets may not be
recoverable. An impairment loss is recognized if, in performing
the impairment review, it is determined that the carrying amount
of an asset exceeds the estimated undiscounted future cash flows
expected to result from the use of the asset and its eventual
disposition. The amount of the impairment loss recorded is equal
to the excess of the assets carrying value over its fair
value. See Note 3 for information regarding our asset
impairment analyses.
Income
Taxes
We account for income taxes under the asset and liability
method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
events that have been included in our consolidated financial
statements. Under this method, deferred tax assets and
liabilities are determined based on the differences between the
financial reporting and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which we
expect the differences to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in
income in the period of the enactment date.
In July 2006, the Financial Accounting Standards Board
(FASB) issued guidance which clarifies the
accounting for uncertainty in income taxes recognized in the
financial statements. This guidance provides that a tax benefit
from an uncertain tax position may be recognized in the
consolidated financial statements when it is more likely than
not that the position will be sustained upon examination,
including resolutions of any related appeals or litigation
processes, based on the technical merits of the position. Income
tax positions must meet a more-likely-than-not recognition
threshold. The rules also provide guidance on measurement,
derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.
We adopted the provisions of the above-noted guidance on
January 1, 2007 with no cumulative effect adjustment
required. We believe that our income tax filing positions and
deductions will be sustained upon examination and, accordingly,
we have not recorded any reserves, or related accruals for
interest and penalties, or uncertain income tax positions at
either December 31, 2009 or 2008. In accordance with this
guidance, we have adopted a policy under which, if required to
be recognized in the future, we will classify interest related
to the underpayment of income taxes as a component of interest
expense and we will classify any related penalties in selling,
engineering, general and administrating expenses in the
consolidated statement of operations.
Derivative
and Other Financial Instruments, and Concentrations of Credit
Risk
From
time-to-time,
we enter into derivative contracts, including copper futures
contracts, to mitigate the potential impact of fluctuations in
the price of copper on our pricing terms with certain customers.
We recognize all of our derivative instruments on our balance
sheet at fair value, and record changes in the fair value of
such contracts within cost of goods sold in the statement of
operations as they occur unless specific hedge accounting
criteria are met. We assess potential counterparty credit risk
on a regular basis. For those hedging relationships that meet
such criteria, and for which hedge accounting is applied, we
formally document our hedge relationships, including identifying
the hedging instruments and the hedged items, as well as the
risk management objectives involved. We have no open hedge
positions at December 31, 2009 to which hedge accounting is
being applied. However, all of our hedges for which hedge
accounting has been applied in the past qualified and were
designated as cash flow hedges. We assess both at inception and
at least quarterly thereafter, whether the derivatives used in
these cash flow hedges are highly effective in offsetting
changes in the cash flows associated with the hedged item. The
effective portion of the related gains or losses on these
derivative instruments are recorded in shareholders equity
as a component of Accumulated Other Comprehensive Income (Loss),
and are subsequently recognized in income or expense in the
period in which the related hedged items are recognized. The
ineffective portion of these hedges (extent to which a change in
the value of the derivative contract does not perfectly offset
the change in value of the designated hedged item) is
immediately recognized in income. Cash settlements related to
derivatives are included in the operating
F-9
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
section of the consolidated statement of cash flows, with
prepaid expenses and other current assets or accrued
liabilities, depending on the position.
Financial instruments also include other working capital items
and debt. The carrying amounts of our cash and cash equivalents,
trade accounts receivable and trade accounts payable approximate
fair value given the immediate or short-term maturity of these
financial instruments. The fair value of the Companys debt
is disclosed in Note 7.
Concentrations of credit risk arising from trade accounts
receivable are due to selling to a number of customers in a
particular industry. The Company performs ongoing credit
evaluations of its customers financial condition and
obtains collateral or other security when appropriate. No
customer accounted for more than 10% of accounts receivable as
of December 31, 2009 or 2008.
Cash and cash equivalents are placed with financial institutions
we believe have adequate credit standings.
Stock-based
Compensation
We recognize compensation expense over the related vesting
period for each share-based award we grant, based on the fair
value of the instrument at grant date. Our stock-based
compensation arrangements are further detailed in Note 12.
Earnings
per Common Share
We compute earnings per share using the two-class method, which
is an earnings allocation formula that determines earnings per
share for common stock and participating securities. Our
participating securities are our grants of unvested common
shares, as such awards contain non-forfeitable rights to
dividends. Security holders are not obligated to fund the
Companys losses, and therefore participating securities
are not allocated a portion of these losses in periods where a
net loss is recorded. Basic earnings per common share is
calculated by dividing net income available to common
shareholders by the weighted average number of common shares
outstanding for each period. Diluted earnings per common share
include the dilutive effect of exercised stock options and the
effect of unvested common shares when dilutive.
New
Accounting Pronouncements
Other than as described below, no new accounting pronouncement
issued or effective during the fiscal year has had or is
expected to have a material impact on the consolidated financial
statements.
Disclosures
about Derivatives Instruments
In March 2008, the FASB issued new accounting guidance on
disclosures about derivative instruments and hedging activities.
The new guidance expands the disclosure requirements for
derivative instruments and hedging activities. Specifically, it
requires entities to provide enhanced disclosures addressing the
following: how and why an entity uses derivative instruments;
how derivative instruments and related hedged items are
accounted for; and how derivative instruments and related hedged
items affect an entitys financial position, financial
performance, and cash flows. We adopted the new guidance in the
first quarter of 2009. The required disclosures have been set
forth in Note 10 to the consolidated financial statements.
Fair
Value Measurements and Disclosures
In August 2009, the FASB issued an accounting update on fair
value measurements and disclosures. This update provides
additional guidance clarifying the measurement of liabilities at
fair value. It clarifies how the price of a traded debt security
should be considered in estimating the fair value of the
issuers liability. We adopted this accounting update in
the fourth quarter of 2009, and its adoption did not have any
significant impact on our financial statements.
F-10
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Postretirement
Benefit Plan Assets
In December 2008, the FASB issued guidance on employers
disclosure about postretirement benefit plan assets. The
accounting guidance provides additional guidance on
employers disclosures about the plan assets of defined
benefit pension or other postretirement plans. The guidance
requires disclosures about how investment allocation decisions
are made, the fair value of each major category of plan assets,
valuation techniques used to develop fair value measurements of
plan assets, the impact of measurements on changes in plan
assets when using significant unobservable inputs and
significant concentrations of risk in the plan assets. We
adopted this guidance for the period ending December 31,
2009 (see Note 15).
Participating
Securities
In June 2008, the FASB issued new accounting guidance on
determining whether instruments granted in share-based payment
transactions are participating securities. This accounting
guidance addresses whether instruments granted in share-based
payment transactions are participating securities prior to
vesting and, therefore, need to be included in the allocation in
computing earnings per share under the two-class method. The
guidance concluded that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders.
If awards are considered participating securities, we are
required to apply the two-class method of computing basic and
diluted earnings per share. We have determined that our
outstanding unvested shares are participating securities.
Effective January 1, 2009, we adopted this standard.
Accordingly, earnings per common share are computed using the
two-class method prescribed by the accounting guidance. All
previously reported earnings per common share data has been
retrospectively adjusted as needed to conform to the new
computation method (see Note 12).
Variable
Interest Entity
In June 2009, the FASB issued an update to the accounting
guidance for consolidation. Accordingly, new accounting
standards concerning the treatment of variable interest entities
were issued. This guidance addresses the effects on certain
provisions of consolidation of variable interest entities as a
result of the elimination of the qualifying special-purpose
entity concept. This guidance also addresses the ability to
provide timely and useful information about an enterprises
involvement in a variable interest entity. The accounting update
is effective for a reporting entitys first annual
reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period and
for interim and annual reporting periods thereafter. We do not
anticipate this guidance will have a material impact on our
financial condition or operating results.
Copperfield,
LLC
On April 2, 2007, we acquired 100% of the outstanding
equity interests of Copperfield, LLC (Copperfield)
for $215,449, including acquisition-related costs and working
capital adjustments. The acquisition of Copperfield, which at
the time of our acquisition was one of the largest
privately-owned manufacturers and suppliers of electrical wire
and cable products in the United States, increased our scale,
diversified and expanded our customer base and we believe
strengthened our competitive position in the industry.
Copperfields results of operations have been included in
our consolidated financial statements since the acquisition date.
In connection with our financing of the Copperfield acquisition,
we issued senior notes with an aggregate principal amount of
$120,000 (the 2007 Notes), and entered into an
amended and restated credit facility (the Revolving Credit
Facility) with Wachovia Bank, National Association, which
amended and restated our previous revolving credit agreement in
its entirety and, among other things, increased our total
borrowing capacity under the Revolving Credit Facility to a
maximum of $200,000. See Note 7 for further discussion.
F-11
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Woods
Industries
On November 30, 2007, we acquired the electrical products
business of Katy Industries, Inc. (Katy), which
operated in the United States as Woods Industries, Inc.
(Woods U.S.) and in Canada as Woods Industries
(Canada) Inc. (Woods Canada), collectively referred
to herein as Woods (Woods). The principal business
of Woods was the design and distribution of consumer electrical
cord products, sold principally to national home improvement,
mass merchant, hardware and other retailers. The acquisition of
Woods expanded our U.S. business while enhancing our market
presence and penetration in Canada. We purchased certain assets
of Woods U.S. and all the stock of Woods Canada for
$53,803, including acquisition-related costs and working capital
adjustments. We utilized our Revolving Credit Facility to
finance the acquisition. Woods results of operations have
been included in our consolidated financial statements since the
acquisition date.
Purchase
Price Allocations
The above acquisitions (2007 Acquisitions) were
accounted for under the purchase method of accounting.
Accordingly, we have allocated the purchase price for each
acquisition to the net assets acquired based on the related
estimated fair values at each respective acquisition date. We
finalized the purchase price allocations for the 2007
Acquisitions in 2008. During the first quarter of 2008, we
changed our management reporting structure and the manner in
which we report our financial results internally, resulting in a
change in our reportable segments. This change required us to
reassign our acquired goodwill to the new segments effective
January 1, 2008 (see Note 3).
The table below summarizes the final allocations of purchase
price related to the 2007 Acquisitions as of their respective
acquisition dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copperfield
|
|
|
Woods
|
|
|
Total
|
|
|
Cash and cash equivalents
|
|
$
|
639
|
|
|
$
|
4,884
|
|
|
$
|
5,523
|
|
Accounts receivable
|
|
|
61,592
|
|
|
|
30,801
|
|
|
|
92,393
|
|
Inventories
|
|
|
41,601
|
|
|
|
27,231
|
|
|
|
68,832
|
|
Prepaid expenses and other current assets
|
|
|
832
|
|
|
|
2,887
|
|
|
|
3,719
|
|
Property, Plant and equipment
|
|
|
62,656
|
|
|
|
1,548
|
|
|
|
64,204
|
|
Intangible assets
|
|
|
64,400
|
|
|
|
1,400
|
|
|
|
65,800
|
|
Goodwill
|
|
|
43,733
|
|
|
|
5,932
|
|
|
|
49,665
|
|
Other assets
|
|
|
607
|
|
|
|
|
|
|
|
607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
276,060
|
|
|
|
74,683
|
|
|
|
350,743
|
|
Current liabilities
|
|
|
(36,806
|
)
|
|
|
(20,719
|
)
|
|
|
(57,525
|
)
|
Long-term liabilities
|
|
|
(42
|
)
|
|
|
|
|
|
|
(42
|
)
|
Deferred income taxes
|
|
|
(23,763
|
)
|
|
|
(161
|
)
|
|
|
(23,924
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(60,611
|
)
|
|
|
(20,880
|
)
|
|
|
(81,491
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
215,449
|
|
|
$
|
53,803
|
|
|
$
|
269,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-12
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The purchase price allocation to identifiable intangible assets,
which are all amortizable, along with their respective
weighted-average amortization periods at the acquisition date
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization Period
|
|
|
Copperfield
|
|
|
Woods
|
|
|
Total
|
|
|
Customer relationships
|
|
|
4
|
|
|
$
|
55,600
|
|
|
$
|
900
|
|
|
$
|
56,500
|
|
Trademarks and trade names
|
|
|
11
|
|
|
|
7,800
|
|
|
|
500
|
|
|
|
8,300
|
|
Non-competition agreements
|
|
|
2
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
|
|
|
$
|
64,400
|
|
|
$
|
1,400
|
|
|
$
|
65,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 41% of the Copperfield acquisition related to the
acquisition of partnership interests, which resulted in a
corresponding step up in basis for U.S. income tax
purposes. As such, approximately $12,000 of the goodwill and
$26,800 of the acquired intangible assets recorded in connection
with the Copperfield acquisition is deductible for
U.S. income tax purposes, primarily over 15 years. For
the Woods acquisition, goodwill and intangible assets
attributable to the acquisition of Woods U.S. is deductible
for U.S. income tax purposes, while goodwill attributable
to Woods Canada is not deductible for Canadian income tax
purposes.
Unaudited
Selected Pro Forma Financial Information
The following unaudited pro forma financial information
summarizes our estimated combined results of operations assuming
that our acquisition of Copperfield and Woods had taken place at
the beginning of 2007. The unaudited pro forma combined results
of operations for the period prior to April 2, 2007
(Copperfield) and November 30, 2007 (Woods) were prepared
on the basis of information provided to us by the former
management of Copperfield and Woods and we make no
representation with respect to the accuracy of such information.
The pro forma combined results of operations reflect adjustments
for interest expense, additional depreciation based on the fair
value of acquired property, plant and equipment, amortization of
acquired identifiable intangible assets and income tax expense.
