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EX-31.1 - CEO 302 CERTIFICATION - WireCo WorldGroup Inc.exhibit311_q1x2015.htm
EX-32.2 - CFO 906 CERTIFICATION - WireCo WorldGroup Inc.exhibit322_q1x2015.htm
EX-32.1 - CEO 906 CERTIFICATION - WireCo WorldGroup Inc.exhibit321_q1x2015.htm
EX-31.2 - CFO 302 CERTIFICATION - WireCo WorldGroup Inc.exhibit312_q1x2015.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form 10-Q
 
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
OR 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 333-174896

 
WireCo WorldGroup Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
27-0061302
 
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
12200 NW Ambassador Drive
Kansas City, Missouri
 
64163
 
 
(Address of registrant's executive offices)
 
(Zip Code)
 
 
(816) 270-4700
 
 
(Registrant's telephone number, including area code)
 


Indicate by check mark whether the registrant (1) has filed all reports required 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 requirements for the past 90 days.    YES  ¨   NO  x 
NOTE: While the Registrant is a voluntary filer not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Date 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  x    NO  ¨
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):
 
Large accelerated filer
 
¨
  
Accelerated filer
 
¨
 
 
 
 
 
 
 
 
Non-accelerated filer
 
x
  
Smaller reporting company
 
¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    YES  ¨   NO  x
There is no market for the Registrant’s equity, all of which is held by affiliates of WireCo WorldGroup (Cayman) Inc. (the “Company”). As of May 1, 2015 the Registrant had 100 shares of common stock outstanding.




WireCo WorldGroup Inc.
Quarterly Report
For the period ended March 31, 2015
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



1


PART I – FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
 
March 31, 2015
 
December 31, 2014
Current assets:
 
(unaudited)
 
 
Cash and cash equivalents
 
$
45,193

 
$
58,195

Restricted cash
 
1,070

 
1,565

Accounts receivable, less allowance for doubtful accounts of $1,774 and $2,223, at March 31, 2015 and December 31, 2014, respectively
 
126,549

 
143,068

Other receivables
 
10,582

 
2,305

Inventories, net
 
205,567

 
225,075

Current deferred income tax assets
 
3,277

 
3,867

Prepaid expenses and other current assets
 
10,332

 
12,976

Total current assets
 
$
402,570

 
$
447,051

Property, plant and equipment, less accumulated depreciation of $175,558 and $181,728, at March 31, 2015 and December 31, 2014, respectively
 
293,641

 
319,198

Intangible assets, net
 
114,139

 
125,578

Goodwill
 
182,666

 
188,925

Deferred financing fees, net
 
13,703

 
15,425

Non-current deferred income tax assets
 
1,086

 
1,123

Derivative assets
 
55,821

 
16,133

Other non-current assets
 
10,305

 
11,418

Total assets
 
$
1,073,931

 
$
1,124,851

Liabilities and Stockholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
18,021

 
$
19,113

Interest payable
 
17,408

 
6,322

Accounts payable
 
77,656

 
98,914

Accrued compensation and benefits
 
18,535

 
19,117

Current deferred income tax liabilities
 
913

 
311

Other current liabilities
 
14,415

 
20,173

Total current liabilities
 
$
146,948

 
$
163,950

Long-term debt, excluding current maturities
 
843,181

 
854,042

Non-current deferred income tax liabilities
 
41,998

 
46,735

Other non-current liabilities
 
14,088

 
15,861

Total liabilities
 
$
1,046,215

 
$
1,080,588

Commitments and contingencies
 


 


Stockholders’ equity:
 
 
 
 
Common stock, $0.01 par value. 3,000,000 shares authorized; 2,054,374 and 2,005,205 shares issued and outstanding, respectively at March 31, 2015 and December 31, 2014
 
$
21

 
$
21

Additional paid-in capital
 
234,809

 
232,883

Accumulated other comprehensive loss
 
(63,162
)
 
(48,579
)
Accumulated deficit
 
(130,374
)
 
(125,626
)
Treasury stock, at cost. 49,169 shares at March 31, 2015 and December 31, 2014
 
(14,465
)
 
(14,465
)
Total stockholders’ equity attributable to WireCo WorldGroup (Cayman) Inc.
 
$
26,829

 
$
44,234

Non-controlling interests
 
887

 
29

Total stockholders’ equity
 
$
27,716

 
$
44,263

Total liabilities and stockholders’ equity
 
$
1,073,931

 
$
1,124,851

The accompanying notes are an integral part of the unaudited consolidated financial statements.

