HIGHLAND HEIGHTS, Ky. — General Cable Corporation reported results for the fourth quarter ended December 31, 2015. For the quarter, the Company generated adjusted earnings per share from continuing operations of $0.05 and adjusted operating income from continuing operations of $28 million. Reported loss per share from continuing operations for the quarter was $0.91 and reported operating loss from continuing operations was $36 million.
Reported fourth quarter adjusted operating income of $28 million was down $12 million year over year due to unfavorable metals impact of approximately $8 million in the quarter and weaker unit volume across all regions, partially offset by restructuring savings.
Highlights
- Generated restructuring savings of $10 million in the fourth quarter, and $36 million for the full year 2015; on track with annual savings target of $80 to $100 million in 2016
- Continued strong management of working capital generated $96 million of cash for the full year inNorth America, Latin America and Europe
- Reduced net debt in 2015 by $220 million from the end of 2014; net leverage down to 3.8x from 4.7x during this same timeframe
- Signed definitive agreement to sell operations in Zambia; divestiture program has generated $176 million of proceeds from sales with more to come
- New strategic roadmap substantially complete and now beginning to implement further restructuring actions, including the consolidation of manufacturing capacity in the electric utility business in North America, further rationalization of low value add construction production inEurope and additional footprint consolidation in Latin America
Michael T. McDonnell, President and Chief Executive Officer, said, “Despite an unfavorable metal price impact and significantly lower volumes across many of our businesses in the quarter, we delivered approximately $10 million of restructuring savings and another strong result in our subsea power business in Europe. I am pleased that the General Cable team continues to execute well. We are now essentially complete with the actions needed to deliver our 2016 target of $80 to $100 million of savings. Our divestiture program, which has already delivered $176 million in proceeds, is also progressing, and we have signed a definitive agreement to sell our operations in Zambia, with more to come. Most importantly, we have substantially completed our strategic roadmap and look forward to sharing our plans in detail at our upcoming investor day in March. While the operating environment remains challenging, we are excited to have a solid plan to substantially improve performance by focusing on actions within our control. We already began to execute several new restructuring initiatives during the fourth quarter from the roadmap.”
Segment Demand
North America – unit volume for 2015 was down 2% year over year primarily due to demand for industrial and specialty cables particularly for those products tied to oil and gas applications. Partially offsetting these trends was demand for communications and electric utility products which was stable year over year. For the fourth quarter of 2015, demand weakened as unit volume declined 19% year over year and 14% sequentially. In addition to typical seasonality, fourth quarter unit volume reflects lower end market demand across the portfolio including industrial and specialty cables as well as electric utility products which benefited from strong aerial transmission and grid reinforcement projects through the first nine months of the year.
Europe – excluding the impact of restructuring activity including the exit from certain low value add end markets in 2015, unit volume for the full year and for the fourth quarter was down 13% and 17%, respectively, year over year principally due to lower demand for industrial and construction products. Year over year demand for electric utility cables was stable during the full year of 2015 and fourth quarter including land and submarine turnkey projects. The Company’s turnkey project backlog was $190 million as of the end of the fourth quarter. Sequentially, unit volume for the fourth quarter was flat.
Latin America – unit volume for 2015, excluding Venezuela, was down 19% year over year as end market demand remains under pressure throughout Latin America due to the ongoing difficult economic conditions and reduced government spending. Unit volume for the fourth quarter, excluding Venezuela, was up 2% sequentially, principally due to aerial transmission product shipments in Brazil.
Other Expense
Other expense of $8 million for the fourth quarter consisted of mark-to-market losses of $6 million on derivative instruments accounted for as economic hedges and foreign currency transactions losses of $2 million.
Net Debt – Excluding Venezuela
Net debt was $999 million at the end of the fourth quarter of 2015, a decrease of $15 million and $220 million from the end of the third quarter of 2015 and the end of 2014, respectively. The decrease in net debt is principally due to continued efficient management of working capital and cash proceeds generated from divestitures.
Other Matters
As previously disclosed, we have been reviewing, with the assistance of external counsel, our use and payment of agents in connection with, and certain other transactions involving, our operations in Angola,Thailand, India, China and Egypt (the “Subject Countries”). Our review has focused upon payments and gifts made, offered, contemplated or promised by certain employees in one or more of the Subject Countries, directly and indirectly, and at various times, to employees of public utility companies and/or other officials of state owned entities that raise concerns under the Foreign Corrupt Practices Act (“FCPA”) and possibly under the laws of other jurisdictions. We have substantially completed our internal review in the Subject Countries and, based on our findings, we have increased our outstanding FCPA-related accrual of $24 million by an incremental $4 million, which represents the estimated profit derived from these subject transactions that we believe is probable to be disgorged. We have also identified certain other transactions that may raise concerns under the FCPA for which it is at least reasonably possible we may be required to disgorge estimated profits derived therefrom in an incremental aggregate amount up to $33 million.
The amounts accrued and the additional range of reasonably possible loss solely reflect profits that may be disgorged based on our investigation in the Subject Countries, and do not include, and we are not able to reasonably estimate, the amount of any possible fines, civil or criminal penalties or other relief, any or all of which could be substantial. The SEC and DOJ inquiries into these matters remain ongoing, and we continue to cooperate with the DOJ and the SEC with respect to these matters.
First Quarter 2016 Outlook for continuing operations of North America, Latin America and Europe
“In the first quarter, we expect sequentially stable-to-improved volumes and further benefits from restructuring and business improvement initiatives, partially offset by unfavorable metal price impact and significantly easing performance of our submarine turnkey business. Visibility is low, but we are encouraged by the resilience in our utility, non-residential construction and communications end markets, even while industrial and oil and gas end markets may soften further. It is a challenging environment, but I am excited that we now have a strategic roadmap, and we are relentlessly focused on execution,” McDonnell concluded.
Revenues in the first quarter are expected to be in the range of $825 to $875 million. Unit volume is anticipated to be flat to up low single-digits sequentially. Adjusted operating income is anticipated to be in the range of $18 to $33 million for the first quarter, inclusive of approximately $8 million of unfavorable metals impact. Adjusted earnings per share are expected to be in the range of ($0.05) to $0.15 per share for the first quarter. The Company’s first quarter outlook assumes copper (COMEX) and aluminum (LME) prices of $2.00 and $0.67, respectively, and constant foreign currency exchange rates. The first quarter outlook does not include operating results from Asia Pacific and Africa.
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