The unaudited pro forma information is presented for
informational purposes only and does not include any cost
savings or other effects of integration. Accordingly, it is not
indicative of the results of operations that may have been
achieved if the acquisition had taken place at the beginning of
2007. The basic and diluted earnings per share amounts shown
below are based on weighted average outstanding shares of 16,786
and 16,826, respectively.
|
|
|
|
|
|
|
2007
|
|
Net sales
|
|
$
|
1,142,266
|
|
Net income
|
|
$
|
7,094
|
|
Earnings per share:
|
|
|
|
|
Basic
|
|
$
|
0.42
|
|
Diluted
|
|
$
|
0.42
|
|
F-13
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
3.
|
GOODWILL,
INTANGIBLE ASSETS AND ASSET IMPAIRMENTS
|
Goodwill
Changes in the carrying amount of goodwill by reportable
business segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
OEM
|
|
|
|
|
|
|
Segment
|
|
|
Segment
|
|
|
Total
|
|
|
Balance as of January 1, 2008
|
|
$
|
96,736
|
|
|
$
|
11,725
|
|
|
$
|
108,461
|
|
Purchase accounting adjustments 2007 Acquisitions
|
|
|
1,763
|
|
|
|
|
|
|
|
1,763
|
|
Impairment losses
|
|
|
|
|
|
|
(11,725
|
)
|
|
|
(11,725
|
)
|
Foreign currency translation adjustments
|
|
|
(145
|
)
|
|
|
|
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2009
|
|
$
|
98,354
|
|
|
$
|
|
|
|
$
|
98,354
|
|
Impairment losses
|
|
|
(69,498
|
)
|
|
|
|
|
|
|
(69,498
|
)
|
Foreign currency translation adjustments
|
|
|
208
|
|
|
|
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
$
|
29,064
|
|
|
$
|
|
|
|
$
|
29,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As noted above, during the first quarter of 2008, we changed our
management reporting structure and the manner in which we report
our financial results internally, resulting in a change in our
reportable segments. Accordingly, we now have two reportable
business segments: (1) Distribution, and (2) OEM. This
change also required us to reassign goodwill, as it had been
recorded under our previous segments, to the new segments to
reflect the new reporting structure. This reallocation was made
effective January 1, 2008.
Under goodwill accounting rules, we are required to assess
goodwill for impairment annually, or more frequently if events
or circumstances indicate impairment may have occurred. The
analysis of potential impairment of goodwill employs a two-step
process. The first step involves the estimation of fair value of
our reporting units. If step one indicates that impairment of
goodwill potentially exists, the second step is performed to
measure the amount of impairment, if any. Goodwill impairment
exists when the estimated implied fair value of goodwill is less
than its carrying value. No goodwill impairment existed prior to
December 31, 2008.
During the first quarter of 2009, we concluded that there were
sufficient indicators to require us to perform an interim
goodwill impairment test based on a combination of factors which
were in existence at that time, including a significant decline
in our market capitalization, as well as the recessionary
economic environment and its then estimated potential impact on
our business. As a result of this test, we recorded a non-cash
goodwill impairment charge of $69,498, representing our best
estimate of the impairment loss incurred within three of the
four reporting units comprising our Distribution segment:
Electrical distribution, Wire and Cable distribution and
Industrial distribution. At the March 31, 2009 test date,
no indication of impairment under the goodwill impairment tests
existed relative to our Retail distribution reporting unit, and
we did not have any goodwill recorded within our OEM segment.
For the purposes of the goodwill impairment analysis, our
estimates of fair value were based primarily on estimates
generated using the income approach, which estimates the fair
value of our reporting units based on their projected future
discounted cash flows.
The goodwill impairment testing process involves the use of
significant assumptions, estimates and judgments, and is subject
to inherent uncertainties and subjectivity. Estimating a
reporting units projected cash flows involves the use of
significant assumptions, estimates and judgments with respect to
numerous factors, including future sales, gross profit, selling,
engineering, general and administrative expense rates, capital
expenditures, and cash flows. These estimates are based on our
business plans and forecasts. These estimates are then
discounted, which necessitates the selection of an appropriate
discount rate. The discount rates used reflect market-based
estimates of the risks associated with the projected cash flows
of the reporting unit. The allocation of the estimated fair
value of our reporting units to the estimated fair value of
their net assets required under the second step of the goodwill
F-14
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
impairment test also involves the use of significant
assumptions, estimates and judgments, which are based on the
best information available to management as of the date of the
assessment.
The use of different assumptions, estimates or judgments in
either step of the goodwill impairment testing process, such as
the estimated future cash flows of our reporting units, the
discount rate used to discount such cash flows, or the estimated
fair value of the reporting units tangible and intangible
assets and liabilities, could significantly increase or decrease
the estimated fair value of a reporting unit or its net assets,
and therefore, impact the related impairment charge. For
example, as of March 31, 2009, (1) a 5% increase or
decrease in the aggregate estimated undiscounted cash flows of
our reporting units (without any change in the discount rate
used in the first step of our goodwill impairment test as of
such date) would have resulted in an increase or decrease of
approximately $14,000 in the aggregate estimated fair value of
our reporting units as of such date, (2) a 100 basis
point increase or decrease in the discount rate used to discount
the aggregate estimated cash flows of our reporting units to
their net present value (without any change in the aggregate
estimated cash flows of our reporting units used in the first
step of our goodwill impairment test as of such date) would have
resulted in a decrease or increase of approximately $18,000 in
the aggregate estimated fair value of our reporting units as of
such date, and (3) a 1% increase or decrease in the
estimated sales growth rate without a change in the discount
rate of each reporting unit would have resulted in an increase
or decrease of approximately $7,000 in the aggregate estimated
fair value of our reporting units as of such date. The goodwill
impairment testing process is complex, and can be affected by
the inter-relationship between certain assumptions, estimates
and judgments that may apply to both the first and second steps
of the process and the fact that the maximum potential
impairment of the goodwill of any reporting unit is limited to
the carrying value of the goodwill of that reporting unit.
Accordingly, the above-described sensitivities around changes in
the aggregate estimated fair values of our reporting units would
not necessarily have a
dollar-for-dollar
impact on the amount of goodwill impairment we recognized as a
result of our analysis. These sensitivities are presented solely
to illustrate the effects that a hypothetical change in one or
more key variables affecting reporting unit fair value might
have on the outcomes produced by the goodwill impairment testing
process.
In addition to the above-noted interim goodwill impairment test
performed during the first quarter of 2009, we performed our
annual goodwill impairment test as of December 31, 2009,
with no indication of potential impairment. Our test indicated
that the estimated fair value of each reporting unit with
recorded goodwill as of December 31, 2009 was significantly
in excess of its related carrying value, with no such reporting
unit having an excess of fair value less than 30% of its
carrying value. As stated above, the use of different
assumptions, estimates or judgments in the goodwill impairment
testing process may significantly increase or decrease the
estimated fair value of a reporting unit. However, as of the
December 31, 2009 annual impairment test date, the
above-noted conclusion, that no indication of goodwill
impairment existed as of the test date, would not have changed
had the test been conducted assuming: 1) a 5% decrease in
the aggregate estimated undiscounted cash flows of our reporting
units (without any change in the discount rate), 2) a
100 basis point increase in the discount rate used to
discount the aggregate estimated cash flows of our reporting
units to their net present value in determining their estimated
fair values (without any change in the aggregate estimated cash
flows of our reporting units), or 3) 1% decrease in the
estimated sales growth rate without a change in the discount
rate of each reporting unit.
Further goodwill impairment charges may be recognized in future
periods in one or more of the Distribution reporting units to
the extent changes in factors or circumstances occur, including
further deterioration in the macro-economic environment or in
the equity markets, including the market value of our common
shares, deterioration in our performance or our future
projections, or changes in our plans for one or more reporting
units.
During 2008, we recorded an $11,725 impairment charge in
connection with our annual goodwill impairment test as of
December 31, 2008. This non-cash goodwill impairment
related entirely to our OEM segment and represented the
write-off of all recorded goodwill in this segment. The
impairment reflected the impact of our revised plans and
projections for the then-forecasted future performance of the
OEM segment in light of our 2008 customer rationalization
efforts, which were completed during the fourth quarter of 2008.
Our failure to secure necessary price increases with such
customers for future business, as well as the then-existing
impact the declining
F-15
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
economy appeared to have had on these customers, were factors in
our decision to significantly downsize our sales projections
for, and capacity dedicated to this segment. These were the
primary factors that caused the recognition of our 2008 goodwill
impairment.
After consideration of the above-noted $11,725 impairment, we
had $98,354 in goodwill recorded at December 31, 2008, all
of which related to our Distribution segment. Of the $98,354 in
total goodwill recorded at December 31, 2008, $77,225 had
been allocated to reporting units where a greater than 10%
margin of excess existed between the respective units
estimated fair value and its carrying value. The remaining
$21,129 in goodwill as of December 31, 2008 was allocated
to our Electrical distribution reporting unit. During our annual
goodwill test performed in the fourth quarter of 2008, we
estimated that a 6% margin of excess existed between this
units fair value and its respective carrying value.
We test the carrying amount of our long-lived assets, including
finite-lived intangible assets and property, plant and
equipment, for recoverability whenever events or changes in
circumstances indicate that the carrying amount of such assets
may not be recoverable. This assessment employs a two-step
approach. The first step is used to determine if an impairment
exists and an associated impairment loss should be recognized.
An impairment loss is recognized if, in performing the
impairment review, it is determined that the carrying amount of
an asset or asset group exceeds the estimated undiscounted
future cash flows expected to result from the use of the asset
or asset group and its eventual disposition. The asset groups
tested under our impairment tests reflect the shared nature of
our facilities and manufacturing capacity. The second step of
the impairment tests involves measuring the amount of the
impairment loss to be recorded. The amount of the impairment
loss recorded is equal to the excess of the asset or asset
groups carrying value over its fair value. For 2009, no
asset impairments were identified relative to either our
long-lived property, plant and equipment or our finite-lived
intangible assets.
During the fourth quarter of 2008, we recorded $17,551 in
long-lived asset impairments related to our plant and equipment
and other long-lived assets. Given our revised plans and
projections for future performance of the OEM segment in light
of our customer rationalization efforts and our failure to
secure necessary future price increases with significant OEM
customers, as well as the impact the declining economy appears
to have had on such customers, we determined it necessary to
test our OEM-related long-lived assets for potential impairment
during the fourth quarter of 2008, and recorded the above-noted
impairment charges as a result of such analysis.
The long-lived asset impairment test uses significant
assumptions, estimates and judgments, and is subject to inherent
uncertainties and subjectivity. Estimating projected cash flows
associated with our asset groups involved the use of significant
assumptions, estimates and judgments with respect to numerous
factors, including future sales, gross profit, selling,
engineering, general and administrative expense rates, discount
rates and cash flows. These estimates were based on our revised
business plans and forecasts in light of the above-noted facts
and circumstances.
Intangible
Assets
The following summarizes our intangible assets at
December 31, 2009 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
2009
|
|
|
2008
|
|
|
|
Average
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
Amortization
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Impairment
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Period
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Losses
|
|
|
Amortization
|
|
|
Amount
|
|
|
Customer relationships
|
|
|
4
|
|
|
$
|
56,500
|
|
|
$
|
(33,140
|
)
|
|
$
|
23,360
|
|
|
$
|
56,500
|
|
|
$
|
(6,754
|
)
|
|
$
|
(18,291
|
)
|
|
$
|
31,455
|
|
Trademarks and trade names
|
|
|
11
|
|
|
|
8,350
|
|
|
|
(1,201
|
)
|
|
|
7,149
|
|
|
|
8,350
|
|
|
|
|
|
|
|
(795
|
)
|
|
|
7,555
|
|
Non-competition agreements
|
|
|
2
|
|
|
|
1,000
|
|
|
|
(925
|
)
|
|
|
75
|
|
|
|
1,000
|
|
|
|
|
|
|
|
(625
|
)
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5
|
|
|
$
|
65,850
|
|
|
$
|
(35,266
|
)
|
|
$
|
30,584
|
|
|
$
|
65,850
|
|
|
$
|
(6,754
|
)
|
|
$
|
(19,711
|
)
|
|
$
|
39,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our intangible assets are being amortized over their estimated
useful lives. The customer-relationship intangibles are being
amortized using an accelerated amortization method which
reflects our estimate of the
F-16
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
pattern in which the economic benefit derived from such assets
will be consumed. Amortization expense for intangible assets was
$8,827, $12,006, and $7,636 for the years ended
December 31, 2009, 2008 and 2007, respectively. Expected
amortization expense for intangible assets over the next five
years is as follows:
|
|
|
|
|
2010
|
|
$
|
6,826
|
|
2011
|
|
|
5,425
|
|
2012
|
|
|
4,316
|
|
2013
|
|
|
3,456
|
|
2014
|
|
|
2,768
|
|
Asset
Impairments
We recorded non-cash asset impairments as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Machinery and equipment
|
|
$
|
|
|
|
$
|
10,216
|
|
Intangible assets
|
|
|
|
|
|
|
6,754
|
|
Goodwill
|
|
|
69,498
|
|
|
|
11,725
|
|
Assets held for sale
|
|
|
1,263
|
|
|
|
581
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
70,761
|
|
|
$
|
29,276
|
|
|
|
|
|
|
|
|
|
|
In addition to the above-discussed goodwill impairment charges
recorded, we also recorded $1,263 of asset impairment charges in
2009 in relation to certain of our closed properties currently
being marketed for sale, with such impairments reflecting a
decline in the estimated fair value of such properties. The
resulting adjusted carrying value for such properties represents
our estimate of each propertys fair value determined by
management after considering the best information available,
including assumptions market participants would use in valuing
the asset.
|
|
4.
|
RESTRUCTURING
AND INTEGRATION ACTIVITIES
|
We incurred restructuring charges of $5,468, $10,225, and $874
during 2009, 2008, and 2007, respectively. For 2009, these
charges included $2,554 recorded in connection with our closure
of our leased East Longmeadow, Massachusetts manufacturing
facility in May 2009, and our closure of our owned Oswego, New
York facility in September 2009, both pursuant to plans we
announced in the first half of 2009. These actions were taken in
order to align our manufacturing capacity and cost structure
with reduced volume levels resulting from the current economic
environment. Production from these facilities has been
transitioned to facilities in Lafayette and Bremen, Indiana,
with back up capacity provided by our Waukegan, Illinois and
Texarkana, Arkansas facilities. The remaining $2,914 in charges
for 2009 primarily consisted of holding costs related to other
facilities closed in 2008. For 2008 and 2007, restructuring
charges were incurred primarily in connection with the
integration of our 2007 Acquisitions.