2

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands)
(unaudited)


 
 
Three months ended
 
 
March 31,
 
 
2015
 
2014
Net sales
 
$
180,355

 
$
210,502

Cost of sales
 
(138,354
)
 
(157,196
)
Gross profit
 
42,001

 
53,306

Other operating expenses:
 

 

Selling expenses
 
(9,775
)
 
(11,001
)
Administrative expenses
 
(17,971
)
 
(20,390
)
Amortization expense
 
(2,309
)
 
(3,147
)
Total other operating expenses
 
(30,055
)
 
(34,538
)
Operating income
 
11,946

 
18,768

Other income (expense):
 

 

Interest expense, net
 
(18,988
)
 
(19,858
)
Foreign currency exchange gains (losses), net
 
(4,278
)
 
950

Other income (expense), net
 
(309
)
 
755

Total other expense, net
 
(23,575
)
 
(18,153
)
Income (loss) before income taxes
 
(11,629
)
 
615

Income tax benefit (expense)
 
7,561

 
(658
)
Net loss
 
(4,068
)
 
(43
)
Less: Net income attributable to non-controlling interests
 
680

 
487

Net loss attributable to WireCo WorldGroup (Cayman) Inc.
 
$
(4,748
)
 
$
(530
)
The accompanying notes are an integral part of the unaudited consolidated financial statements.




3

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)


 
 
Three months ended
 
 
March 31,
 
 
2015
 
2014
Net loss
 
$
(4,068
)
 
$
(43
)
Other comprehensive loss:
 
 
 

Foreign currency translation loss
 
(14,405
)
 
(3,094
)
Comprehensive loss
 
(18,473
)
 
(3,137
)
Less: Comprehensive income (loss) attributable to non-controlling interests
 
858

 
(411
)
Comprehensive loss attributable to WireCo WorldGroup (Cayman) Inc.
 
$
(19,331
)
 
$
(2,726
)
The accompanying notes are an integral part of the unaudited consolidated financial statements.



4

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)


 
 
Three months ended
 
 
March 31,
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(4,068
)
 
$
(43
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 

Depreciation and amortization
 
11,375

 
13,035

Amortization of debt issuance costs, discounts and premium
 
1,855

 
2,078

Share-based compensation
 
1,926

 
1,762

Unrealized gain on derivative instruments, net
 
(39,553
)
 

Unrealized foreign currency exchange losses, net
 
43,306

 
239

Other adjustments
 
139

 
(287
)
Changes in assets and liabilities:
 

 

Accounts receivable
 
7,495

 
(11,037
)
Inventories
 
4,801

 
(11,382
)
Prepaid expenses and other assets
 
(8,679
)
 
(3,895
)
Interest payable
 
11,107

 
12,326

Accounts payable
 
(12,696
)
 
12,611

Other accrued liabilities
 
(4,408
)
 
243

Net cash provided by operating activities
 
$
12,600

 
$
15,650

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(9,212
)
 
(3,200
)
Net cash used in investing activities
 
$
(9,212
)
 
$
(3,200
)
Cash flows from financing activities:
 
 
 
 
Principal payments on long-term debt
 
(830
)
 
(838
)
Borrowings under revolving credit agreement
 
21,550

 
33,400

Repayments under revolving credit agreement
 
(32,650
)
 
(46,900
)
Other financing activities
 

 
228

Net cash used in financing activities
 
$
(11,930
)
 
$
(14,110
)
Effect of exchange rates on cash and cash equivalents
 
(4,460
)
 
46

Decrease in cash and cash equivalents
 
$
(13,002
)
 
$
(1,614
)
Cash and cash equivalents, beginning of period
 
58,195

 
34,987

Cash and cash equivalents, end of period
 
$
45,193

 
$
33,373

Supplemental Disclosure of Cash Flow Information:
 
 
 
 
Cash paid for interest, net of interest capitalized
 
$
5,639

 
$
5,239

Cash paid for income taxes, net of refunds
 
1,460

 
1,495

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(unaudited)


