10-K405 1 d95068e10-k405.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 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 33-93970 --------------------- INTERNATIONAL WIRE GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 43-1705942 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 101 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63105 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 719-1000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 the filing requirements for at least the past 90 days. Yes [X] No [ ] 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 registrant's 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. [X] State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. NO ESTABLISHED PUBLISHED PUBLIC TRADING MARKET EXISTS FOR THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF INTERNATIONAL WIRE GROUP, INC. ALL OF THE OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF INTERNATIONAL WIRE GROUP, INC. ARE HELD BY INTERNATIONAL WIRE HOLDING COMPANY. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
OUTSTANDING AT CLASS FEBRUARY 28, 2002 ----- ----------------- Common Stock 1,000
DOCUMENTS INCORPORATED BY REFERENCE NONE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS Information set forth in this Annual Report on Form 10-K regarding expected or possible future events, including statements of the plans and objectives of management for future growth, operations, products and services and statements related to future economic performance, is forward-looking and subject to risks and uncertainties. For those statements, International Wire Group, Inc. (the "Company") claims the protection of the safe harbor for forward-looking statements provided for by Section 21E of the Securities Exchange Act of 1934, as amended. Factors that could affect the future results of the Company and could cause those results to differ materially from those expressed in the forward-looking statements are discussed at greater length herein. Forward-looking statements can be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "pro forma," "anticipates" or "intends" or the negative of any thereof or other variations thereof or comparable terminology, or by discussions of strategy or intentions. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." PART I ITEM 1. BUSINESS GENERAL The Company, through its subsidiaries, is a leading designer and manufacturer of wire products, including bare and tin-plated copper wire and insulated copper wire products, for other wire suppliers and original equipment manufacturers ("OEMs"). The Company's products include a broad spectrum of copper wire configurations and gauges with a variety of electrical and conductive characteristics and are utilized by a wide variety of customers primarily in the appliance, automotive, electronics and data communications, and general industrial/energy industries. The Company manufactures and distributes its products at 23 facilities located in the United States, Italy, the Philippines and France. The Company recently purchased another facility in Mexico and expects to begin production in mid 2002. - Bare Wire Products. The Company's bare and tin-plated copper wire products (or conductors) are used to transmit digital, video and audio signals or conduct electricity and are sold to a diverse customer base of approximately 800 insulated wire manufacturers and various industrial OEMs for use in computer and data communications products, general industrial, energy, appliances, automobiles, and other applications. - Insulated Wire Products. The Company's insulated wire products (copper conductors insulated with plastic or other polymeric compounds) are primarily manufactured for the automotive and appliance end-user markets. The Company's insulated wire products are used in the assembly of wire harnesses that are installed in both automobiles and appliances. A wire harness is comprised of an assembly of wires with connectors and terminals that transmit electricity between two or more end points. The Company also participates in several niche businesses in the high temperature silicone and heater wire, medical equipment and submersible pump cable markets. The principal executive offices of the Company are located at 101 South Hanley Road, Suite 400, St. Louis, Missouri 63105, and the Company's telephone number at such address is (314) 719-1000. BACKGROUND In December 1992, an investor group led by Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") acquired (the "Original Wirekraft Acquisition") Kirtland Indiana, Limited Partnership ("KILP"), which was subsequently renamed Wirekraft Industries, Inc. ("Wirekraft"). KILP was engaged in the manufacturing of insulated wire and fabrication of wire harnesses. In March 1995, an investor group led by Hicks Muse acquired Omega Wire, Inc. ("Omega"). The acquisition of Omega broadened the Company's product offering through the addition of a broad and diverse bare wire product offering and vertically integrated the Company by substantially reducing the Company's need to purchase outside bare wire. In June 1995, through 2 a series of acquisitions and mergers, the Company was organized to combine the operations of Wirekraft and Omega (the "Wirekraft/Omega Combination"). In March 1996, the Company acquired (the "DWT Acquisition") the business of Hoosier Wire, Inc., Dekko Automotive Wire, Inc., Albion Wire, Inc. and Silicones, Inc., a group of affiliated companies together under the trade name Dekko Wire Technology Group ("Dekko"). Dekko was engaged in the design, manufacture and marketing of insulated and bare copper wire. The DWT Acquisition increased the Company's insulated and bare wire manufacturing capabilities, as well as increased the Company's capacity to better serve its client base and expand into new markets by