During 2008, we successfully completed the majority of
activities involved in fully integrating our 2007 Acquisitions.
We fully integrated Woods, incorporating this business into our
core operations and eliminating separate corporate and
distribution functions during the first half of 2008. We also
consolidated three former distribution facilities (located in
Indianapolis, Indiana (acquired as part of the Woods
acquisition); Gurnee, Illinois; and Waukegan, Illinois) into a
single leased distribution facility which opened in April 2008
in Pleasant Prairie, Wisconsin. Additionally, as part of our
integration strategy related to Copperfield, we closed
facilities and consolidated the related operations of a number
of the manufacturing and distribution facilities acquired as
part of the Copperfield acquisition. This included the
consolidation and closure of former Copperfield manufacturing
and distribution facilities located in Avilla, Indiana; Nogales,
Arizona; and El Paso, Texas, primarily into operations
F-17
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
at one modern new facility in El Paso, Texas. As a result,
we ceased manufacturing operations in 2008 at former Copperfield
facilities located in Avilla, Indiana; Nogales, Arizona; and
within three El Paso, Texas facilities: Zaragosa Road,
Inglewood Road, and the Esther Lama Road distribution center.
The buildings and properties associated with both the Avilla and
Zaragosa facilities are owned and have been classified as assets
held for sale in the accompanying consolidated balance sheet at
December 31, 2009. We remain obligated under a long-term
lease for the Nogales, Arizona facility. Additionally, we
recorded a reserve as a component of purchase accounting in 2008
for estimated exit costs associated with facilities acquired as
part of the Woods acquisition and closed pursuant to a plan for
closing such facilities at the time of the acquisition.
In addition, during the second half of 2008, we announced and
executed a series of separately planned workforce reduction
initiatives, including (1) a headcount reduction at our
Oswego, New York manufacturing facility, and (2) workforce
reductions at our El Paso, Texas facilities and within our
corporate offices in Waukegan, Illinois. The Oswego reductions
were made as the result of a decision to transition copper
fabrication activities from the Oswego plant to our Bremen,
Indiana facility, and resulted in $298 of restructuring expenses
for severance and related benefits paid to effected employees.
The El Paso and corporate reductions were in part a
function of our integration efforts, as well as in response the
deterioration of economic conditions during the fourth quarter
of 2008.
The following table summarizes activity for restructuring
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
Lease
|
|
|
Equipment
|
|
|
Other
|
|
|
|
|
|
|
Severance
|
|
|
Termination
|
|
|
Relocation
|
|
|
Closing
|
|
|
|
|
|
|
Costs
|
|
|
Costs
|
|
|
Costs
|
|
|
Costs
|
|
|
Total
|
|
|
Restructuring Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2007
|
|
$
|
385
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
|
|
|
445
|
|
|
|
3,358
|
|
|
|
4,039
|
|
|
|
2,383
|
|
|
|
10,225
|
|
Purchase accounting adjustments
|
|
|
740
|
|
|
|
2,802
|
|
|
|
|
|
|
|
132
|
|
|
|
3,674
|
|
Uses
|
|
|
(1,545
|
)
|
|
|
(1,193
|
)
|
|
|
(4,039
|
)
|
|
|
(2,491
|
)
|
|
|
(9,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2008
|
|
$
|
25
|
|
|
$
|
4,967
|
|
|
$
|
|
|
|
$
|
24
|
|
|
$
|
5,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
|
|
|
650
|
|
|
|
2,201
|
|
|
|
360
|
|
|
|
2,257
|
|
|
|
5,468
|
|
Uses
|
|
|
(652
|
)
|
|
|
(2,806
|
)
|
|
|
(360
|
)
|
|
|
(2,281
|
)
|
|
|
(6,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE December 31, 2009
|
|
$
|
23
|
|
|
$
|
4,362
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We currently have nine closed former facilities, five of which
are leased for various lengths of time through 2015, and four of
which are owned, for which we are obligated to pay holding
costs. We anticipate incurring between approximately $1,500 and
$2,500 in such costs in 2010 not giving effect to the potential
we may successfully negotiate sales, subleases, or lease
buy-outs for one or more of such properties. We do not currently
have any new significant restructuring initiatives planned for
2010; however, management is continually adjusting plans and
production schedules in light of sales trends, the
macro-economic environment and other demand indicators, and the
possibility exists that we may determine further plant closings,
restructurings and workforce reductions are necessary, some of
which may be significant.
F-18
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
FIFO cost:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
20,962
|
|
|
$
|
14,628
|
|
Work in progress
|
|
|
3,807
|
|
|
|
2,038
|
|
Finished products
|
|
|
41,453
|
|
|
|
56,702
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
66,222
|
|
|
$
|
73,368
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Salaries, wages and employee benefits
|
|
$
|
3,113
|
|
|
$
|
3,289
|
|
Sales incentives
|
|
|
8,302
|
|
|
|
10,416
|
|
Interest
|
|
|
5,824
|
|
|
|
5,988
|
|
Other
|
|
|
6,741
|
|
|
|
11,498
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,980
|
|
|
$
|
31,191
|
|
|
|
|
|
|
|
|
|
|
Total borrowings were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Revolving credit facility expiring April 2, 2012
|
|
$
|
10,239
|
|
|
$
|
30,000
|
|
9.875% Senior notes due October 1, 2012, including
unamortized premium of $1,617 and $2,352, respectively
|
|
|
226,597
|
|
|
|
242,352
|
|
Capital lease obligations
|
|
|
17
|
|
|
|
462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,853
|
|
|
|
272,814
|
|
Less current portion
|
|
|
(14
|
)
|
|
|
(30,445
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
236,839
|
|
|
$
|
242,369
|
|
|
|
|
|
|
|
|
|
|
Subsequent
Event Refinancing of 9.875% Senior Notes
(2012 Senior Notes)
On February 3, 2010 we completed a private placement
offering of $235,000 aggregate principal amount of
9.0% unsecured senior notes due in 2018 (the 2018
Senior Notes) to refinance our 2012 Senior Notes (the
Private Placement). The 2018 Senior Notes mature on
February 15, 2018 and interest on these notes will accrue
at a rate of 9.0% per annum and be payable semi-annually on each
February 15 and August 15, commencing August 15, 2010.
The gross proceeds from the Private Placement, approximately
$231,700 which reflects a discounted issue price of 98.597% of
the principal amount, were used, together with other available
funds, for payment of consideration and costs relating to a cash
tender offer and consent solicitation for our 2012 Senior Notes.
A total of $199,429 aggregate principal amount of the 2012 Notes
were tendered, which represented approximately 88.6% of the
$224,980 aggregate principal amount of the 2012 Notes
outstanding. Consequently, as of March 3, 2010,
F-19
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approximately $25,551 of the 2012 Senior Notes remain
outstanding. We will redeem the remaining 2012 Senior Notes on
March 22, 2010.
We undertook the above-described refinancing of our 2012 Senior
Notes to take advantage of what we believe were favorable
refinancing conditions within the related financial markets at
the time. The refinancing also allowed us to extend the maturity
of such debt from 2012 to 2018, while at the same time reducing
our annual cash interest requirements given the lower coupon
rate on the 2018 Senior Notes, partially offset by an increase
in the total aggregate principal amount of senior notes
outstanding. We expect to record a loss of between approximately
$8,500 and $9,000 in the first quarter of 2010 on the early
extinguishment of our 2012 Senior Notes. This amount includes
the write-off of approximately $1,851 of unamortized debt
issuance costs related to the 2012 Senior Notes, as well as the
impact of the call and tender premiums paid in connection with
the refinancing.
In addition, in order to complete the above refinancing, we were
required to amend the terms of our Revolving Credit Facility to
allow for the refinancing. Accordingly, on January 19,
2010, our Revolving Credit Facility was amended (i) to
permit the Private Placement, (ii) to enhance our ability
to create and finance foreign subsidiaries, (iii) to
liberalize key covenants and make other changes to increase
operating flexibility (the 2010 Amendment). Pursuant
to the 2010 Amendment, borrowing availability under the
Revolving Credit Facility for foreign subsidiaries is limited to
the greater of (i) the sum of 85% of the aggregate book
value of accounts receivable of such foreign subsidiaries plus
60% of the aggregate book value of the inventory of such foreign
subsidiaries and (ii) $25,000 (excluding permitted
intercompany indebtedness of such foreign subsidiaries).
Senior
Secured Revolving Credit Facility
Our Revolving Credit Facility is a senior secured facility that
provides for aggregate borrowings of up to $200,000, subject to
certain limitations as discussed below. The proceeds from the
Revolving Credit Facility are available for working capital and
other general corporate purposes, including merger and
acquisition activity. At December 31, 2009, we had $10,239
in borrowings outstanding under the facility, with $80,838 in
remaining excess availability. At December 31, 2008, we had
$30,000 in borrowings outstanding under the facility, with
$74,184 in remaining excess availability.
On June 18, 2009, in connection with the 2012 Senior Notes
repurchases described below, the Revolving Credit Facility was
amended to permit us to spend up to $30,000 to redeem, retire or
repurchase our 2012 Senior Notes so long as (i) no default
or event of default exists at the time of the repurchase or
would result from the repurchase and (ii) excess
availability under the Revolving Credit Facility after giving
effect to the repurchase remains above $40,000 (the 2009
Amendment). Prior to the 2009 Amendment, we were
prohibited from making prepayments on or repurchases of the 2012
Senior Notes. We were required to pay an upfront amendment fee
of $1,000, and the 2009 Amendment also increased the applicable
interest rate margins by 1.25% and the unused line fee increased
by 0.25%. Accordingly, subsequent to the 2009 Amendment,
interest is payable, at our option, at the agents prime
rate plus a range of 1.25% to 1.75% or the Eurodollar rate plus
a range of 2.50% to 3.00%, in each case based on quarterly
average excess availability under the Revolving Credit Facility.
Pursuant to the terms of the Revolving Credit Facility, we are
required to maintain a minimum of $10,000 in excess availability
under the facility at all times. Borrowing availability under
the Revolving Credit Facility is limited to the lesser of
(i) $200,000 or (ii) the sum of 85% of eligible
accounts receivable, 55% of eligible inventory and an advance
rate to be determined of certain appraised fixed assets, with a
$10,000 sublimit for letters of credit.
The Revolving Credit Facility is guaranteed by our domestic
subsidiary and is secured by substantially all of our assets and
the assets of our domestic subsidiary, including accounts
receivable, inventory and any other tangible and intangible
assets (including real estate, machinery and equipment and
intellectual property) as well as by a pledge of all the capital
stock of our domestic subsidiary and 65% of the capital stock of
our Canadian foreign subsidiary, but not our Chinese 100%-owned
entity.
F-20
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Revolving Credit Facility contains financial and other
covenants that limit or restrict our ability to pay dividends or
distributions, incur indebtedness, permit liens on property,
make investments, provide guarantees, enter into mergers,
acquisitions or consolidations, conduct asset sales, enter into
leases or sale and lease back transactions, and enter into
transactions with affiliates. In addition to maintaining a
minimum of $10,000 in excess availability under the facility at
all times, the financial covenants in the Revolving Credit
Facility require us to maintain a fixed charge coverage ratio of
not less than 1.1 to 1.0 for any month during which our excess
availability under the Revolving Credit Facility falls below
$30,000. We maintained greater than $30,000 of monthly excess
availability during 2009.
In 2007, the Revolving Credit Facility was amended to allow for
our acquisition of certain assets of Woods U.S. and the
stock of Woods Canada. The amendment also permitted us to make
future investments in our Canadian subsidiaries in an aggregate
amount, together with the investment made to acquire Woods
Canada, not to exceed $25,000. As of December 31, 2009, we
were in compliance with all of the covenants on our Revolving
Credit Facility.
2012
Senior Notes
At December 31, 2009, we had $224,980 in aggregate
principal amount outstanding of our 2012 Senior Notes, all of
which were scheduled to mature on October 1, 2012. During
the first nine months of 2009, we repurchased $15,020 in par
value of our 2012 Senior Notes at a discount to their par value
resulting in a pre-tax gain of $3,285 being recorded in
connection with such repurchases. A portion of the 2012 were
issued at 102.875% of the principal amount thereof, resulting in
the recognition of a premium which has been amortized to par
value over their remaining life, and accordingly, the effective
interest rate on our $225,000 principal Senior Notes was 9.74%
in 2009.
As noted above, we completed the Private Placement of the 2018
Senior Notes in February of 2010 in order to refinance our
outstanding 2012 Senior Notes. As a result of the Private
Placement and associated Offer for the 2012 Notes, as of
March 3, 2010, approximately $25,551 of the 2012 Senior
Notes remain outstanding. We plan to redeem the $25,551 in
remaining outstanding 2012 Senior Notes on March 22, 2010
at a price of 102.4688% of the principal amount of such 2012
Senior Notes, which, excluding accrued and unpaid interest, will
equate to a total redemption amount of approximately $26,200.