(1) Interim Financial Statement Presentation
The financial information included in this quarterly report on Form 10-Q are those of WireCo WorldGroup (Cayman) Inc., its wholly-owned subsidiaries, including WireCo WorldGroup Inc., and subsidiaries in which it has a controlling interest (collectively, the “Company”). The accompanying unaudited interim consolidated financial statements included herein have been prepared in United States ("U.S.") dollars and in accordance with U.S. generally accepted accounting principles (“GAAP”). In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected.
Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2014.
New Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP. Pending enactment of a delay in the effective date, the new standard would be effective for public entities on January 1, 2017. In April 2015, the FASB proposed delaying this standard by one year. ASU 2014-09 allows the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect of ASU 2014-09 and has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest to reduce complexity in accounting standards and make the presentation of debt issuance costs consistent with the presentation of debt discounts. This ASU requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, rather than as an asset. ASU 2015-03 is limited to simplifying the presentation of debt issuance costs and there will be no effect on the income statement. This ASU requires retrospective adoption and is effective for the Company during the first quarter of 2016 with early adoption permitted. Upon adoption, the Company will present its remaining unamortized debt issuance costs as a direct deduction from the carrying amount of the related debt liability.

(2) Inventories, net
The major classes of inventories were as follows as of the dates indicated:
 
 
March 31, 2015
 
December 31, 2014
Raw materials, net
 
$
76,027

 
$
86,669

Work in process, net
 
9,639

 
10,487

Finished goods, net
 
119,901

 
127,919

Inventories, net
 
$
205,567

 
$
225,075


6

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

(3) Intangible Assets and Goodwill
The components of finite-lived intangible assets were as follows as of the dates indicated:
 
 
March 31, 2015
 
December 31, 2014
 
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
carrying
amount
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
carrying
amount
Finite-lived assets
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
 
$
119,373

 
$
(86,649
)
 
$
32,724

 
$
124,856

 
$
(87,406
)
 
$
37,450

Patented and unpatented technology
 
21,308

 
(10,410
)
 
10,898

 
22,216

 
(10,539
)
 
11,677

Other
 
6,207

 
(6,207
)
 

 
6,505

 
(6,505
)
 

Total finite-lived intangible assets
 
$
146,888

 
$
(103,266
)
 
$
43,622

 
$
153,577

 
$
(104,450
)
 
$
49,127


Using the exchange rates in effect at period end, estimated amortization of finite-lived intangible assets as of March 31, 2015 was as follows:
Remainder of 2015
 
$
6,612

2016
 
8,632

2017
 
7,056

2018
 
3,460

2019
 
3,223

Thereafter
 
14,639

Total
$
43,622


Intangible assets with indefinite lives are not amortized. The carrying values of trade names as of March 31, 2015 and December 31, 2014 were $70,517 and $76,451, respectively.

The change in the carrying value of goodwill was as follows as of the dates indicated:
December 31, 2014
 
$
188,925

Foreign currency translation
 
(6,259
)
March 31, 2015
 
$
182,666


7

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

(4) Borrowings
Long-term debt consisted of the following as of the dates indicated:
 
 
March 31, 2015
 
December 31, 2014
Borrowings under Revolving Loan Facility
 
$
57,650

 
$
68,750

Term Loan due 2017
 
323,532

 
324,362

9.00% Senior Notes due 2017
 
56,000

 
56,000

9.50% Senior Notes due 2017
 
425,000

 
425,000

Other indebtedness
 

 
157

Total debt at face value
 
862,182

 
874,269

Less: Unamortized discount, net
 
(980
)
 
(1,114
)
Less: Current maturities of long-term debt
 
(18,021
)
 
(19,113
)
Total long-term debt
 
$
843,181

 
$
854,042


For a detailed discussion of the Company's borrowings, see Note 7—“Borrowings” to the Company's audited consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of the annual report on Form 10-K for the year ended December 31, 2014.

Senior Secured Credit Facilities - Revolving Loan Facility and Term Loan due 2017
The Company's maximum borrowing capacity under the Revolving Loan Facility is $145,000. As of March 31, 2015, availability under the Revolving Loan Facility was $86,275. Availability is based upon the maximum borrowing capacity, less outstanding borrowings and letters of credit, and if applicable, further restricted by certain covenants in the Company's credit agreements. Outstanding letters of credit were $1,075 at March 31, 2015. The variable interest rate on the Revolving Loan Facility and Term Loan due 2017 at March 31, 2015 was 5.47% and 6.00%, respectively.