adding specialty products to the Company's product offering. In February 1997, the Company acquired (the "Camden Acquisition") all of the issued and outstanding common stock of Camden Wire Co., Inc., a designer, manufacturer and marketer of bare and tin-plated copper wire. The Camden Acquisition allowed the Company to expand its geographic manufacturing base and to realize efficiencies through consolidation of operations and process improvements. In 1998, the Company made two strategic acquisitions, the acquisition of the assets of Spargo Wire Company, Inc. ("Spargo Wire"), which expanded the Company's offering of bare wire, and the acquisition of Italtrecce S.r.l. ("Italtrecce"), which expanded the Company's offering of specialty braid products and allowed the Company to expand its geographic manufacturing base to Italy. In addition, in July 1998, the Company completed the construction of a facility in Cebu, Philippines and began operations. The Cebu facility allowed the Company to supply global customers of the Company and to build relationships with new customers in the Asia Pacific markets. In December 1999, the Company acquired a group of French wire manufacturers (collectively, the "Forissier Group"). Two of the operating companies manufacture specialty braids, rope and cable products and the third operating company manufactures insulated wire products. This acquisition complimented the Company's existing business in Italy as well as expanded sales opportunities throughout Europe. In March 2000, the Company sold its Wire Harness Segment, as described below, to a subsidiary of Viasystems Group, Inc. ("Viasystems") for $210.8 million in cash (the "Wire Harness Sale"). The Company and Viasystems are commonly controlled by affiliates of Hicks Muse. In connection with the Wire Harness Sale, the Company entered into an agreement to supply Viasystems' wire harness business with substantially all of their insulated wire requirements through 2003, which is a continuation of existing practice. See Note 6 to the Company's Consolidated Financial Statements included herein for a further discussion of the Wire Harness Sale. In August 2001, the Company furthered its international expansion with the purchase of a manufacturing facility in Durango, Mexico. Management believes that this new facility, approximately 600 miles south of the U.S./Mexican border, will allow the Company to expand its relationships with existing global customers in North America and seek new opportunities in Central and South America. Production is expected to begin in mid 2002. PRODUCTS AND MARKETS Prior to the Wire Harness Sale, the Company conducted its operations through two segments: (i) the manufacture and marketing of bare and tin-plated copper wire products and insulated copper wire products (the "Wire Segment") and (ii) the manufacture and marketing of wire harness assemblies for sale primarily to the major U.S. manufacturers of household appliances such as Amana, Frigidaire, General Electric, Maytag and Whirlpool who utilized the wire harnesses assemblies in the manufacture of refrigerators, freezers, washers, dryers, ranges and dishwashers (the "Wire Harness Segment"). With the sale of the Wire Harness 3 Segment in March 2000, the Company now conducts its operations in only the Wire Segment. The following is a description of the Company's primary products and markets served: Bare Wire Products (55% of 2001 consolidated sales) The Company's external sales of bare wire products are primarily to wire insulators, who apply insulating materials to the bare wire through an extrusion process. These wire insulators sell the insulated wire to a variety of customers in the following markets: (i) appliance (approximately 11% of total 2001 bare wire sales); (ii) automotive (approximately 23% of total 2001 bare wire sales); (iii) electronics and data communications (approximately 31% of total bare wire sales) including cable television, safety and security control, and local area network ("LAN") and computer systems; and (iv) general industrial/energy (approximately 35% of total 2001 bare wire sales) including heating, ventilating and air conditioning ("HVAC") systems; circuit protection, digital and cellular phone towers, elevator cables, mining and oil exploration, mass transit, and utility power distribution applications. The Company manufactures a broad array of bare and tin-plated copper conductors including the following: - Single End Wire. Single end wire is an individual wire drawn to the customer's size requirements ranging from .16 to .00157 inches in diameter (6 American Wire Gauge ("awg") to 46 awg). Single end wire is capable of transmitting signals or electrical currents between two points and is used to transmit digital, video and audio signals or low voltage current in a variety of wire products used in motor controls, local area networks, security systems, television or telephone connections and water sprinkler systems. Single end wire is generally the least expensive form of wire to produce due to its simple configuration. - Stranded Wire. Stranded wire is comprised of a number of single end wires twisted together in a specific geometric pattern that preserves each individual wire's relative position for the length of the wire. Stranded wire, like single end wire, transmits digital, video and audio signals or low voltage current. However, stranded wire is more flexible and capable of connecting multiple terminals allowing greater application. Stranded wire is generally used in products that connect peripherals to the personal computer ("PC"), connect the internal components of the PC, and control HVAC, security and other functions inside buildings. In addition, stranded wire is used in antilock braking systems, airbag systems, utility power distribution and circuit breakers. - Bunched