At December 31, 2009, annual maturities of long-term debt
for each of the next five years and thereafter are shown in the
below table. The following table does not give effect to the
February 2010 Private Placement transaction described above that
effectively extends the maturity of our $224,980 of 2012 Senior
Notes to February of 2018.
|
|
|
|
|
2010
|
|
|
14
|
|
2011
|
|
|
3
|
|
2012
|
|
|
224,980
|
|
2013
|
|
|
|
|
Subsequent to 2013
|
|
|
|
|
|
|
|
|
|
Total debt maturities
|
|
|
224,996
|
|
Revolving Credit Facility
|
|
|
10,239
|
|
Unamortized premium on long-term debt
|
|
|
1,617
|
|
|
|
|
|
|
Total debt
|
|
$
|
236,853
|
|
|
|
|
|
|
Our Indenture governing the Senior Notes and Revolving Credit
Facility contains covenants that limit our ability to pay
dividends. Under these covenants, we could not declare excess
cash flow dividends for the year ended December 31, 2009.
The Company does not anticipate paying any dividends on its
common stock in the foreseeable
F-21
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
future. The fair value of our debt and capitalized lease
obligations was approximately $225,000 and $191,200 at
December 31, 2009 and 2008, respectively.
Debt
Issue Costs
We have incurred debt issue costs in connection with our prior
senior note issuances and our Revolving Credit Facility,
including amendment fees related to the Revolving Credit
Facility. These fees are being amortized over the remaining term
of the senior notes and Revolving Credit Facility, respectively.
Amortization of debt issuance costs was $2,055, $1,896, and
$1,656 in 2009, 2008 and 2007, respectively. Accumulated
amortization of debt issue costs was $7,712 and $5,656 at
December 31, 2009 and 2008, respectively.
Our income (loss) before income taxes includes the following
components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
(75,894
|
)
|
|
$
|
(45,358
|
)
|
|
$
|
23,367
|
|
Foreign
|
|
|
4,841
|
|
|
|
3,388
|
|
|
|
898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(71,053
|
)
|
|
$
|
(41,970
|
)
|
|
$
|
24,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax expense (benefit) consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current tax expense
|
|
$
|
177
|
|
|
$
|
1,453
|
|
|
$
|
13,064
|
|
Deferred income tax expense (benefit)
|
|
|
(4,211
|
)
|
|
|
(15,164
|
)
|
|
|
(3,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
(4,034
|
)
|
|
$
|
(13,709
|
)
|
|
$
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our deferred taxes result primarily from the tax effect of
differences between the financial and tax basis of assets and
liabilities based on enacted tax laws. Valuation allowances, if
necessary, are provided against deferred tax assets that are not
likely to be realized. We believe that our deferred tax assets
will be fully utilized based on projections for future earnings
and tax planning strategies. Additionally, we believe our income
tax filing positions and deductions will be sustained and, thus,
we have not recorded any reserves related to our deferred tax
assets, or related accruals for interest and penalties, or
uncertain income tax positions under the accounting guidance at
either December 31, 2009 or 2008.
F-22
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Significant components of deferred tax (assets) and liabilities
as of December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Reserves not deducted for tax:
|
|
|
|
|
|
|
|
|
Allowances for uncollectible accounts
|
|
$
|
(453
|
)
|
|
$
|
(537
|
)
|
Legal reserves
|
|
|
(151
|
)
|
|
|
(216
|
)
|
Employee benefits
|
|
|
|
|
|
|
(372
|
)
|
Insurance receivable
|
|
|
(601
|
)
|
|
|
(613
|
)
|
Other
|
|
|
(2,289
|
)
|
|
|
(3,273
|
)
|
Tax credits
|
|
|
(1,652
|
)
|
|
|
(1,488
|
)
|
Inventories
|
|
|
(1,459
|
)
|
|
|
(1,266
|
)
|
Stock-based compensation
|
|
|
(3,551
|
)
|
|
|
(2,741
|
)
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,266
|
|
|
|
12,734
|
|
Other
|
|
|
825
|
|
|
|
658
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability (asset)
|
|
$
|
(1,065
|
)
|
|
$
|
2,886
|
|
|
|
|
|
|
|
|
|
|
The reconciliation between income tax amounts at the statutory
tax rate to income tax expense recorded on our consolidated
income statement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income taxes (benefit) at federal statutory rate
|
|
$
|
(24,868
|
)
|
|
$
|
(14,698
|
)
|
|
$
|
8,487
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nondeductible goodwill impairments
|
|
|
20,846
|
|
|
|
3,345
|
|
|
|
|
|
Change in state tax rates
|
|
|
(121
|
)
|
|
|
(851
|
)
|
|
|
|
|
State tax benefit (net of federal tax effect)
|
|
|
(393
|
)
|
|
|
(918
|
)
|
|
|
1,331
|
|
Other
|
|
|
502
|
|
|
|
(587
|
)
|
|
|
(443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
(4,034
|
)
|
|
$
|
(13,709
|
)
|
|
$
|
9,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We are subject to taxation in the U.S. and various states
and foreign jurisdictions. We provide for U.S. deferred
taxes and foreign withholding tax on undistributed earnings not
considered permanently reinvested in our
non-U.S. subsidiaries.
The Internal Revenue Service has completed reviews of our
federal income tax returns through 2004.
F-23
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
9.
|
COMMITMENTS
AND CONTINGENCIES
|
Capital
and Operating Leases
We lease certain of our buildings, machinery and equipment under
lease agreements that expire at various dates over the next ten
years. Rental expense under operating leases was $7,661, $8,026,
and $4,603 for 2009, 2008 and 2007, respectively. Minimum future
lease payments under capital and operating leases, with
non-cancelable initial lease terms in excess of one year as of
December 31, 2009, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
Leases
|
|
|
Leases
|
|
|
2010
|
|
|
15
|
|
|
|
8,188
|
|
2011
|
|
|
3
|
|
|
|
6,762
|
|
2012
|
|
|
|
|
|
|
6,583
|
|
2013
|
|
|
|
|
|
|
5,304
|
|
2014
|
|
|
|
|
|
|
4,274
|
|
After 2014
|
|
|
|
|
|
|
11,236
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18
|
|
|
$
|
42,347
|
|
|
|
|
|
|
|
|
|
|
Less: Amounts representing interest
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of future minimum lease payments
|
|
|
17
|
|
|
|
|
|
Less: Current obligations under capital leases
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations under capital leases
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We record our obligation under capital leases within debt in the
accompanying consolidated balance sheets (see Note 7). The
gross amount of assets recorded under capital leases as of
December 31, 2009 and 2008 was $875 and $2,019,
respectively. Accumulated depreciation was $847 and $1,757 at
December 31, 2009 and 2008, respectively. We depreciate
these assets over the shorter of their related lease terms or
estimated useful lives.
Legal
Matters
We are party to one environmental claim. The Leonard Chemical
Company Superfund site consists of approximately 7.1 acres
of land in an industrial area located a half mile east of
Catawba, York County, South Carolina. The Leonard Chemical
Company operated this site until the early 1980s for recycling
of waste solvents. These operations resulted in the
contamination of soils and groundwaters at the site with
hazardous substances. In 1984, the U.S. Environmental
Protection Agency (the EPA) listed this site on the
National Priorities List. Riblet Products Corporation, with
which the Company merged in 2000, was identified through
documents as a company that sent solvents to the site for
recycling and was one of the companies receiving a special
notice letter from the EPA identifying it as a party potentially
liable under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA).
In 2004, along with other potentially responsible
parties (PRPs), we entered into a Consent
Decree with the EPA requiring the performance of a remedial
design and remedial action (RD/RA) for this site. We
have entered into a Site Participation Agreement with the other
PRPs for fulfillment of the requirements of the Consent Decree.
Under the Site Participation Agreement, we are responsible for
9.19% share of the costs for the RD/RA. As of December 31,
2009 we had a $400 accrual recorded for this liability.
Although no assurances are possible, we believe that our
accruals related to the environmental litigation and other
claims are sufficient and that these items and our rights to
available insurance and indemnity will be resolved without
material adverse effect on our financial position, results of
operations or cash flows.
F-24
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Self-Insurance
We are partially self-insured for health benefit costs for
covered individuals at a majority of our facilities. The accrual
for our self-insurance liability is determined by management and
is based on claims filed and an estimate of actual claims
incurred but not yet reported.
Tax
Matters Agreement
As part of our conversion from conducting business as an
S corporation to a C corporation for federal and state
income tax purposes in 2006, we entered into a tax matters
agreement with our then-existing S corporation shareholders
(the Tax Matters Agreement) that provides for, among
other things, the indemnification of these shareholders for any
increase in their tax liability, including interest and
penalties, and reimbursement of their expenses (including
attorneys fees) related to the period prior to our
conversion to a C corporation.
In 2006, the Internal Revenue Service (IRS) issued a
Notice of Proposed Adjustment claiming that we were not entitled
to tax deductions in connection with our then-existing practice
involving the prepayment of certain management fees and our
payment of certain factoring costs to CCI Enterprises, Inc., our
then-existing wholly-owned C corporation subsidiary. We settled
this matter with the IRS in 2008 and as a result, under the
above-noted Tax Matters Agreement, we are obligated to indemnify
our S corporation shareholders on record as of the
effective date of the Tax Matters Agreement, for amounts owed as
a result of the settlement. As of December 31, 2009, we
have an accrued current liability of approximately $441,
including interest, recorded for this obligation. Amounts
expensed for this matter have been classified in other loss in
the accompanying consolidated statements of operations.
We are exposed to certain commodity price risks including
fluctuations in the price of copper. From
time-to-time,
we enter into copper futures contracts to mitigate the potential
impact of fluctuations in the price of copper on our pricing
terms with certain customers. All of our copper futures
contracts are tied to the COMEX copper market index and the
value of our futures contracts varies directly with underlying
changes in the related COMEX copper futures prices. We recognize
all of our derivative instruments on our balance sheet at fair
value, and record changes in the fair value of such contracts
within cost of goods sold in the statement of operations as they
occur unless specific hedge accounting criteria are met. For
those hedging relationships that meet such criteria, and for
which hedge accounting is applied, we formally document our
hedge relationships, including identifying the hedging
instruments and the hedged items, as well as the risk management
objectives involved. We had no open hedge positions at
December 31, 2009, to which hedge accounting was applied.
However, all of our hedges for which hedge accounting has been
applied in the past qualified and were designated as cash flow
hedges. We assess both at inception and at least quarterly
thereafter, whether the derivatives used in these cash flow
hedges are highly effective in offsetting changes in the cash
flows associated with the hedged item. The effective portion of
the related gains or losses on these derivative instruments are
recorded in shareholders equity as a component of
Accumulated Other Comprehensive Income (Loss), and are
subsequently recognized in income or expense in the period in
which the related hedged items are recognized. The ineffective
portion of these hedges related to an over-hedge (extent to
which a change in the value of the derivative contract does not
perfectly offset the change in value of the designated hedged
item) is immediately recognized in income. Cash settlements
related to derivatives are included in the operating section of
the consolidated statement of cash flows, with prepaid expenses
and other current assets or accrued liabilities, depending on
the position.
We use exchange traded futures contracts to mitigate the
potential impact of fluctuations in the price of copper. We
calculate the fair value of futures contracts quarterly based on
the quoted market price for the same or similar financial
instruments. These derivatives have been determined to be
Level 1 under the fair value hierarchy due to available
market prices. At December 31, 2009, we had outstanding
copper futures contracts, with an aggregate fair value of $91,
consisting of contracts to sell 625 pounds of copper in March
2010.
F-25
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As our derivatives are part of a legally enforceable master
netting agreement, for purposes of presentation within our
condensed consolidated balance sheets, gross values are netted
and classified within Prepaid expenses and other current
assets or Accrued liabilities depending upon
our aggregate net position at the balance sheet date. At
December 31, 2009, we had $215 cash collateral posted
relative to our outstanding derivative positions.
We reclassified $668, net of cumulated losses of $137 that
existed at December 31, 2008, from Accumulated Other
Comprehensive Income into earnings during the twelve-month
period ended December 31, 2009. We had no open hedge
positions at December 31, 2009 to which hedge accounting
was applied. Consequently, there were no amounts recorded in
accumulated other comprehensive income (loss) at
December 31, 2009 related to derivatives. No cash flow
hedges were discontinued during 2009 as a result of the hedged
forecasted transaction no longer being probable of occurring.
Additionally, no amounts were excluded from our effectiveness
tests relative to these cash flow hedges.
|
|
|
|
|
|
|
|
|
Loss Recognized
|
|
Location of Loss
|
Derivatives Not Accounted for as Hedges Under the Accounting
Rules
|
|
in Income
|
|
Recognized in Income
|
|
Copper commodity contracts:
|
|
|
|
|
|
|
Twelve months ended December 31, 2009
|
|
|
1,726
|
|
|
Cost of goods sold
|
At December 31, 2008, we had outstanding copper futures
contracts, with an aggregate fair value of $132, consisting of
contracts to sell 1,425 pounds of copper in March 2009, as well
as contracts to buy 875 pounds of copper at various dates
through the end of 2009. The aggregate fair value of such
contracts was recorded as a component of prepaid expenses and
other current assets on our consolidated balance sheet at
December 31, 2008. At December 31, 2008, we had an
aggregate loss of $137, net of tax, recorded as a component of
Accumulated Other Comprehensive Income (Loss) in relation to
those contracts meeting the hedge accounting requirements to be
accounted for as cash flow hedges. We did not reclassify any
amounts from Accumulated Other Comprehensive Income (Loss) into
earnings during 2008. We recognized $12 in ineffectiveness
expense related to these hedges in 2008. We recorded aggregate
gains of $3,589, and $320 as a reduction to cost of goods sold
in our consolidated income statement for 2008 and 2007,
respectively.