Interest expense, net
Net interest expense consists of:
 
 
Three months ended
 
 
March 31,
 
 
2015
 
2014
Interest on long-term debt
 
$
17,116

 
$
18,045

Amortization of debt issuance costs, discounts and premium
 
1,855

 
2,078

Capitalized interest
 
(64
)
 
(247
)
Other
 
81

 
(18
)
Interest expense, net
 
$
18,988

 
$
19,858


(5) Derivative Financial Instruments
During September 2014, the Company entered into cross-currency swaps with three counterparties to economically hedge exposures to foreign currency exchange risk related to its global operations. The cross-currency swaps notional value is $300,000, at a weighted average foreign currency exchange rate of $1.00 to €0.7820, and matures in February 2017. In accordance with the cross-currency swap agreements, on a semi-annual basis, the Company pays interest at a weighted average fixed rate of 8.79% and receives interest based on a fixed rate of 9.50%.
In March 2015, the Company entered into a foreign currency forward contract to mitigate the exchange rate risk associated with fluctuations of the U.S. dollar to euro on internal cash movements associated with its global operations. Pursuant to the contract, the Company will receive a notional value of $3,093 at a foreign currency exchange rate of $1.00 to €0.9700 on the settlement date of May 13, 2015.
None of the Company's derivative financial instruments qualify for hedge accounting treatment and accordingly, changes in fair value are recorded in Foreign currency exchange gains (losses) within the consolidated statements of operations. The

8

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

following table presents the unrealized gain or (loss) amounts included in Foreign currency exchange gains (losses) in the consolidated statements of operations:
 
Three months ended
 
March 31,
 
2015
 
2014
Cross-currency swaps
$
39,688

 
$

Foreign currency forward contract
(135
)
 


Refer to Note 6—“Fair Value Measurements” for additional information regarding the fair value of the Company’s derivative arrangements included in the consolidated balance sheets.

(6) Fair Value Measurements
The Company’s short-term financial instruments include cash and cash equivalents, accounts receivable and accounts payable. The carrying amounts reported on the consolidated balance sheets for these items approximate fair market value due to their relative short-term nature.
The table below sets forth by level, within the fair value hierarchy, the fair value of the Company's derivative financial instruments that are measured on a recurring basis. The Company estimates the fair value of its derivative instruments using present value measurements based on the spot rate, forward option spreads and other relevant market conditions.
 
 
March 31, 2015
 
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
     Cross-currency swaps
 
$

 
$
55,821

 
$

 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
 
    Foreign currency forward contract
 
$

 
$
135

 
$

 
 
December 31, 2014
 
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
Derivative assets:
 
 
 
 
 
 
     Cross-currency swaps
 
$

 
$
16,133

 
$


The carrying amounts and estimated fair values of the Company’s long-term debt at March 31, 2015 were as follows:
 
 
Carrying
amount
 
Estimated
fair value
Revolving Loan Facility
 
$
57,650

 
$
57,650

Term Loan due 2017
 
322,166

 
324,341

9.00% Senior Notes due 2017
 
56,000

 
52,640

9.50% Senior Notes due 2017
 
425,386

 
416,500

As the Revolving Loan Facility is a revolving credit agreement, the carrying amount approximates fair value. The estimated fair value of the Term Loan due 2017 is based on rates currently available for obligations with similar terms and maturities (Level 2 inputs). The estimated fair value of the 9.00% Senior Notes is based on a model that incorporates assumptions a market participant would use in pricing the liability (Level 3 inputs), and the estimated fair value of the 9.50% Senior Notes is based on current market rates in inactive markets (Level 2 inputs).

9

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)


(7) Restructuring Charges

As part of the Company's initiatives to manage costs in response to the challenges in the oil and gas end market, the Company reduced its production and administrative workforce during the first quarter of 2015. Restructuring charges related to employee termination and related benefits were recorded in Administrative expenses in the consolidated statement of operations. The accrual balance is included in Other current liabilities on the consolidated balance sheet.

A rollforward of this restructuring activity is set forth below:
Balance at December 31, 2014
$

Restructuring charges incurred in 2015
672

Payments made in 2015
(274
)
Balance at March 31, 2015
$
398


(8) Income Taxes
The Company determines the interim tax provision by applying an estimate of the annual effective tax rate to the year-to-date pretax book income (loss) and adjusts for discrete items during the reporting period, if any. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded. Additionally, for certain tax jurisdictions where a reliable estimate of year-to-date income tax expense or benefit cannot be made, the Company applied the actual effective tax rate to quarter-to-date income.
The effective income tax rate for the three months ended March 31, 2015 and 2014 was 65.0% and 107.0%, respectively. The Company's effective income tax rates differ from the applicable statutory tax rate primarily due to a valuation allowance on U.S. and Portuguese deferred tax assets, the mix of earnings (losses) by jurisdiction, and the effects of foreign tax rate differential.