Wire. Bunched wire is formed by twisting a number of single end wires in a random pattern. Bunched wire allows increased flexibility while maintaining conductivity. This type of wire is the primary wire used in appliance wire harnesses. In addition, bunched wire is commonly used for transmission of electrical current in lighting fixture cords, extension cords and power cords for portable, power hand tools. - Cabled Wire and Braided Wire. Cabled wire and braided wire are combinations of single, bunched or stranded wire twisted together in various patterns and thickness. These wires transmit electrical current and are typically used in mining, mass transportation, automotive, utility power distribution cellular and digital towers and other industrial applications. - Shielding Wire. Shielding wire is comprised of varying numbers of single end wires that are wound together in parallel construction around a bobbin. Shielding wire does not transmit signals or voltage but rather shields the signal traveling through the core conductor from outside interference. This type of wire is primarily used in data communication applications, telecommunications equipment, cable television equipment and security systems. Insulated Wire Products (45% of 2001 consolidated sales) The Company's sales of insulated wire products are primarily to independent wire harness fabricators for use in the automotive (approximately 66% of total 2001 insulated wire sales), appliance (approximately 32% of total 2001 insulated wire sales) and other industrial (approximately 2% of total 2001 insulated wire sales) markets. The Company divides its customers who manufacture wire harnesses into three broad groups: 4 (a) Tier 1 suppliers to Ford Motor Company and Chrysler Corporation (General Motors Corporation ("GM") continues to purchase the majority of its wire and wire harness products from Delphi Automotive Systems, formerly a division of GM that has in-house wire and wire harness manufacturing capability); (b) suppliers to the North American facilities of Japanese automakers, that utilize "thin-wall" insulated wire which complies with Japanese Industrial Standards ("JIS"); and (c) suppliers to appliance OEMs. The Company manufactures a diverse array of insulated wire products including the following: - PVC Lead Wire and Cable. PVC lead wire and cable is copper wire that has been insulated with polyvinyl chloride ("PVC"). This product is used primarily in automotive wire harnesses located behind the instrument panel or in the vehicle body that control certain functions including turn signals and air bags. - JIS Wire. JIS wire is copper wire insulated with PVC that is produced according to Japanese Industrial Standards. The primary difference between domestic PVC wire and JIS wire is that JIS wire is manufactured to metric dimensions and generally has thinner insulation than products manufactured according to U.S. Society of Automotive Engineers Standards. JIS wire is used primarily in automotive wire harnesses located behind the instrument panel or in the vehicle body. - XLPE Insulated Wire. Cross-linked polyethylene ("XLPE") wire is copper wire insulated with polyethylene that is subjected to heat and steam pressure ("cross-linking") to make the wire resistant to high temperatures. This product's primary application includes use in high temperature environments such as the engine compartment of vehicles and in electric ranges. - PVC Insulated Cord. PVC insulated cord is insulated wire that is surrounded with fillers and then jacketed with PVC insulation. This product is used primarily for wall-plug applications (cord sets) in the appliance and power tool industries. - Appliance Wire. Appliance wire is copper wire primarily insulated with PVC and used in producing harnesses for a variety of appliances. The Company also manufactures high temperature wire, insulated with silicone, used primarily in electric ranges and niche applications such as resistance heaters, motor leads and lighting products. MARKETING The Company sells its products through a combination of direct (Company employed) sales people, manufacturer's representatives and distributors. The Company's sales organization is supported by an internal marketing staff and customer service groups. Collectively, these departments act as a bridge between the Company's customers and its production and engineering staff. The Company's engineers work directly with customers in designing the wire products to the customer's exact specifications. In addition, engineers work closely with the Company's production managers, quality supervisors and customer service representatives to ensure the timely delivery of quality products. KEY CUSTOMERS The Company sells its products primarily to major appliance and automotive wire harness manufacturers and copper wire insulators who then sell to a diverse array of end users. For the years ended December 31, 2001, 2000 and 1999, the Company had significant sales to Lear Corporation which represented 12%, 13% and 15% of the Company's consolidated net sales for each of the respective years. The Company had no other customers who accounted for more than 10% of consolidated net sales during these years. INTERNATIONAL OPERATIONS The Company currently has operations in the Philippines, Italy and France. In 2001, the Company purchased a facility in Mexico and expects to begin production in mid 2002. For the years ended December 31, 2001, 2000 and 1999, approximately 14%, 12% and 4% of the Company's sales from continuing operations originated from these foreign operations. A portion of these sales were to Tier 1 automotive 5 suppliers whose products were sold back into the United States. The Company has a manufacturing facility in Cebu, Philippines, a manufacturing facility in Vinovo, Italy and three facilities near