We compute earnings per share using the two-class method, which
is an earnings allocation formula that determines earnings per
share for common stock and participating securities. Our
participating securities are our grants of restricted stock, as
such awards contain non-forfeitable rights to dividends.
Security holders are not obligated to fund the Companys
losses, and therefore participating securities are not allocated
a portion of these losses in periods where a net loss is
recorded. Basic earnings per common share is calculated by
dividing net income available to common shareholders by the
weighted average number of common shares outstanding for each
period. Diluted earnings per common share also included the
dilutive effect of potential common shares, exercise of stock
options, and the effect of restricted stock when dilutive.
The dilutive effect of stock options outstanding on weighted
average shares outstanding for 2009, 2008 and 2007 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Basic weighted average shares outstanding
|
|
|
16,809
|
|
|
|
16,787
|
|
|
|
16,786
|
|
Dilutive effect of share-based awards
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
16,809
|
|
|
|
16,787
|
|
|
|
16,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To the extent stock options and awards are anti-dilutive, they
are excluded from the calculation of diluted weighted average
shares outstanding. Awards with respect to 1,671, 1,096, and 848
common shares were not
F-26
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
included in the computation of diluted earnings per share for
2009, 2008, and 2007, respectively, because they were
anti-dilutive.
|
|
12.
|
STOCK-BASED
COMPENSATION
|
Stock-Based
Compensation
The Company has a stock-based compensation plan for its
directors, executives and certain key employees under which the
grant of stock options and other share-based awards is
authorized. In April 2008, an amended and restated plan was
approved by shareholders that, among other things,
(1) increased the number of shares authorized for issuance
under the Companys plan from 1,650 to 2,440 and
(2) added stock appreciation rights, restricted or unvested
stock, restricted stock units, performance shares, performance
units and incentive performance bonuses as available awards
under the plan. Of the total 2,440 shares authorized for
issuance under the plan, 1,671 were issued as of
December 31, 2009, with the remaining 769 shares
available for future grant over the balance of the plans
ten-year life, which ends in 2016. Total stock-based
compensation expense was $2,340, $2,426, and $3,739 in 2009,
2008, and 2007, respectively. At December 31, 2009, there
was $426 of total unrecognized compensation cost related to
nonvested share-based compensation arrangements that we expect
will vest and be recognized over a weighted-average period of
1.2 years.
Stock
Options
Option awards are granted with an exercise price equal to the
market price of our common stock at the date of grant. These
options become exercisable over a three-year annual vesting
period and expire 10 years from the date of grant. We
utilize the fair value method in accounting for
stock-compensation expense, estimating the fair value of options
granted under our plan at each related grant date using a
Black-Scholes option-pricing model. We determine the value of
all stock options using the simplified method, as prescribed in
the accounting guidance, due to our lack of sufficient
historical exercise data to provide a reasonable basis upon
which to estimate expected term and due to the limited period of
time our equity shares have been publicly traded. The following
table sets forth information about the weighted-average fair
value of options granted during 2009, 2008 and 2007, and the
weighted-average assumptions used for such grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Fair value of options at grant date (per share)
|
|
$
|
2.59
|
|
|
$
|
4.38
|
|
|
$
|
11.67
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility
|
|
|
83
|
%
|
|
|
51
|
%
|
|
|
45
|
%
|
Risk-free interest rate
|
|
|
1.96
|
%
|
|
|
3.56
|
%
|
|
|
4.70
|
%
|
Expected term of options
|
|
|
6 years
|
|
|
|
6 years
|
|
|
|
6 years
|
|
We do not expect to pay dividends in the foreseeable future and
therefore used a zero-percent dividend yield in our estimates.
The risk-free interest rate for the period matching the expected
term of the option is based on the U.S. Treasury yield
curve in effect at the time of the grant. Given the limited
history of our own common shares, the expected volatility
factors above are based on average volatilities relative to a
group of U.S. public companies which we believe are
comparable to us. Similarly, the expected term of the options
granted, representing the period of time that options granted
are expected to be outstanding, is derived from published
studies analyzing historic exercise behavior in public company
stock option plans.
F-27
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Changes in stock options for 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Terms
|
|
|
Value
|
|
|
Outstanding on January 1, 2009
|
|
|
1,029
|
|
|
$
|
14.12
|
|
|
|
8.1
|
|
|
|
|
|
Granted
|
|
|
290
|
|
|
$
|
3.99
|
|
|
|
9.1
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(19
|
)
|
|
|
14.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2009
|
|
|
1,300
|
|
|
$
|
11.86
|
|
|
|
7.5
|
|
|
|
|
|
At December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest
|
|
|
1,264
|
|
|
$
|
12.03
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value for stock options is defined as the difference
between the current market value of the Companys common
stock and the exercise price of the stock option. When the
current market value is less than the exercise price, there is
no aggregate intrinsic value. We have no policy or plan to
repurchase common shares to mitigate the dilutive impact of
options.
Stock
Awards
In January 2009, the Company granted unvested common shares to
members of its board of directors. One-third of the shares vest
on the first, second and third anniversary of the grant date.
Changes in nonvested shares for 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2009
|
|
|
67
|
|
|
$
|
8.41
|
|
Granted
|
|
|
326
|
|
|
|
3.99
|
|
Vested
|
|
|
(22
|
)
|
|
|
8.41
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
371
|
|
|
$
|
4.52
|
|
We lease our corporate office facility from HQ2 Properties, LLC
(HQ2). HQ2 is owned by certain members of our Board
of Directors and executive management. We made rental payments
of $388, $378, and $368 to HQ2 in 2009, 2008, and 2007,
respectively. In addition, we lease three manufacturing
facilities and three vehicles from DJR Ventures, LLC in which
one of our executive officers has a substantial minority
interest, and we paid a total of $1,069, $1,189 and $907 in
2009, 2008, and 2007, respectively.
For 2007 and prior years, we had consulting arrangements with
two of our shareholders whereby, in addition to their service as
directors of the Company, they provided advice and counsel on
business planning and strategy, including advice on potential
acquisitions. Under these consulting arrangements, each of these
two individuals received $175 as annual compensation for their
services. Pursuant to these arrangements, and for their service
as directors, we paid each individual $175 in 2007. The
consulting arrangements were terminated effective
December 31, 2007. Furthermore, in addition to the
above-noted consulting services, each received $75 as annual
compensation for their services as co-chairmen of the board of
directors in 2007. On January 1, 2008, the Company amended
its compensation arrangements for its directors. Under these
arrangements, annually the co-chairmen each
F-28
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
receive $100 in cash and $100 in Company stock. For 2009 and
2008, $174 and $155 was expensed for each individuals
services as co-chairmen.
David Bistricer is a member of the Companys Board of
Directors and owns Morgan Capital LLC (Morgan
Capital), a company with 15 employees engaged in the
real estate business. Prior to July 1, 2007, Morgan
Capitals employees purchased health insurance for
themselves and their dependents from the Companys
insurance carrier at the same rates we paid for our employees.
This arrangement resulted in no additional cost to us. On
July 1, 2007, we revised our health insurance arrangements
so that we would self-insure our employees health coverage
subject to an insurance policy providing catastrophic health
coverage in the event the claims of any employee exceeded $40 in
any year. The employees of Morgan Capital became part of the
self-insurance arrangement. Morgan Capital agreed to indemnify
us for any payments made by us for any Morgan Capital
participants in excess of premiums paid to us by Morgan Capital,
as well as for any administrative expenses related to the
participation of the Morgan Capital participants, which were not
significant in 2007. Morgan Capital has obtained separate and
independent insurance arrangements for its employees as of
February 2008.
In 2005, we experienced a theft of inventory resulting from
break-ins at our manufacturing facility in Miami Lakes, Florida,
which we have since closed. We have been in discussion with our
insurance carriers relative to this matter, and during the first
quarter of 2008, we engaged outside legal counsel in an effort
to resolve certain disputes pertaining to our coverage under our
related insurance policies. During the third quarter of 2008, as
a result of failing to secure satisfactory settlement of the
matter with our insurers, we commenced legal action in regard to
this matter and recorded an allowance for the related insurance
receivable. Accordingly, we recorded a $1,588 non-cash charge in
2008 that fully reserves the insurance receivable reflected on
our consolidated balance sheet for the theft of the related
inventory and associated product reels. Though an ultimate
resolution is still to be determined, we are seeking to recover
the related loss, net of deductibles, under such insurance
policies.
Employee
Savings Plan
We provide defined contribution savings plans for employees
meeting certain age and service requirements. In the past, we
have made matching contributions for a portion of employee
contributions to the plans. Including such matching
contributions, we recorded expenses totaling $300, $1,307, and
$1,005 related to these savings plans during 2009, 2008 and
2007, respectively. Early in 2009, we suspended our
discretionary matching contributions to such plans for our
non-union participants. We reinstated our discretionary matching
contributions effective January 1, 2010 and accordingly,
anticipate making approximately $1,150 in such matching
contributions in 2010.
Riblet
Pension Plan
As a result of its merger with Riblet Products Corporation
(Riblet) in 2000, the Company is responsible for a
defined-benefit pension plan of Riblet. The Riblet plan was
frozen in 1990 and no additional benefits have been earned by
plan participants since that time. A total of 89 former
employees of Riblet currently receive or may be eligible to
receive future benefits under the plan. In 2008, we recorded a
cumulative effect charge and associated accrual of $923 to
reflect the estimated funded status of the plan at
December 31, 2008.
F-29
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Plan
benefit costs and funded status
The components of net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Components of Net Periodic Benefit Cost:
|
|
2009
|
|
|
2008
|
|
|
Service Cost
|
|
|
N/A
|
|
|
|
N/A
|
|
Interest cost
|
|
$
|
65
|
|
|
$
|
76
|
|
Expected return on plan assets
|
|
|
(37
|
)
|
|
|
(41
|
)
|
Recognized net actuarial loss
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
28
|
|
|
$
|
85
|
|
|
|
|
|
|
|
|
|
|
The following table shows changes in the benefit obligation,
plan assets and funded status of the Riblet pension plan:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,190
|
|
|
$
|
1,192
|
|
Interest cost
|
|
|
65
|
|
|
|
76
|
|
Actuarial (gain)/loss
|
|
|
82
|
|
|
|
|
|
Benefits paid
|
|
|
(76
|
)
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,261
|
|
|
$
|
1,190
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
267
|
|
|
$
|
363
|
|
Actual return on plan assets
|
|
|
332
|
|
|
|
(25
|
)
|
Employer contribution
|
|
|
968
|
|
|
|
8
|
|
Benefits paid
|
|
|
(77
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,490
|
|
|
$
|
267
|
|
|
|
|
|
|
|
|
|
|
Funded status:
|
|
$
|
229
|
|
|
$
|
(923
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in Other Comprehensive Loss for the periods
presented and in Accumulated Other Comprehensive Loss at
December 31, are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
Amounts recognized in other comprehensive loss and in
accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
Net loss (gain), net of tax provision of $81
|
|
$
|
(132
|
)
|
|
$
|
|
|
F-30
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Assumptions
Weighted average assumptions used to determine the Riblet
pension plan obligation:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
6.25
|
%
|
Rate of compensation increases
|
|
|
N/A
|
|
|
|
N/A
|
|
Weighted average assumptions used to determine net cost for
years ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.72
|
%
|
|
|
6.25
|
%
|
Expected return on plan assets
|
|
|
5.72
|
%
|
|
|
5.72
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
The discount rate is determined based on examination of
long-term corporate bond yields and expectations of yields over
the foreseeable future. The expected return on plan assets is
based principally on the asset allocation and the historic
returns for the plans asset classes determined from both
actual returns and the long-term market returns for those assets.
Plan
Assets
The plans overall investment objective is to provide a
long-term return that, along with Company contributions, is
expected to meet future benefit payment requirements. A
long-term horizon has been adopted in establishing investment
policy such that the likelihood and duration of investment
losses are carefully weighed against the long-term potential for
appreciation of assets. The plans investment policy
requires investments to be diversified across individual
securities, industries, market capitalization, and valuation
characteristics.
Plan assets were invested in the following classes of securities
(none of which were securities of the Company):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Plan Asset Composition:
|
|
|
|
|
|
|
|
|
Cash, real estate and other
|
|
|
12
|
%
|
|
|
100
|
%
|
Equity securities
|
|
|
44
|
%
|
|
|
|
|
Fixed-income securities
|
|
|
44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
The plans target allocation is determined by taking into
consideration the amounts and timing of projected liabilities,
our funding policies and expected returns on various asset
classes. At December 31, 2009, the plans target asset
allocation was 35% equity, 55% fixed income, and 10% cash and
other, which is comprised of real estate and other investment
strategies. To develop the expected long-term rate of return on
assets assumption, we considered the historical returns and the
future expectations for returns for each asset class, as well as
the target asset allocation of the pension portfolio.
The table below presents the Riblet pension plan assets using
the fair value hierarchy as of December 31, 2009. The
plans investments are held in the form of cash, group
fixed and variable deferred annuities, real estate, and other
investments. Of the total plan assets, $1,175 qualify as level
two fair values under the fair value hierarchy at
December 31, 2009.
F-31
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Cash, real estate and other
|
|
$
|
185
|
|
|
$
|
97
|
|
|
$
|
88
|
|
|
$
|
|
|
Equity securities
|
|
|
654
|
|
|
|
|
|
|
|
436
|
|
|
|
218
|
|
Fixed-income securities
|
|
|
651
|
|
|
|
|
|
|
|
651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,490
|
|
|
$
|
97
|
|
|
$
|
1,175
|
|
|
$
|
218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The investments classified as Level 1 under the hierarchy,
which means their fair values are based on quoted prices in
active markets, consist entirely of cash investments. All
investments classified as Level 2 under the hierarchy,
which means their fair values are estimated or calculated based
on observable inputs for the asset or liability either directly
or indirectly, are held in the form of group fixed and variable
deferred annuities invested in a series of fixed-income, real
estate, commodity-based, and equity-related mutual funds. The
investment classified as Level 3 under the hierarchy, which
means its fair value was based on unobservable inputs, consisted
of a private-equity investment held at December 31, 2009,
which was redeemed in January 2010 and reinvested into
Level 2 annuity funds.