(9) Related Party Transactions
Paine & Partners, LLC (“Paine & Partners”), which manages the funds that control the Company, has entered into a management agreement with the Company to provide administrative and other support services. During the first quarters of 2015 and 2014, the Company paid an annual management fee of $3,112 and $3,042, respectively. This annual management fee is deferred as a prepaid and recognized ratably over the year as the services are provided. The Company recognized management fee expense of $778 and $761 during the three months ended March 31, 2015 and 2014, respectively, that was recorded in Administrative expenses in the consolidated statements of operations.
During the first quarters of 2015 and 2014, the Company had product sales of $282 and $306, respectively, to its Spanish joint venture, Lankhorst Euronete Espana SA. Also, the Company purchased $854 and $1,168 of product for the three months ended March 31, 2015 and 2014, respectively, from its Greek joint venture, Eurorope Performance Rope Producers SA.

(10) Contingencies
The Company is involved in various claims and legal actions arising in the ordinary course of business, which are incidental to its operations. Insurance coverage is maintained for certain risks, such as product liability and workers’ compensation. The Company is not currently a party to any legal proceedings or other contingencies that it believes would have a material adverse effect on its financial position, results of operations, or cash flows.

10

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

(11) Segment Reporting
The Company reports the manufacturing, marketing, selling and distribution of wire and synthetic ropes, specialty wire and engineered products as one operating and one reportable segment. The Company's net sales by product line for the periods presented was as follows:
 
 
Three months ended
 
 
March 31,
 
 
2015
 
2014
Product line net sales
 
($)
(%)
 
($)
(%)
Rope
 
$
130,003

72
%
 
$
159,628

76
%
Specialty wire
 
32,931

18
%
 
33,108

16
%
Engineered products
 
17,421

10
%
 
17,766

8
%
Total net sales
 
$
180,355

100
%
 
$
210,502

100
%
 
 
 
 
 
 
 
(12) Condensed Consolidating Financial Statements
Guarantees of the 9.50% Senior Notes
WireCo WorldGroup Inc. has registered 9.50% Senior Notes, which are unsecured obligations. These obligations are jointly and severally and fully and unconditionally guaranteed by WireCo WorldGroup (Cayman) Inc. Certain entities controlled by WireCo WorldGroup (Cayman) Inc. (collectively referred to as the “Guarantor Subsidiaries”) also jointly and severally and fully and unconditionally guarantee these obligations, subject to customary release provisions. All voting shares for the entities presented in the “Guarantor Subsidiaries” column are 100% owned directly or indirectly by the Company. Certain subsidiaries with locations primarily in the Netherlands, Brazil and France do not guarantee the debt (collectively referred to as the “Non-Guarantor Subsidiaries”). The following condensed consolidating financial statements are prepared with each entity’s investment in subsidiaries accounted for under the equity method. The adjustments eliminate investments in subsidiaries, related stockholders’ equity and other intercompany balances and transactions. There are currently no significant restrictions on the ability of WireCo WorldGroup Inc. or any guarantor to obtain funds from its subsidiaries by dividend or loan.


11

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

Condensed Consolidating Balance Sheets
 
March 31, 2015
 
WireCo
WorldGroup
(Cayman) Inc.
(Parent)
 
WireCo
WorldGroup
Inc.
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Elimination
Adjustments
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
23

 
$
5,151

 
$
30,975

 
$
9,044

 
$

 
$
45,193

Restricted cash

 

 
542

 
528

 

 
1,070

Accounts receivable, net

 
37,723

 
65,115

 
23,711

 

 
126,549

Intercompany accounts receivable
29,191

 
65,236

 
57,658

 
23,959

 
(176,044
)
 

Other receivables

 
57

 
5,289

 
5,236

 

 
10,582

Inventories, net

 
71,615

 
107,242

 
26,710

 

 
205,567

Current deferred income tax assets

 
1,384

 
1,781

 
112

 

 
3,277

Prepaid expenses and other current assets

 
3,933

 
5,188

 
1,211

 