Lyon, France. See Note 12 to the Company's Consolidated Financial Statements included herein for further information about the Company's international operations. The Company is subject to risks generally associated with international operations, including price and exchange controls and other restrictive actions. In addition, fluctuations in currency exchange rates may affect the Company's results of operations. See Item 7A, "Quantitative And Qualitative Disclosures About Market Risk" for further discussion about the Company's foreign currency risk. RAW MATERIALS The principal raw material used by the Company is copper, which is primarily purchased in the form of 5/16-inch rod from the major copper producers in North America and Japan. Copper rod prices are based on market prices, which are generally established by reference to the New York Mercantile Exchange, Inc. ("COMEX") prices, plus a premium charged to convert copper cathode to copper rod and deliver it to the required location. As a world traded commodity, copper prices have historically been subject to fluctuations. While fluctuations in the price of copper may directly affect the per unit prices of the Company's products, these fluctuations have not had, nor are expected to have, a material impact on the Company's profitability due to copper price pass-through arrangements that the Company has with its customers. These sales arrangements are based on similar variations of monthly copper price formulas. Use of these copper price formulas minimizes the differences between raw material copper costs charged to the cost of sales and the pass-through pricing charged to customers. Other major raw materials consumed by the Company include PVC compound, XLPE compound, silicon compound, color concentrate, tin and other metals. The Company enters into long-term supply agreements on a wide variety of materials consumed. Supplies on all critical materials are currently adequate to meet the Company's needs. The Company orders material based on purchase orders received and accepted and seeks to minimize the inventory of material not identified for specific orders. The Company works with its suppliers to develop just-in-time supply systems to reduce inventory carrying costs. MANUFACTURING AND DISTRIBUTION The Company is committed to the highest quality standards for its products, a standard maintained in part by continuous improvements to its production processes and upgrades and investments to its manufacturing equipment. The Company's equipment can be adapted to satisfy the changing needs of its customers. The following is a description of the Company's manufacturing and distribution facilities and processes for its major product lines. BARE WIRE PRODUCTS As of December 31, 2001, the Company had twelve facilities dedicated to the production and distribution of bare wire products. Six of these facilities are located in New York, two are located in France, one facility is located in Indiana, one facility is located in Texas, one facility is located in Italy and one distribution facility is located in California. The manufacturing of bare wire consists of one or more of the following four processes: wire drawing; plating; bunching and stranding; and cabling. - Wire Drawing Process. Wire drawing is a multi-step process in which raw copper material, primarily 5/16 inch copper rod, is drawn through a series of dies of decreasing diameter. - Plating Process. After being drawn, the Company's wire products may be plated through an electroplating process. The Company has the capability to plate copper wire with tin and other metals. Approximately 32% of the Company's bare wire products are plated with tin. The plating process prevents the bare copper from oxidizing and also allows the wire to be soldered, which is an important quality in many electrical applications. 6 - Bunching and Stranding Process. Bunching and stranding is the process of twisting together single strand wires to form a construction ranging from seven to over 200 strands. If the wire is bunched, the individual strands of wire are twisted together in a random pattern. Stranded wire is composed of a number of single end wires twisted together in a specific geometric pattern where each strand's relative position is maintained throughout the length of the wire. - Cabling Process. Cabling is the process of twisting bunched wire to form a construction ranging from 49 to 47,000 strands. INSULATED WIRE PRODUCTS As of December 31, 2001, the Company had eleven manufacturing and distribution facilities used to produce and distribute insulated wire. Four of the manufacturing facilities are located in Texas, three are located in Indiana, one is located in Alabama, one is located in the Philippines and one is located in France. The Company has one distribution facility in Texas. The Company recently purchased another manufacturing facility in Durango, Mexico and expects to begin production at this facility in mid 2002. The production of insulated wire starts with bare wire (primarily manufactured internally) and involves insulating the wire products with various polymeric insulating compounds through an extrusion process. Extrusion involves the feeding, melting and pumping of insulating compounds through a die to shape it into its final form on the wire. In order to enhance the insulation properties of some products, certain polymeric compounds can be chemically cross-linked after the extrusion process. The Company has extensive chemical cross-linking capabilities. COMPETITION As a result of the diversity of the Company's product offerings, the Company believes that no single competitor competes with the Company across the entire spectrum of the Company's product lines. However, in each market served, the Company experiences competition from at least one major competitor. The