Information regarding expected future cash flows for the Riblet
pension plan is as follows:
|
|
|
|
|
Pension Benefits:
|
|
|
|
|
Employer Contributions:
|
|
|
|
|
Fiscal 2010 (expected)
|
|
$
|
|
|
Expected benefit payments:
|
|
|
|
|
Fiscal 2010
|
|
$
|
97
|
|
Fiscal 2011
|
|
|
108
|
|
Fiscal 2012
|
|
|
100
|
|
Fiscal 2013
|
|
|
94
|
|
Fiscal 2014
|
|
|
87
|
|
Fiscal
2015-2019
|
|
|
330
|
|
|
|
|
|
|
Total benefit payments
|
|
|
816
|
|
|
|
|
|
|
|
|
16.
|
BUSINESS
SEGMENT INFORMATION
|
During the first quarter of 2008, we changed our management
reporting structure and the manner in which we report our
financial results internally, including the integration of our
2007 Acquisitions for reporting purposes. The changes resulted
in a change in our reportable segments. Accordingly, we now have
two reportable business segments: (1) Distribution, and
(2) OEM. These reportable segment classifications are based
on an aggregation of customer groupings and distribution
channels reflective of the manner in which our chief operating
decision maker, the chief executive officer, evaluates the
Companys results. Our Distribution segment serves our
customers in distribution businesses, who are resellers of our
products, while our OEM segment serves our OEM customers, who
generally purchase more tailored products from us which are in
turn used as inputs into subassemblies of manufactured finished
goods. Where applicable, prior period amounts have been recast
to reflect the new reporting structure.
We have aggregated our operating segments, as set forth in the
table below, into the above-noted reportable business segments
in accordance with the applicable criteria set forth in the
relevant accounting rules. Our operating segments have common
production processes and manufacturing facilities. Accordingly,
we do not identify our net assets to our operating segments.
Thus, we do not report capital expenditures at the segment
level. Additionally, depreciation expense is not allocated to
our segments but is included in our manufacturing overhead cost
pools and is absorbed into product cost (and inventory) as each
product passes through our manufacturing work centers.
Accordingly, as products are sold across multiple segments, it
is impracticable to determine the amount of depreciation expense
included in the operating results of each operating segment.
F-32
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenues by business segment represent sales to unaffiliated
customers and no one customer or group of customers under common
control accounted for more than 10% of consolidated net sales.
|
|
|
|
|
|
|
End Markets
|
|
Principal Products
|
|
Applications
|
|
Customers
|
|
Distribution Segment
|
|
|
|
|
|
|
Retail Distribution
|
|
Extension cords, trouble lights, battery booster cables, battery
cables and accessories, surge and strip and electronic cable
products
|
|
Wide variety of consumer applications
|
|
National and regional mass merchandisers, home centers, hardware
distributors, warehouse clubs and other consumer retailers
|
Electrical Distribution
|
|
Industrial power, electronic and communication cables, low
voltage wire and assembled products
|
|
Construction and industrial MRO applications
|
|
Buying groups, national chains and independent distributors
|
Wire and Cable Distribution
|
|
Industrial power, electronic and communication cables and low
voltage wire
|
|
Construction and industrial MRO applications
|
|
Independent distributors
|
Industrial Distribution
|
|
Extension cords, ground fault circuit interrupters, industrial
cord reels, custom cords, trouble lights, portable halogen
lights and electrical/electronic cables
|
|
Various commercial construction and industrial applications
|
|
Specialty, tool and fastener distributors; MRO/industrial
catalog houses and retail/general construction supply houses
|
|
|
Irrigation, sprinkler and polyethylene golf course cables
|
|
Commercial and residential sprinkler systems, low voltage
lighting applications and well pumps
|
|
Turf and landscape, golf course and submersible pump distributors
|
OEM Segment
|
|
|
|
|
|
|
OEM
|
|
Custom cables and specialty copper products
|
|
Various applications across various OEM businesses
|
|
OEMs
|
Segment operating income represents income from continuing
operations before interest income or expense, other income or
expense, and income taxes. Corporate consists of items not
charged or allocated to the segments, including costs for
employee relocation, discretionary bonuses, professional fees,
restructuring expenses, asset impairments and intangible
amortization. The Companys segments have common production
processes, and manufacturing and distribution capacity.
Accordingly, we do not identify net assets to our segments. The
accounting policies of the segments are the same as those
described in Note 1.
F-33
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Financial data for our business segments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
$
|
390,911
|
|
|
$
|
670,740
|
|
|
$
|
576,602
|
|
OEM
|
|
|
113,241
|
|
|
|
302,228
|
|
|
|
287,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
504,152
|
|
|
$
|
972,968
|
|
|
$
|
864,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
$
|
36,666
|
|
|
$
|
57,142
|
|
|
$
|
58,439
|
|
OEM
|
|
|
7,074
|
|
|
|
(3,348
|
)
|
|
|
8,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
43,740
|
|
|
|
53,794
|
|
|
|
66,762
|
|
Corporate
|
|
|
(93,950
|
)
|
|
|
(63,927
|
)
|
|
|
(14,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
$
|
(50,210
|
)
|
|
$
|
(10,133
|
)
|
|
$
|
51,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers by our product groups are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales by Groups of Products
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Industrial Wire and Cable
|
|
$
|
187,671
|
|
|
$
|
293,250
|
|
|
$
|
312,105
|
|
Electronic Wire
|
|
|
133,090
|
|
|
|
381,227
|
|
|
|
402,146
|
|
Assembled Wire and Cable Products
|
|
|
167,734
|
|
|
|
261,313
|
|
|
|
120,940
|
|
Fabricated Bare Wire
|
|
|
15,657
|
|
|
|
37,178
|
|
|
|
28,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
504,152
|
|
|
$
|
972,968
|
|
|
$
|
864,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009, 2008, and 2007 our consolidated net sales included a
total of $36,550, $42,476, and $3,395, respectively, of net
sales in Canada. In addition, we had a total of approximately
$394 and $450 in tangible
long-lived
assets in Canada at both December 31, 2009 and 2008,
respectively. In addition, we did not have any significant sales
outside of the U.S. and Canada in 2009, 2008 or 2007.
|
|
17.
|
SUPPLEMENTAL
GUARANTOR INFORMATION
|
Our payment obligations under the 2012 Senior Notes and the
Revolving Credit Facility (see Note 7) are guaranteed
by our wholly-owned subsidiary, CCI International, Inc.
(Guarantor Subsidiary). Such guarantees are full,
unconditional and joint and several. The following supplemental
financial information sets forth, on a combined basis, balance
sheets, statements of income and statements of cash flows for
Coleman Cable, Inc. (Parent) and the Companys Guarantor
Subsidiary CCI International, Inc. which is 100%
owned by the Parent.
F-34
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
Net sales
|
|
$
|
467,602
|
|
|
$
|
|
|
|
$
|
36,550
|
|
|
$
|
|
|
|
$
|
504,152
|
|
Cost of goods sold
|
|
|
400,575
|
|
|
|
|
|
|
|
27,910
|
|
|
|
|
|
|
|
428,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
67,027
|
|
|
|
|
|
|
|
8,640
|
|
|
|
|
|
|
|
75,667
|
|
Selling, engineering, general and administrative expenses
|
|
|
36,315
|
|
|
|
|
|
|
|
4,506
|
|
|
|
|
|
|
|
40,821
|
|
Intangible amortization
|
|
|
8,724
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
8,827
|
|
Asset impairments
|
|
|
70,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,761
|
|
Restructuring charges
|
|
|
5,405
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
5,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(54,178
|
)
|
|
|
|
|
|
|
3,968
|
|
|
|
|
|
|
|
(50,210
|
)
|
Interest expense
|
|
|
25,004
|
|
|
|
|
|
|
|
319
|
|
|
|
|
|
|
|
25,323
|
|
Gain on repurchase of Senior Notes
|
|
|
(3,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,285
|
)
|
Other income, net
|
|
|
(3
|
)
|
|
|
|
|
|
|
(1,192
|
)
|
|
|
|
|
|
|
(1,195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(75,894
|
)
|
|
|
|
|
|
|
4,841
|
|
|
|
|
|
|
|
(71,053
|
)
|
Income tax expense (benefit)
|
|
|
(5,988
|
)
|
|
|
|
|
|
|
1,954
|
|
|
|
|
|
|
|
(4,034
|
)
|
Income from subsidiaries
|
|
|
2,887
|
|
|
|
|
|
|
|
|
|
|
|
(2,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(67,019
|
)
|
|
$
|
|
|
|
$
|
2,887
|
|
|
$
|
(2,887
|
)
|
|
$
|
(67,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATING
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
Net sales
|
|
$
|
930,492
|
|
|
$
|
|
|
|
$
|
42,476
|
|
|
$
|
|
|
|
$
|
972,968
|
|
Cost of goods sold
|
|
|
847,364
|
|
|
|
|
|
|
|
32,003
|
|
|
|
|
|
|
|
879,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
83,128
|
|
|
|
|
|
|
|
10,473
|
|
|
|
|
|
|
|
93,601
|
|
Selling, engineering, general and administrative expenses
|
|
|
47,828
|
|
|
|
(2
|
)
|
|
|
4,401
|
|
|
|
|
|
|
|
52,227
|
|
Intangible amortization
|
|
|
11,901
|
|
|
|
|
|
|
|
105
|
|
|
|
|
|
|
|
12,006
|
|
Asset impairments
|
|
|
29,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,276
|
|
Restructuring charges
|
|
|
10,215
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
10,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(16,092
|
)
|
|
|
2
|
|
|
|
5,957
|
|
|
|
|
|
|
|
(10,133
|
)
|
Interest expense
|
|
|
29,362
|
|
|
|
|
|
|
|
294
|
|
|
|
|
|
|
|
29,656
|
|
Other (income) loss, net
|
|
|
(69
|
)
|
|
|
|
|
|
|
2,250
|
|
|
|
|
|
|
|
2,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(45,385
|
)
|
|
|
2
|
|
|
|
3,413
|
|
|
|
|
|
|
|
(41,970
|
)
|
Income tax expense (benefit)
|
|
|
(14,681
|
)
|
|
|
|
|
|
|
972
|
|
|
|
|
|
|
|
(13,709
|
)
|
Income from subsidiaries
|
|
|
2,443
|
|
|
|
|
|
|
|
|
|
|
|
(2,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(28,261
|
)
|
|
$
|
2
|
|
|
$
|
2,441
|
|
|
$
|
(2,443
|
)
|
|
$
|
(28,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-35
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
Net sales
|
|
$
|
860,749
|
|
|
$
|
|
|
|
$
|
3,395
|
|
|
$
|
|
|
|
$
|
864,144
|
|
Cost of goods sold
|
|
|
757,581
|
|
|
|
|
|
|
|
1,970
|
|
|
|
|
|
|
|
759,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
103,168
|
|
|
|
|
|
|
|
1,425
|
|
|
|
|
|
|
|
104,593
|
|
Selling, engineering, general and administrative expenses
|
|
|
43,782
|
|
|
|
|
|
|
|
476
|
|
|
|
|
|
|
|
44,258
|
|
Intangible amortization
|
|
|
7,627
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
7,636
|
|
Restructuring charges
|
|
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
50,885
|
|
|
|
|
|
|
|
940
|
|
|
|
|
|
|
|
51,825
|
|
Interest expense
|
|
|
27,476
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
27,519
|
|
Other (income) loss, net
|
|
|
42
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
23,367
|
|
|
|
|
|
|
|
898
|
|
|
|
|
|
|
|
24,265
|
|
Income tax expense
|
|
|
9,126
|
|
|
|
|
|
|
|
249
|
|
|
|
|
|
|
|
9,375
|
|
Income from subsidiaries
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
|
(649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,890
|
|
|
$
|
|
|
|
$
|
649
|
|
|
$
|
(649
|
)
|
|
$
|
14,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
BALANCE SHEET AS OF DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,018
|
|
|
$
|
57
|
|
|
$
|
3,524
|
|
|
$
|
|
|
|
$
|
7,599
|
|
Accounts receivable, net of allowances
|
|
|
78,904
|
|
|
|
|
|
|
|
7,489
|
|
|
|
|
|
|
|
86,393
|
|
Intercompany receivable
|
|
|
2,674
|
|
|
|
|
|
|
|
|
|
|
|
(2,674
|
)
|
|
|
|
|
Inventories
|
|
|
61,277
|
|
|
|
|
|
|
|
4,945
|
|
|
|
|
|
|
|
66,222
|
|
Deferred income taxes
|
|
|
2,770
|
|
|
|
|
|
|
|
359
|
|
|
|
|
|
|
|
3,129
|
|
Assets held for sale
|
|
|
3,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,624
|
|
Prepaid expenses and other current assets
|
|
|
4,499
|
|
|
|
12
|
|
|
|
1,448
|
|
|
|
|
|
|
|
5,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
157,766
|
|
|
|
69
|
|
|
|
17,765
|
|
|
|
(2,674
|
)
|
|
|
172,926
|
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
50,272
|
|
|
|
|
|
|
|
394
|
|
|
|
|
|
|
|
50,666
|
|
GOODWILL
|
|
|
27,598
|
|
|
|
|
|
|
|
1,466
|
|
|
|
|
|
|
|
29,064
|
|
INTANGIBLE ASSETS
|
|
|
30,440
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
30,584
|
|
DEFERRED INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
434
|
|
|
|
|
|
|
|
434
|
|
OTHER ASSETS
|
|
|
10,785
|
|
|
|
|
|
|
|
6
|
|
|
|
(4,358
|
)
|
|
|
6,433
|
|
INVESTMENT IN SUBSIDIARIES
|
|
|
6,581
|
|
|
|
|
|
|
|
|
|
|
|
(6,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
283,442
|
|
|
$
|
69
|
|
|
$
|
20,209
|
|
|
$
|
(13,613
|
)
|
|
$
|
290,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
14
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14
|
|
Accounts payable
|
|
|
15,106
|
|
|
|
|
|
|
|
2,587
|
|
|
|
|
|
|
|
17,693
|
|
Intercompany payable
|
|
|
|
|
|
|
56
|
|
|
|
2,618
|
|
|
|
(2,674
|
)
|
|
|
|
|
Accrued liabilities
|
|
|
19,988
|
|
|
|
13
|
|
|
|
3,979
|
|
|
|
|
|
|
|
23,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
35,108
|
|
|
|
69
|
|
|
|
9,184
|
|
|
|