 
10,332

Total current assets
$
29,214

 
$
185,099

 
$
273,790

 
$
90,511

 
$
(176,044
)
 
$
402,570

Long-term intercompany notes receivable

 
458,837

 
17,860

 
108,060

 
(584,757
)
 

Property, plant and equipment, net

 
52,350

 
201,884

 
39,407

 

 
293,641

Intangible assets, net

 
33,295

 
62,149

 
18,695

 

 
114,139

Goodwill

 
116,842

 
47,352

 
18,472

 

 
182,666

Investments in subsidiaries
5,989

 

 
153,493

 
7,860

 
(167,342
)
 

Deferred financing fees, net

 
13,703

 

 

 

 
13,703

Non-current deferred income tax assets

 

 
1,086

 

 

 
1,086

Derivative assets

 
55,821

 

 

 

 
55,821

Other non-current assets

 
199

 
10,098

 
8

 

 
10,305

Total assets
$
35,203

 
$
916,146

 
$
767,712

 
$
283,013

 
$
(928,143
)
 
$
1,073,931

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$

 
$
18,021

 
$

 
$

 
$

 
$
18,021

Interest payable

 
17,354

 
63

 
40

 
(49
)
 
17,408

Accounts payable

 
16,132

 
50,445

 
11,079

 

 
77,656

Accrued compensation and benefits

 
4,214

 
11,208

 
3,113

 

 
18,535

Intercompany accounts payable
1,674

 
82,898

 
80,281

 
11,327

 
(176,180
)
 

Current deferred income tax liabilities

 

 
311

 
602

 

 
913

Other current liabilities

 
1,917

 
10,133

 
2,365

 

 
14,415

Total current liabilities
$
1,674

 
$
140,536

 
$
152,441

 
$
28,526

 
$
(176,229
)
 
$
146,948


12

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

Long-term debt, excluding current maturities

 
843,181

 

 

 

 
843,181

Long-term intercompany notes payable
6,700

 

 
552,029

 
26,008

 
(584,737
)
 

Non-current deferred income tax liabilities

 
11,949

 
22,571

 
7,478

 

 
41,998

Other non-current liabilities

 
197

 
12,340

 
1,551

 

 
14,088

Total liabilities
$
8,374

 
$
995,863

 
$
739,381

 
$
63,563

 
$
(760,966
)
 
$
1,046,215

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity attributable to WireCo WorldGroup (Cayman) Inc.
26,829

 
(79,717
)
 
31,063

 
215,831

 
(167,177
)
 
26,829

Non-controlling interests

 

 
(2,732
)
 
3,619

 

 
887

Total stockholders’ equity
$
26,829

 
$
(79,717
)
 
$
28,331

 
$
219,450

 
$
(167,177
)
 
$
27,716

Total liabilities and stockholders’ equity
$
35,203

 
$
916,146

 
$
767,712

 
$
283,013

 
$
(928,143
)
 
$
1,073,931



13

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

 
December 31, 2014
 
WireCo
WorldGroup
(Cayman) Inc.
(Parent)
 
WireCo
WorldGroup
Inc.
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Elimination
Adjustments
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
24

 
$
4,178

 
$
35,792

 
$
18,201

 
$

 
$
58,195

Restricted cash

 

 
656

 
909

 

 
1,565

Accounts receivable, net

 
45,159

 
69,645

 
28,264

 

 
143,068

Intercompany accounts receivable
27,454

 
64,043

 
55,654

 
18,493

 
(165,644
)
 

Other receivables

 

 
1,914

 
391

 

 
2,305

Inventories, net

 
71,924

 
122,025

 
31,126

 

 
225,075

Current deferred income tax assets

 
1,384

 
1,902

 
581

 

 
3,867

Prepaid expenses and other current assets

 
2,935

 
6,378

 
3,663

 

 
12,976

Total current assets
$
27,478

 
$
189,623

 
$
293,966

 
$
101,628

 
$
(165,644
)
 
$
447,051

Long-term intercompany notes receivable

 
467,127

 
22,461

 
112,482

 
(602,070
)
 

Property, plant and equipment, net

 
54,302

 
220,675

 
44,221

 

 
319,198

Intangible assets, net

 
34,052

 
70,186

 
21,340

 

 
125,578

Goodwill

 
116,842

 
50,906

 
21,177

 

 
188,925

Investment in subsidiaries
25,057

 

 
129,522

 
7,659

 
(162,238
)
 