Company competes primarily on the basis of quality, reliability, price, reputation, customer service and delivery time. The Company believes it maintains a leading market share position in the non-captive U.S. market for each of its product lines. Several customers the Company serves have in-house or "captive" wire production facilities. However, these captive facilities do not compete with the Company for sales to other customers. The Company also sells its products to customers with captive production to meet needs in excess of their internal production capacity. BACKLOG Due to the manner in which it processes its orders, the Company has no significant order backlog. The Company follows the industry practice of producing its products on an ongoing basis to meet customer demand without significant delay. Management believes the ability to supply orders in a timely fashion is a competitive factor in its market, and therefore, attempts to minimize order backlog to the extent practicable. PATENTS AND TRADEMARKS The Company has three patents and seven registered trademarks. The Company does not believe that its competitive position is dependent on patent protection or that its operations are dependent on any individual patent or trademark or group of related patents or trademarks. EMPLOYEES As of December 31, 2001, the Company employed approximately 2,100 full time employees. The Company believes that it has a good relationship with its employees. 7 SEASONALITY The Company does not believe that its business is subject to significant seasonal fluctuations. ENVIRONMENTAL MATTERS The Company is subject to a number of federal, state, local and foreign environmental laws and regulations relating to the storage, handling, use, emission, discharge, release or disposal of materials into the environment and the investigation and remediation of contamination associated with such materials. These laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Water Pollution Control Act, the Clean Air Act and the Resource Conservation and Recovery Act, the regulations promulgated thereunder, and any state analogs. The Company's operations also are governed by laws and regulations relating to employee health and safety. The Company believes that it is in material compliance with such applicable laws and regulations and that its existing environmental controls are adequate. Further, the Company has no current plans for substantial capital expenditures in this area. As is the case with most manufacturers, the Company could incur costs relating to environmental compliance, including remediation costs related to historical hazardous materials handling and disposal practices at certain facilities, although it does not believe that such costs would materially and adversely affect the Company. In the past, the Company has undertaken remedial activities to address on-site soil contamination caused by historic operations. None of these activities have resulted in any material liability. Currently, the Company is involved with environmental monitoring activities at one of its Camden, New York facilities and its Jordan, New York facility. The Company currently does not anticipate that compliance with environmental laws or regulations or the costs to remediate the sites discussed above will have a material adverse effect on the Company. As mentioned above, however, the risk of environmental liability and remediation costs is inherent in the nature of the Company's business and, therefore, there can be no assurances that material environmental costs, including remediation costs, will not arise in the future. In addition, it is possible that future developments (e.g., new regulations or stricter regulatory requirements) could result in the Company incurring material costs to comply with applicable environmental laws and regulations. ITEM 2. PROPERTIES The Company uses owned or leased properties as manufacturing and distribution facilities, warehouses and offices throughout the United States, the Philippines, France and Italy, and recently purchased a facility in Mexico where production is expected to begin in mid 2002. The Company's principal executive offices are located in St. Louis, Missouri. All of the Company's domestic owned properties are pledged to secure the Company's indebtedness under the Company's Second Amended and Restated Credit Agreement dated as of December 20, 2001, with J.P. Morgan Chase Bank and the other lenders party thereto, as amended (the "Credit Agreement"). 8 Listed below are the principal manufacturing and distribution facilities operated by the Company as of December 31, 2001:
LOCATION SQUARE FEET OWNED/LEASED PRIMARY PRODUCTS/END USE ---------------------------- ----------- ------------ --------------------------------- BARE WIRE Camden, New York............ 450,000 Owned Single end, bunched, stranded, cabled and electroplated wire Williamstown, New York...... 210,000 Owned Single end, bunched, stranded and cabled wire Bremen, Indiana............. 175,000 Owned Bunched wire Camden, New York............ 150,000 Leased(1) Single end, bunched, stranded and cabled wire Jordan, New York............ 120,000 Leased(1) Single end, bunched, stranded, shielding and cabled wire Rome, New York.............. 112,000 Owned Bunched, stranded, cabled and electroplated wire Cazenovia, New York......... 60,000 Owned Braided wire Saint-Chamond, France....... 60,000 Owned Specialty braids, rope and cable products El Paso, Texas.............. 57,000 Owned Bunched wire Saint-Chamond, France....... 30,000 Owned Specialty braids, rope and cable products Vinovo, Italy............... 25,000 Owned Braided wire LaMirada, California........ 19,000 Leased(2) Distribution INSULATED WIRE Cebu, Philippines........... 135,000 Owned Automotive Avilla, Indiana............. 119,000 Owned Appliance and automotive El Paso, Texas.............. 101,000 Leased(2) Appliance and automotive Beynost, France............. 82,000 Owned Automotive El Paso, Texas.............. 70,000 Owned Automotive Elkmont, Alabama............ 65,000 Owned Appliance and automotive Kendallville, Indiana....... 61,000 Leased(2) Appliance and automotive Kendallville, Indiana....... 60,000 Owned Appliance and automotive El Paso, Texas.............. 60,000 Owned Automotive El Paso, Texas.............. 50,000 Leased(3) Distribution El Paso, Texas.............. 28,000 Leased(2) Automotive