(2,674
|
)
|
|
|
41,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
236,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,839
|
|
LONG-TERM LIABILITIES
|
|
|
3,823
|
|
|
|
|
|
|
|
4,358
|
|
|
|
(4,358
|
)
|
|
|
3,823
|
|
DEFERRED INCOME TAXES
|
|
|
2,412
|
|
|
|
|
|
|
|
86
|
|
|
|
|
|
|
|
2,498
|
|
Common stock
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
Additional paid in capital
|
|
|
88,475
|
|
|
|
|
|
|
|
1,000
|
|
|
|
(1,000
|
)
|
|
|
88,475
|
|
Accumulated other comprehensive loss
|
|
|
(245
|
)
|
|
|
|
|
|
|
(345
|
)
|
|
|
345
|
|
|
|
(245
|
)
|
Retained earnings (accumulated deficit)
|
|
|
(82,987
|
)
|
|
|
|
|
|
|
5,926
|
|
|
|
(5,926
|
)
|
|
|
(82,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
5,260
|
|
|
|
|
|
|
|
6,581
|
|
|
|
(6,581
|
)
|
|
|
5,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
283,442
|
|
|
$
|
69
|
|
|
$
|
20,209
|
|
|
$
|
(13,613
|
)
|
|
$
|
290,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-37
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
BALANCE SHEET AS OF DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,617
|
|
|
$
|
49
|
|
|
$
|
3,662
|
|
|
$
|
|
|
|
$
|
16,328
|
|
Accounts receivable, net of allowances
|
|
|
90,636
|
|
|
|
|
|
|
|
6,402
|
|
|
|
|
|
|
|
97,038
|
|
Intercompany receivable
|
|
|
843
|
|
|
|
|
|
|
|
|
|
|
|
(843
|
)
|
|
|
|
|
Inventories
|
|
|
68,002
|
|
|
|
|
|
|
|
5,366
|
|
|
|
|
|
|
|
73,368
|
|
Deferred income taxes
|
|
|
4,159
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
4,202
|
|
Assets held for sale
|
|
|
3,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,535
|
|
Prepaid expenses and other current assets
|
|
|
10,626
|
|
|
|
9
|
|
|
|
53
|
|
|
|
|
|
|
|
10,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
190,418
|
|
|
|
58
|
|
|
|
15,526
|
|
|
|
(843
|
)
|
|
|
205,159
|
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
60,993
|
|
|
|
|
|
|
|
450
|
|
|
|
|
|
|
|
61,443
|
|
GOODWILL
|
|
|
97,096
|
|
|
|
|
|
|
|
1,258
|
|
|
|
|
|
|
|
98,354
|
|
INTANGIBLE ASSETS
|
|
|
39,164
|
|
|
|
|
|
|
|
221
|
|
|
|
|
|
|
|
39,385
|
|
OTHER ASSETS
|
|
|
16,913
|
|
|
|
|
|
|
|
70
|
|
|
|
(9,358
|
)
|
|
|
7,625
|
|
INVESTMENT IN SUBSIDIARIES
|
|
|
2,412
|
|
|
|
|
|
|
|
|
|
|
|
(2,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
406,996
|
|
|
$
|
58
|
|
|
$
|
17,525
|
|
|
$
|
(12,613
|
)
|
|
$
|
411,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
30,445
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30,445
|
|
Accounts payable
|
|
|
25,265
|
|
|
|
8
|
|
|
|
2,135
|
|
|
|
|
|
|
|
27,408
|
|
Intercompany payable
|
|
|
|
|
|
|
17
|
|
|
|
801
|
|
|
|
(818
|
)
|
|
|
|
|
Accrued liabilities
|
|
|
27,957
|
|
|
|
31
|
|
|
|
3,203
|
|
|
|
|
|
|
|
31,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
83,667
|
|
|
|
56
|
|
|
|
6,139
|
|
|
|
(818
|
)
|
|
|
89,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT
|
|
|
242,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
242,369
|
|
LONG-TERM LIABILITIES
|
|
|
4,071
|
|
|
|
|
|
|
|
9,358
|
|
|
|
(9,383
|
)
|
|
|
4,046
|
|
DEFERRED INCOME TAXES
|
|
|
7,470
|
|
|
|
|
|
|
|
(382
|
)
|
|
|
|
|
|
|
7,088
|
|
Common stock
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
Additional paid in capital
|
|
|
86,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,135
|
|
Accumulated other comprehensive loss
|
|
|
(765
|
)
|
|
|
|
|
|
|
(629
|
)
|
|
|
629
|
|
|
|
(765
|
)
|
Retained earnings (accumulated deficit)
|
|
|
(15,968
|
)
|
|
|
2
|
|
|
|
3,039
|
|
|
|
(3,041
|
)
|
|
|
(15,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
69,419
|
|
|
|
2
|
|
|
|
2,410
|
|
|
|
(2,412
|
)
|
|
|
69,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
406,996
|
|
|
$
|
58
|
|
|
$
|
17,525
|
|
|
$
|
(12,613
|
)
|
|
$
|
411,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-38
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(67,019
|
)
|
|
$
|
|
|
|
$
|
2,887
|
|
|
$
|
(2,887
|
)
|
|
$
|
(67,019
|
)
|
Adjustments to reconcile net income (loss) to net cash flow from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
23,059
|
|
|
|
|
|
|
|
272
|
|
|
|
|
|
|
|
23,331
|
|
Asset impairments
|
|
|
70,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,761
|
|
Stock-based compensation
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,340
|
|
Foreign currency transaction gain
|
|
|
|
|
|
|
|
|
|
|
(1,195
|
)
|
|
|
|
|
|
|
(1,195
|
)
|
Gain on repurchase of Senior Notes
|
|
|
(3,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,285
|
)
|
Deferred tax
|
|
|
(4,621
|
)
|
|
|
|
|
|
|
410
|
|
|
|
|
|
|
|
(4,211
|
)
|
Loss on disposal of fixed assets
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
484
|
|
Equity in consolidated subsidiary
|
|
|
(2,887
|
)
|
|
|
|
|
|
|
|
|
|
|
2,887
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
11,732
|
|
|
|
|
|
|
|
(1,570
|
)
|
|
|
|
|
|
|
10,162
|
|
Inventories
|
|
|
6,725
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
6,953
|
|
Prepaid expenses and other assets
|
|
|
6,481
|
|
|
|
(3
|
)
|
|
|
(1,301
|
)
|
|
|
|
|
|
|
5,177
|
|
Accounts payable
|
|
|
(10,186
|
)
|
|
|
(10
|
)
|
|
|
524
|
|
|
|
|
|
|
|
(9,672
|
)
|
Intercompany accounts
|
|
|
(1,262
|
)
|
|
|
39
|
|
|
|
1,223
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
(8,209
|
)
|
|
|
(18
|
)
|
|
|
2,087
|
|
|
|
|
|
|
|
(6,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities
|
|
|
24,113
|
|
|
|
8
|
|
|
|
3,565
|
|
|
|
|
|
|
|
27,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(4,037
|
)
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
(4,087
|
)
|
Investment in subsidiaries
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Proceeds from the disposal of fixed assets
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
Net cash flow from investing activities
|
|
|
(4,914
|
)
|
|
|
|
|
|
|
950
|
|
|
|
|
|
|
|
(3,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under revolving loan facilities
|
|
|
(19,761
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,761
|
)
|
Debt amendment fee
|
|
|
(1,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,012
|
)
|
Repayment of long-term debt
|
|
|
(7,025
|
)
|
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
|
|
|
(12,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities
|
|
|
(27,798
|
)
|
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
|
|
|
(32,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
347
|
|
|
|
|
|
|
|
347
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(8,599
|
)
|
|
|
8
|
|
|
|
(138
|
)
|
|
|
|
|
|
|
(8,729
|
)
|
CASH AND CASH EQUIVALENTS
Beginning of year
|
|
|
12,617
|
|
|
|
49
|
|
|
|
3,662
|
|
|
|
|
|
|
|
16,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS End of year
|
|
$
|
4,018
|
|
|
$
|
57
|
|
|
$
|
3,524
|
|
|
$
|
|
|
|
$
|
7,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH ACTIVITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Unpaid capital expenditures
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
|
|
F-39
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(28,261
|
)
|
|
$
|
2
|
|
|
$
|
2,441
|
|
|
$
|
(2,443
|
)
|
|
$
|
(28,261
|
)
|
Adjustments to reconcile net income (loss) to net cash flow from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
29,773
|
|
|
|
|
|
|
|
242
|
|
|
|
|
|
|
|
30,015
|
|
Asset impairments
|
|
|
29,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,276
|
|
Stock-based compensation
|
|
|
2,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,426
|
|
Inventory theft insurance receivable allowance
|
|
|
1,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,588
|
|
Foreign currency transaction loss
|
|
|
|
|
|
|
|
|
|
|
2,250
|
|
|
|
|
|
|
|
2,250
|
|
Provision for inventories
|
|
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,800
|
|
Deferred tax
|
|
|
(16,448
|
)
|
|
|
|
|
|
|
1,284
|
|
|
|
|
|
|
|
(15,164
|
)
|
Loss on disposal of fixed assets
|
|
|
228
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
284
|
|
Equity in consolidated subsidiary
|
|
|
(2,443
|
)
|
|
|
|
|
|
|
|
|
|
|
2,443
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
61,493
|
|
|
|
|
|
|
|
(1,428
|
)
|
|
|
|
|
|
|
60,065
|
|
Inventories
|
|
|
58,747
|
|
|
|
|
|
|
|
(523
|
)
|
|
|
|
|
|
|
58,224
|
|
Prepaid expenses and other assets
|
|
|
(3,764
|
)
|
|
|
(9
|
)
|
|
|
(282
|
)
|
|
|
|
|
|
|
(4,055
|
)
|
Accounts payable
|
|
|
(20,498
|
)
|
|
|
(11
|
)
|
|
|
647
|
|
|
|
|
|
|
|
(19,862
|
)
|
Intercompany accounts
|
|
|
3,509
|
|
|
|
43
|
|
|
|
(3,552
|
)
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
(3,771
|
)
|
|
|
23
|
|
|
|
(1,640
|
)
|
|
|
|
|
|
|
(5,388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities
|
|
|
116,655
|
|
|
|
48
|
|
|
|
(505
|
)
|
|
|
|
|
|
|
116,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(12,805
|
)
|
|
|
|
|
|
|
(461
|
)
|
|
|
|
|
|
|
(13,266
|
)
|
Acquisition of businesses, net cash acquired
|
|
|
(708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(708
|
)
|
Proceeds from the disposal of fixed assets
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from investing activities
|
|
|
(13,338
|
)
|
|
|
|
|
|
|
(461
|
)
|
|
|
|
|
|
|
(13,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under revolving loan facilities
|
|
|
(93,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93,438
|
)
|
Repayment of long-term debt
|
|
|
(1,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities
|
|
|
(94,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
|
|
(413
|
)
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
8,782
|
|
|
|
48
|
|
|
|
(1,379
|
)
|
|
|
|
|
|
|
7,451
|
|
CASH AND CASH EQUIVALENTS Beginning of year
|
|
|
3,835
|
|
|
|
1
|
|
|
|
5,041
|
|
|
|
|
|
|
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS End of year
|
|
$
|
12,617
|
|
|
$
|
49
|
|
|
$
|
3,662
|
|
|
$
|
|
|
|
$
|
16,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH ACTIVITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
$
|
135
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
135
|
|
Unpaid capital expenditures
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
F-40
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONSOLIDATING
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Subsidiary
|
|
|
Subsidiary
|
|
|
Eliminations
|
|
|
Total
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,890
|
|
|
$
|
|
|
|
$
|
649
|
|
|
$
|
(649
|
)
|
|
$
|
14,890
|
|
Adjustments to reconcile net income (loss) to net cash flow from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
21,659
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
21,662
|
|
Stock-based compensation
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,739
|
|
Deferred tax
|
|
|
(3,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,689
|
)
|
Gain on disposal of fixed assets
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Equity in consolidated subsidiary
|
|
|
(649
|
)
|
|
|
|
|
|
|
|
|
|
|
649
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(6,196
|
)
|
|
|
|
|
|
|
1,590
|
|
|
|
|
|
|
|
(4,606
|
)
|
Inventories
|
|
|
(3,628
|
)
|
|
|
|
|
|
|
735
|
|
|
|
|
|
|
|
(2,894
|
)
|
Prepaid expenses and other assets
|
|
|
(4,799
|
)
|
|
|
|
|
|
|
(168
|
)
|
|
|
|
|
|
|
(4,967
|
)
|
Accounts payable
|
|
|
(5,819
|
)
|
|
|
2
|
|
|
|
(560
|
)
|
|
|
|
|
|
|
(6,377
|
)
|
Intercompany accounts
|
|
|
1,438
|
|
|
|
24
|
|
|
|
(1,462
|
)
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
6,617
|
|
|
|
(30
|
)
|
|
|
(532
|
)
|
|
|
|
|
|
|
6,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities
|
|
|
23,543
|
|
|
|
(4
|
)
|
|
|
255
|
|
|
|
|
|
|
|
23,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(5,987
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
(6,010
|
)
|
Acquisition of businesses, net cash acquired
|
|
|
(267,924
|
)
|
|
|
|
|
|
|
4,785
|
|
|
|
|
|
|
|
(263,138
|
)
|
Proceeds from the disposal of fixed assets
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
Proceeds from sale of investment
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from investing activities
|
|
|
(273,835
|
)
|
|
|
|
|
|
|
4,762
|
|
|
|
|
|
|
|
(269,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under revolving loan facilities
|
|
|
121,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,630
|
|
Proceeds of issuance of common stock, net
|
|
|
(451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(451
|
)
|
Repayment of long-term debt
|
|
|
(1,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,133
|
)
|
Issuance of senior notes, net of issuance costs
|
|
|
119,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from financing activities
|
|
|
239,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
24
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(10,894
|
)
|
|
|
(4
|
)
|
|
|
5,041
|
|
|
|
|
|
|
|
(5,857
|
)
|
CASH AND CASH EQUIVALENTS Beginning of year
|
|
|
14,729
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
14,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS End of year
|
|
$
|
3,835
|
|
|
$
|
1
|
|
|
$
|
5,041
|
|
|
$
|
|
|
|
$
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH ACTIVITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
$
|
50
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
50
|
|
Unpaid capital expenditures
|
|
|
1,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,453
|
|
F-41
COLEMAN
CABLE, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
18.