Deferred financing fees, net

 
15,425

 

 

 

 
15,425

Non-current deferred income tax assets

 

 
1,123

 

 

 
1,123

Derivative assets

 
16,133

 

 

 

 
16,133

Other non-current assets

 
207

 
11,202

 
9

 

 
11,418

Total assets
$
52,535

 
$
893,711

 
$
800,041

 
$
308,516

 
$
(929,952
)
 
$
1,124,851

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$

 
$
19,098

 
$
6

 
$
9

 
$

 
$
19,113

Interest payable

 
6,038

 
131

 
153

 

 
6,322

Accounts payable

 
23,830

 
62,158

 
12,926

 

 
98,914

Accrued compensation and benefits

 
5,009

 
10,558

 
3,550

 

 
19,117

Intercompany accounts payable
1,572

 
75,197

 
74,251

 
14,538

 
(165,558
)
 

Current deferred income tax liabilities

 

 
311

 

 

 
311

Other current liabilities

 
2,927

 
12,940

 
4,306

 

 
20,173

Total current liabilities
$
1,572

 
$
132,099

 
$
160,355

 
$
35,482

 
$
(165,558
)
 
$
163,950

Long-term debt, excluding current maturities

 
853,899

 
143

 

 

 
854,042


14

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

Long-term intercompany notes payable
6,700

 

 
564,740

 
30,610

 
(602,050
)
 

Non-current deferred income tax liabilities

 
11,949

 
25,084

 
9,702

 

 
46,735

Other non-current liabilities

 
414

 
13,825

 
1,622

 

 
15,861

Total liabilities
$
8,272

 
$
998,361

 
$
764,147

 
$
77,416

 
$
(767,608
)
 
$
1,080,588

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity attributable to WireCo WorldGroup (Cayman) Inc.
44,234

 
(104,650
)
 
39,399

 
227,591

 
(162,340
)
 
44,234

Non-controlling interests
29

 

 
(3,505
)
 
3,509

 
(4
)
 
29

Total stockholders’ equity
$
44,263

 
$
(104,650
)
 
$
35,894

 
$
231,100

 
$
(162,344
)
 
$
44,263

Total liabilities and stockholders’ equity
$
52,535

 
$
893,711

 
$
800,041

 
$
308,516

 
$
(929,952
)
 
$
1,124,851




15

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
 
Three months ended March 31, 2015
 
WireCo
WorldGroup
(Cayman) Inc.
(Parent)
 
WireCo
WorldGroup
Inc.
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Elimination
Adjustments
 
Consolidated
Net sales
$

 
$
57,967

 
$
116,097

 
$
34,104

 
$
(27,813
)
 
$
180,355

Cost of sales

 
(47,322
)
 
(90,963
)
 
(28,440
)
 
28,371

 
(138,354
)
Gross profit

 
10,645

 
25,134

 
5,664

 
558

 
42,001

Other operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Selling expenses

 
(3,049
)
 
(3,906
)
 
(2,820
)
 

 
(9,775
)
Administrative expenses
(191
)
 
(12,103
)
 
(4,470
)
 
(1,207
)
 

 
(17,971
)
Amortization expense

 
(757
)
 
(1,253
)
 
(299
)
 

 
(2,309
)
Total other operating expenses
(191
)
 
(15,909
)
 
(9,629
)
 
(4,326
)
 

 
(30,055
)
Operating income (loss)
(191
)
 
(5,264
)
 
15,505

 
1,338

 
558

 
11,946

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income (expense), net
(101
)
 
(10,552
)
 
(9,761
)
 
1,426

 

 
(18,988
)
Equity income (loss) from subsidiaries
(4,456
)
 

 
23,971

 
201

 
(19,716
)
 

Foreign currency exchange gains (losses), net

 
40,450

 
(52,590
)
 
7,862

 

 
(4,278
)
Other income (expense), net

 
(94
)
 
(221
)
 
6

 

 
(309
)
Total other income (expense), net
(4,557
)
 
29,804

 
(38,601
)
 
9,495

 
(19,716
)
 
(23,575
)
Income (loss) before income taxes
(4,748
)
 
24,540

 
(23,096
)
 
10,833

 
(19,158
)
 
(11,629
)
Income tax benefit

 
41

 
3,240

 
4,280

 

 
7,561

Net income (loss)
(4,748
)
 
24,581

 
(19,856
)
 