--------------- (1) The leases on the Company's Camden, New York and Jordan, New York facilities have remaining terms of approximately 10 years. During 1997, the Company purchased the notes that were collateralized by the Camden and Jordan properties from an unrelated creditor. The Company negotiated a payment schedule with the lessor which allows the lessor to retain title to the property until the termination of the lease, at which time the Company will have the option to purchase the properties for a nominal purchase price. (2) The lease has a remaining term of approximately three years. (3) The lease has a remaining term of approximately one-year. The Company has not determined whether it will attempt to renew the current lease or obtain an alternate distribution facility. The Company does not believe that this facility is critical to its on-going operations. The Company believes its plants and equipment include state-of-the-art technology and are well maintained. During 2001, the Company announced its intention to realign its production capacity and consolidate certain facilities (See Note 9 to the Company's Consolidated Financial Statements for informa- 9 tion regarding the Company's plan to realign capacity). In connection with the realignment, the Company closed six of its plants, which are located in Ardmore, Alabama; Elkmont, Alabama; Albion, Indiana; Corunna, Indiana and two facilities in Pine Bluff, Arkansas. The production capacity for these locations has been primarily transferred and consolidated into the Company's existing plants in Indiana, Texas and New York, which were expanded as necessary to accommodate the production transfer. Some of the production capacity from the closed locations will be moved to the Company's new facility in Durango, Mexico. In addition, as part of the Company's alignment plan, the Company has announced its intention to close the remaining facility in Elkmont, Alabama in 2002 (see Note 9 to the Company's Consolidated Financial Statements). The Company believes that its remaining facilities after the realignment will be suitable for their present and intended purposes and adequate for the Company's current level of operations and expected demand for the Company's products. ITEM 3. LEGAL PROCEEDINGS The Company is a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to the operations of the Company. The Company does not believe that such proceedings and actions would materially affect the Company. During 2001, the Company reached settlements with various claimants, including certain claims related to product liability claims of the Company's former Wire Harness Segment. See Note 6 to the Company's Consolidated Financial Statements for a further discussion of these claims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders in the fourth quarter of 2001. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS All of the Company's outstanding common stock is held by International Wire Holding Company ("Holding"), and there is no established public trading market for such. The Company has paid no dividends to common stockholders since inception and does not have any present intention to commence payment of any cash dividends. The Company intends to retain earnings to provide funds for operation and expansion of the Company's business and to repay outstanding indebtedness. The Company's ability to pay such dividends is limited by the terms of its Credit Agreement and the Indentures relating to its 11 3/4% Senior Subordinated Notes due 2005, its 14% Senior Subordinated Notes due 2005 and its 11 3/4% Series B Senior Subordinated Notes due 2005 (collectively, the "Senior Subordinated Notes"). The Company did not sell any of its equity securities in the year ended December 31, 2001. 10 ITEM 6. SELECTED FINANCIAL DATA The selected financial data set forth below presents financial information for the Company for the years ended December 31, 2001, 2000, 1999, 1998 and 1997, as derived from the audited consolidated financial statements of the Company as adjusted to reflect the reclassification of discontinued operations as the result of the Wire Harness Sale. The selected financial data should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations," each included elsewhere herein.
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (IN THOUSANDS) RESULTS OF OPERATIONS: Net sales............................. $425,130 $564,250 $481,665 $497,540 $549,546 Cost of goods sold(1)................. 339,295 419,172 346,975 367,420 430,870 Selling, general and administrative expenses(2)........................ 23,497 47,123 40,504 44,561 43,453 Depreciation and amortization......... 36,475 36,206 35,537 34,999 29,224 Impairment, unusual and plant closing charges(3)......................... 12,855 650 -- -- 2,000 Inventory valuation adjustment(4)..... 10,000 -- -- -- 8,500 (Gain)/loss on sale of property, plant and equipment...................... (344) 543 -- -- -- -------- -------- -------- -------- -------- Operating income...................... 3,352 60,556 58,649 50,560 35,499 Interest expense...................... (35,237) (40,804) (43,955) (44,292) (44,407) Amortization of deferred financing costs.............................. (1,346) (2,097) (2,521) (2,461) (2,587) Other, net............................ (318) (222) -- 99 11 -------- -------- -------- -------- -------- Income (loss) from continuing operations before income tax provision (benefit), cumulative effect of change in accounting principle and extraordinary item... (33,549) 17,433 12,173 3,906 (11,484) Income tax provision (benefit)........ (18,895) 7,799 4,613 3,348 (3,261) -------- -------- -------- -------- -------- Income (loss) from continuing operations before cumulative effect of change in accounting principle and extraordinary item............. (14,654) 9,634 7,560 558 (8,223) Income (loss) from discontinued operations, net of income taxes of ($2,150), ($1,261), $4,355, $6,654 and $5,915, respectively(5)........ (2,850) (157) 6,364 9,097 8,194 -------- -------- -------- -------- -------- Income (loss) before cumulative effect of change in accounting principle and extraordinary item............. (17,504) 9,477 13,924 9,655 (29) Cumulative effect of change in accounting for start-up costs, net of tax benefit of $592(6).......... -- -- (818) -- -- -------- -------- -------- -------- --------
11
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (IN THOUSANDS) Income (loss) before extraordinary item............................... (17,504) 9,477 13,106 9,655 (29) Extraordinary item -- loss related to the early extinguishment of debt, net of tax benefit of $2,073 and $1,679, respectively(7)............ -- (2,747) -- -- (2,991) -------- -------- -------- -------- -------- Net income (loss)................ $(17,504) $ 6,730 $ 13,106 $ 9,655 $ (3,020) ======== ======== ======== ======== ======== OTHER DATA: EBITDA, as adjusted(8)................ $ 57,703 $ 98,035 $ 92,644 $ 89,717 $ 79,233 Capital expenditures from continuing operations......................... 25,968 22,469 19,883 29,288 25,896 Total assets.......................... 511,943 585,734 678,107 639,114 628,048 Long-term obligations (including current maturities)................ 331,792 335,433 535,944 527,205 523,795 CASH FLOW DATA: Net cash from (used in) operating activities......................... $ 3,930 $ 34,610 $ 51,475 $ 40,646 $ 33,998 Net cash from (used in) investing activities......................... (23,435) (18,165) (50,506) (42,120) (86,756) Net cash from (used in) financing activities......................... (4,489) 8,410 6,456 1,474 52,758
--------------- (1) Cost of goods sold in 2001 includes costs of $5,758, related to the closure and consolidation of certain facilities that the Company considers to be one-time unusual items incremental to the Company's on-going operations. These expenses include inefficiencies incurred during the transition of production capacity and other incremental costs related to the transferred lines of production. (2) Includes non-cash compensation expense (income) related to the stock appreciation (depreciation) of Holding Class A Common Stock (as defined herein) in the amount of ($10,393), $80, ($1,542), $4,158 and $4,010 for the years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively. See Note 2 to the Company's Consolidated Financial Statements and Item 12, "Securities Ownership." (3) Consists of charges related to the closure and consolidation of certain facilities and administrative and corporate reorganizations of $7,387 and impairment of fixed assets related to the plant consolidations of $5,468 in 2001 (See Note 9 to the Company's Consolidated Financial Statements), charges relating to employee severance agreements in the amount of $650 in 2000 and charges relating to plant closings in the amount of $2,000 in 1997. (4) Represents a pre-tax inventory valuation charge to reduce the last in, first out ("LIFO") valuation of copper in inventory as a result of the decline in the average price of copper during 2001 and 1997. See Note 3 to the Company's Consolidated Financial Statements included herein. (5) The income (loss) from discontinued operations represents the results of the Company's Wire Harness Segment, which it sold to a subsidiary of Viasystems in March 2000. See Note 6 to the Company's Consolidated Financial Statements included herein. (6) The cumulative effect of change in accounting principle in 1999 represents a loss related to the adoption of Financial Accounting Standards Board ("FASB") Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities." See Note 2 to the Company's Consolidated Financial Statements included herein. (7) The extraordinary items in the years ended December 31, 2000 and 1997 represent losses on the early extinguishment of debt. See Note 5 to the Company's Consolidated Financial Statements included herein. (8) "EBITDA, as adjusted" is defined as operating income plus depreciation, amortization of intangible assets, impairment, unusual and plant closing charges, (gain)/loss on sale of property, plant and 12 equipment, inventory valuation adjustment, non-cash compensation expense (income), one-time unusual items incremental to the on-going operations included in cost of sales and other non-cash expense (income) items. EBITDA, as adjusted, is presented because (i) it is a widely accepted indicator of a company's ability to incur and service debt and (ii) it is the basis on which the Company's compliance with certain financial covenants contained in the Credit Agreement is principally determined. However, EBITDA, as adjusted, does not purport to represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flow, is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Also, the measure of EBITDA, as adjusted, may not be comparable to similar measures reported by other companies. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." RECONCILIATION OF EBITDA, AS ADJUSTED, TO OPERATING INCOME PER GAAP The schedule below reconciles EBITDA, as adjusted, to operating income per GAAP for all periods presented in the Selected Financial Data Table.