|
QUARTERLY
RESULTS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Total Net Sales
|
|
$
|
117,322
|
|
|
$
|
252,483
|
|
|
$
|
112,932
|
|
|
$
|
267,578
|
|
|
$
|
133,795
|
|
|
$
|
270,712
|
|
|
$
|
140,103
|
|
|
$
|
182,195
|
|
|
$
|
504,152
|
|
|
$
|
972,968
|
|
Gross Profit
|
|
|
16,548
|
|
|
|
28,849
|
|
|
|
17,010
|
|
|
|
28,292
|
|
|
|
20,320
|
|
|
|
29,898
|
|
|
|
21,789
|
|
|
|
6,562
|
|
|
|
75,667
|
|
|
|
93,601
|
|
Total Operating Income (Loss)
|
|
|
(66,896
|
)
|
|
|
13,250
|
|
|
|
3,404
|
|
|
|
8,871
|
|
|
|
6,341
|
|
|
|
10,045
|
|
|
|
6,941
|
|
|
|
(42,299
|
)
|
|
|
(50,210
|
)
|
|
|
(10,133
|
)
|
Total Net Income (Loss)
|
|
|
(64,770
|
)
|
|
|
3,258
|
|
|
|
300
|
|
|
|
843
|
|
|
|
784
|
|
|
|
1,737
|
|
|
|
(3,333
|
)
|
|
|
(34,099
|
)
|
|
|
(67,019
|
)
|
|
|
(28,261
|
)
|
Net Income (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(3.85
|
)
|
|
|
0.19
|
|
|
|
0.02
|
|
|
|
0.05
|
|
|
|
0.05
|
|
|
|
0.10
|
|
|
|
(0.20
|
)
|
|
|
(2.03
|
)
|
|
|
(3.99
|
)
|
|
|
(1.68
|
)
|
Diluted
|
|
|
(3.85
|
)
|
|
|
0.19
|
|
|
|
0.02
|
|
|
|
0.05
|
|
|
|
0.05
|
|
|
|
0.10
|
|
|
|
(0.20
|
)
|
|
|
(2.03
|
)
|
|
|
(3.99
|
)
|
|
|
(1.68
|
)
|
Annual amounts may differ from sum of respective quarters due to
rounding.
As discussed in Note 3, we incurred non-cash asset
impairment charges totaling $70,761 and $29,276 in 2009 and 2008
respectively, related primarily to the impairment of goodwill in
the first quarter of 2009 and the fourth quarter of 2008.
As discussed in Note 4, we have incurred restructuring and
integration charges related to two the integration of our 2007
Acquisitions, and to a lesser degree, two facilities closed in
2006. We recorded $657, $1,700, 1,692 and $1,419 in total
restructuring expenses in the first, second, third and fourth
quarters of 2009, respectively, and $176, $2,835, 2,504 and
$4,710 in restructuring and integration charges in the first,
second, third and fourth quarters of 2008, respectively.
Income tax expense for the fourth quarter of 2009 included an
out-of-period
adjustment to correct an error in the amount of tax benefit
initially recorded in relation to the non-cash goodwill
impairment charge of $69,498 recorded in the first quarter of
2009. The adjustment, which we have evaluated as immaterial from
both quantitative and qualitative perspectives, resulted in a
$2,900 decrease in the tax benefit associated with the
impairment charge and a corresponding decrease in the
non-current deferred income taxes previously reported in the
first quarter of 2009.
We evaluated subsequent events through the date the consolidated
financial statements were issued, see Note 7.
F-42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on this 3rd day of March 2010.
COLEMAN CABLE, INC
(Registrant)
G. Gary Yetman
President and Chief Executive Officer
POWER OF
ATTORNEY
The undersigned officers and directors of Coleman Cable, Inc.
hereby severally constitute G. Gary Yetman and Richard N. Burger
and each of them singly our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our
names in the capacities indicated below the Annual Report on
Form 10-K
filed herewith and any and all amendments thereto, and generally
do all such things in our name and on our behalf in our
capacities as officers and directors to enable Coleman Cable,
Inc. to comply with the provisions of the Securities and
Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any
one of them on this Annual Report on
Form 10-K
and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated on
this 3rd day of March 2010.
|
|
|
|
|
|
|
|
/s/ G.
Gary Yetman
G.
Gary Yetman
|
|
Director, President and Chief Executive Officer
|
|
|
|
/s/ Richard
N. Burger
Richard
N. Burger
|
|
Executive Vice President, Chief Financial Officer,
Secretary and Treasurer (Principal Financial and
Accounting Officer)
|
|
|
|
/s/ David
Bistricer
David
Bistricer
|
|
Director
|
|
|
|
/s/ Nachum
Stein
Nachum
Stein
|
|
Director
|
|
|
|
/s/ Shmuel
D. Levinson
Shmuel
D. Levinson
|
|
Director
|
|
|
|
/s/ James
G. London
James
G. London
|
|
Director
|
|
|
|
/s/ Denis
Springer
Denis
Springer
|
|
Director
|
|
|
|
/s/ Isaac
Neuberger
Isaac
Neuberger
|
|
Director
|
|
|
|
/s/ Harmon
Spolan
Harmon
Spolan
|
|
Director
|
|
|
|
/s/ Dennis
Martin
Dennis
Martin
|
|
Director
|
S-1
Index to
Exhibits
|
|
|
|
|
|
|
|
1
|
.0
|
|
|
|
Purchase Agreement dated January 26, 2010 by and among
Coleman Cable, Inc., certain subsidiary guarantors and the
initial purchasers of the Notes.
|
|
3
|
.1
|
|
|
|
Certificate of Incorporation of Coleman Cable, Inc., as filed
with the Delaware Secretary of State on October 10, 2006,
incorporated herein by reference to our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2006.
|
|
3
|
.2
|
|
|
|
Amended and Restated By-Laws of Coleman Cable, Inc.,
incorporated herein by reference to our Current Report on
Form 8-K
as filed on May 5, 2008.
|
|
4
|
.1
|
|
|
|
Registration Rights Agreement dated September 28, 2004
between Coleman Cable, Inc. and Wachovia Capital Markets, LLC,
as Initial Purchaser under the Purchase Agreement, incorporated
herein by reference to our
Form S-4
filed on April 26, 2005.
|
|
4
|
.2
|
|
|
|
Registration Rights Agreement, dated October 11, 2006
between Coleman Cable, Inc. and Friedman, Billings,
Ramsey & Co., Inc., incorporated herein by reference
to our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2006.
|
|
4
|
.3
|
|
|
|
Registration Rights Agreement dated as of February 3, 2010
among Coleman Cable, the guarantors from time to time party
thereto and the initial purchasers of the Notes, incorporated
herein by reference to our Current Report on
Form 8-K
filed on February 3, 2010.
|
|
4
|
.4
|
|
|
|
Indenture dated as of September 28, 2004 among Coleman
Cable, Inc., the Note Guarantors from time to time party thereto
and Deutsche Bank Trust Company Americas, as Trustee,
incorporated herein by reference to our
Form S-4
filed on April 26, 2005.
|
|
4
|
.5
|
|
|
|
Supplemental Indenture dated February 3, 2010 among Coleman
Cable, the guarantors from time to time party thereto and
Deutsche Bank National Trust Company, as Trustee,
incorporated herein by reference to our Current Report on
Form 8-K
filed on February 3, 2010.
|
|
4
|
.6
|
|
|
|
Indenture dated as of February 3, 2010 among Coleman Cable,
the guarantors from time to time party thereto and Deutsche Bank
Trust Company Americas, as trustee (including the Form of
9% Senior Note due 2018 attached as Exhibit A
thereto), incorporated herein by reference to our Current Report
on
Form 8-K
filed on February 3, 2010.
|
|
4
|
.7
|
|
|
|
Shareholders Agreement, dated October 11, 2006 between
Coleman Cable, Inc. and its Existing Holders, incorporated
herein by reference to our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2006.
|
|
10
|
.1
|
|
|
|
Amended and Restated Credit Agreement dated as of April 2,
2007 among Coleman Cable, Inc., certain of its Subsidiaries, the
Lenders named therein, and Wachovia Bank, National Association,
as administration agent, incorporated herein by reference to our
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007.
|
|
10
|
.2
|
|
|
|
First Amendment to Amended and Restated Credit Agreement dated
as of November 1, 2007 by and among Coleman Cable, Inc.,
certain of its Subsidiaries, the Lenders named therein, and
Wachovia Bank, National Association, as administrative agent,
incorporated herein by reference to our
Form 8-K
filed on November 2, 2007.
|
|
10
|
.3
|
|
|
|
Second Amendment to Amended and Restated Credit Agreement, dated
as of June 18, 2009, by and among Coleman Cable, Inc., the
Subsidiaries that are signatories thereto, and the lenders that
are signatories thereto, incorporated herein by reference to our
Current Report on
Form 8-K
as filed on June 18, 2009.
|
|
10
|
.4
|
|
|
|
Third Amendment to Amended and Restated Credit Agreement, dated
as of January 19, 2010, by and among Coleman Cable, Inc.,
the Subsidiaries that are signatories thereto, and the lenders
that are signatories thereto, incorporated herein by reference
to our Current Report on
Form 8-K
as filed on June 18, 2009.
|
|
10
|
.5
|
|
|
|
Lease dated as of September 11, 2003, by and between
Panattoni Development Company, LLC and Coleman Cable, Inc., as
subsequently assumed by HQ2 Properties, LLC pursuant to an
Assignment and Assumption of Lease, dated as of August 15,
2005, amended by First Amendment to Lease, dated as of
August 15, 2005, by and between HQ2 Properties, LLC and
Coleman Cable, Inc., incorporated herein by reference to our
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2005.
|
|
*10
|
.6
|
|
|
|
Coleman Cable, Inc. Long-Term Incentive Plan, incorporated
herein by reference to our Definitive 14A Proxy Statement filed
on April 3, 2008.
|
E-1
|
|
|
|
|
|
|
|
*10
|
.7
|
|
|
|
Form of Non-Qualified Stock Option Agreement Under the Coleman
Cable, Inc. Long-Term Incentive Plan, incorporated herein by
reference to our
Form S-1
filed on November 16, 2006.
|
|
*10
|
.8
|
|
|
|
Form of Restricted Stock Award Agreement under the Coleman
Cable, Inc. Long-Term Incentive Plan, incorporated herein by
reference to our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009.
|
|
10
|
.9
|
|
|
|
Indemnification Agreement dated November 13, 2007 by and
between Morgan Capital LLC and Coleman Cable, Inc., incorporated
herein by reference to our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007.
|
|
*10
|
.10
|
|
|
|
Amended and Restated Employment Agreement, dated as of
December 29, 2008 by and between Coleman Cable, Inc. and
Richard N. Burger incorporated herein by reference to our Annual
Report on
Form 10-K
for the year ended December 31, 2008.
|
|
*10
|
.11
|
|
|
|
Employment Agreement, dated December 29, 2008 between
Coleman Cable, Inc. and Richard Carr incorporated herein by
reference to our Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
|
*10
|
.12
|
|
|
|
Amended and Restated Employment Agreement, dated as of
December 30, 2008 by and between Coleman Cable, Inc. and G.
Gary Yetman incorporated herein by reference to our Annual
Report on
Form 10-K
for the year ended December 31, 2008.
|
|
*10
|
.13
|
|
|
|
Employment Agreement, dated December 30, 2008 between
Coleman Cable, Inc. and Mike Frigo incorporated herein by
reference to our Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
|
*10
|
.14
|
|
|
|
Severance Agreement dated as of May 7, 2009 between the
Company and K. McAllister incorporated herein by reference to
our
Form 10-Q
for the quarter ended March 31, 2009.
|
|
21
|
.1
|
|
|
|
Subsidiaries.
|
|
23
|
.1
|
|
|
|
Consent of Deloitte & Touche LLP.
|
|
24
|
.1
|
|
|
|
Power of Attorney (included on signature page of this filing).
|
|
31
|
.1
|
|
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Denotes management contract or compensatory plan or arrangement. |
E-2