15,113

 
(19,158
)
 
(4,068
)
Less: Net income (loss) attributable to non-controlling interests

 

 
805

 
(125
)
 

 
680

Net income (loss) attributable to WireCo WorldGroup (Cayman) Inc.
(4,748
)
 
24,581

 
(20,661
)
 
15,238

 
(19,158
)
 
(4,748
)
Comprehensive income (loss)
$
(18,473
)
 
$
24,581

 
$
(34,261
)
 
$
28,838

 
$
(19,158
)
 
$
(18,473
)
 

16

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

 
Three months ended March 31, 2014
 
WireCo
WorldGroup
(Cayman) Inc.
(Parent)
 
WireCo
WorldGroup
Inc.
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Elimination
Adjustments
 
Consolidated
Net sales
$

 
$
72,224

 
$
123,462

 
$
39,529

 
$
(24,713
)
 
$
210,502

Cost of sales

 
(55,854
)
 
(95,474
)
 
(30,634
)
 
24,766

 
(157,196
)
Gross profit

 
16,370

 
27,988

 
8,895

 
53

 
53,306

Other operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Selling expenses

 
(2,921
)
 
(4,990
)
 
(3,090
)
 

 
(11,001
)
Administrative expenses
(144
)
 
(12,433
)
 
(6,832
)
 
(1,181
)
 
200

 
(20,390
)
Amortization expense

 
(466
)
 
(2,378
)
 
(303
)
 

 
(3,147
)
Total other operating expenses
(144
)
 
(15,820
)
 
(14,200
)
 
(4,574
)
 
200

 
(34,538
)
Operating income (loss)
(144
)
 
550

 
13,788

 
4,321

 
253

 
18,768

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income (expense), net
(101
)
 
(10,977
)
 
(8,917
)
 
137

 

 
(19,858
)
Equity income (loss) from subsidiaries
(264
)
 

 
(5,354
)
 
439

 
5,179

 

Foreign currency exchange gains (losses), net

 
(21
)
 
(228
)
 
1,199

 

 
950

Other income (expense), net

 
(9
)
 
735

 
29

 

 
755

Total other income (expense), net
(365
)
 
(11,007
)
 
(13,764
)
 
1,804

 
5,179

 
(18,153
)
Income (loss) before income taxes
(509
)
 
(10,457
)
 
24

 
6,125

 
5,432

 
615

Income tax expense

 
(24
)
 
(607
)
 
(175
)
 
148

 
(658
)
Net income (loss)
(509
)
 
(10,481
)
 
(583
)
 
5,950

 
5,580

 
(43
)
Less: Net income (loss) attributable to non-controlling interests

 
(346
)
 
(5
)
 
838

 

 
487

Net income (loss) attributable to WireCo WorldGroup (Cayman) Inc.
(509
)
 
(10,135
)
 
(578
)
 
5,112

 
5,580

 
(530
)
Comprehensive income (loss)
$
(3,137
)
 
$
(10,481
)
 
$
2,511

 
$

 
$
7,970

 
$
(3,137
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


17

WIRECO WORLDGROUP (CAYMAN) INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands)
(unaudited)

Condensed Consolidating Statements of Cash Flows
 
Three months ended March 31, 2015
 
WireCo
WorldGroup
(Cayman) Inc.
(Parent)
 
WireCo
WorldGroup
Inc.
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Elimination
Adjustments
 
Consolidated
Net cash provided by (used in) operating activities
$
(1
)
 
$
6,015

 
$
11,270

 
$
(4,684
)
 
$

 
12,600

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 
(2,061
)
 
(6,471
)
 
(680
)
 

 
(9,212
)
Repayments from intercompany loans

 
8,949

 
2,044

 

 
(10,993
)
 

Net cash provided by (used in) investing activities
$

 
$
6,888

 
$
(4,427
)
 
$
(680
)
 
$
(10,993
)
 
$
(9,212
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Principal payments on long-term debt

 
(830
)
 

 

 

 
(830
)
Borrowings under revolving credit agreement

 
21,550

 

 

 

 
21,550

Repayments under revolving credit agreement

 
(32,650
)
 

 

 

 
(32,650
)
Repayments of intercompany loans

 

 
(8,949
)
 
(2,044
)
 
10,993

 

Net cash used in financing activities
$

 
$
(11,930
)
 
$
(8,949
)
 
$
(2,044
)
 
$
10,993