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- (IN THOUSANDS) EBITDA, as adjusted............. $ 57,703 $ 98,035 $ 92,644 $ 89,717 $ 79,233 Unusual charges related to plant consolidations................ (5,758) -- -- -- -- Non-cash compensation income (expense)..................... 10,393 (80) 1,542 (4,158) (4,010) Depreciation and amortization... (36,475) (36,206) (35,537) (34,999) (29,224) Impairment, unusual and plant closing charges............... (12,855) (650) -- -- (2,000) Inventory valuation adjustment.................... (10,000) -- -- -- (8,500) (Gain)/loss on sale of property, plant and equipment........... 344 (543) -- -- -- -------- -------- -------- -------- -------- Operating income per GAAP....... $ 3,352 $ 60,556 $ 58,649 $ 50,560 $ 35,499 ======== ======== ======== ======== ========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company conducts its operations as one business segment. The table below sets forth the major components of the results of operations for the years ended December 31, 2001, 2000 and 1999, and should be used in reviewing the discussion and analysis of results of operations and liquidity and capital resources. In March 2000, the Company sold its Wire Harness Segment to a subsidiary of Viasystems Group, Inc. ("Viasystems") for $210.8 million in cash (the "Wire Harness Sale") (See Notes 1 and 6 to the Company's Consolidated Financial Statements included herein for further discussion of the Wire Harness Sale). The Wire Harness Segment was previously reported as a separate segment. The results of operations of the Wire Harness Segment have been reclassified to discontinued operations for all periods presented. Included in the years ended December 31, 2001 and 2000, are the results of operations of the Forissier Group, which was acquired at the end of 1999. A portion of the Company's revenues is derived from processing customer-owned ("tolled") copper. The value of tolled copper is excluded from both sales and costs of sales of the Company, as title to these materials and the related risks of ownership do not pass to the Company. The cost of copper has historically been subject to fluctuations. While fluctuations in the price of copper may directly affect the per unit prices of the Company's products, these fluctuations have not had, nor are expected to have, a material impact on the Company's profitability due to copper price pass-through arrangements that the Company has with its customers. These sales arrangements are based on similar variations of monthly copper price formulas. Use of 13 these copper price formulas minimizes the differences between raw material copper costs charged to the cost of sales and the pass-through pricing charged to customers. RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ------------------------------ 2001 2000 1999 -------- -------- -------- (IN THOUSANDS) Net sales............................................ $425,130 $564,250 $481,665 Cost of goods sold: Cost of goods sold excluding item below............ 333,537 419,172 346,975 Unusual costs related to plant consolidations...... 5,758 -- -- -------- -------- -------- Total cost of goods sold................... 339,295 419,172 346,975 Selling, general and administrative expenses: Selling, general and administrative expenses excluding item below............................ 33,890 47,043 42,046 Non-cash compensation expense (income)............. (10,393) 80 (1,542) -------- -------- -------- Total selling, general and administrative expenses................................. 23,497 47,123 40,504 Depreciation and amortization........................ 36,475 36,206 35,537 Impairment, unusual and plant closing charges........ 12,855 650 -- Inventory valuation adjustment....................... 10,000 -- -- (Gain)/loss on sale of property, plant and equipment.......................................... (344) 543 -- -------- -------- -------- Operating income........................... $ 3,352 $ 60,556 $ 58,649 ======== ======== ========
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Net sales for the year ended December 31, 2001 were $425.1 million, representing an $139.1 million, or 24.7%, decrease compared to 2000. This decrease was primarily the result of lower volume from weak economic conditions in the United States, including reduced demand from customers supplying the automotive, electronics and data communications, and industrial markets and the impact of a decrease in the average cost and selling price of copper. The average price of copper based upon the New York Mercantile Exchange, Inc. ("COMEX") decreased to $0.73 per pound during 2001 from $0.84 per pound during 2000. Cost of goods sold excluding unusual costs related to plant consolidations as a percentage of sales increased to 78.5% for the year ended December 31, 2001, from 74.3% for the same period in 2000. This increase was primarily the result of operating inefficiencies associated with reduced production levels in 2001 and lower pricing under new agreements with customers who supply the automotive industry. These operating inefficiencies have been partially offset by plant closures, headcount reductions and other cost reduction and containment actions taken by the Company and the impact of lower copper prices. Because the Company's products are typically priced at a spread over the cost of copper, a lower copper price leads to a higher gross margin percentage but generally has no impact on gross margin dollars. During 2001, the Company charged $5.8 million to cost of goods sold for one-time unusual charges incremental to its on-going operations related to plant consolidations. These charges include inefficiencies incurred during the transition of production capacity and other incremental costs related to the transferred production lines. There were no such charges in the comparable period in 2000. Selling, general and administrative expenses excluding non-cash compensation income/expense were $33.9 million for the year ended December 31, 2001, compared to $47.0 million for 2000. This decrease was the result of volume related items and various cost reductions. These expenses as a percent of net sales improved from 8.3% for the year ended December 31, 2000 to 8.0% for 2001. This improvement is attributable 14 to headcount reductions, administrative and corporate reorganizations and other cost reduction and containment actions taken by the Company. Depreciation and amortization was $36.5 million for the year ended December 31, 2001, as compared to $36.2 million for the same period in 2000. The increase of $0.3 million was the result of capital additions. In 2001, the Company announced its plan for a realignment and consolidation of production capacity and initiated the closing of seven facilities located in Alabama (3), Indiana (2) and Arkansas (2). Six of these facilities were closed by the end of 2001, with one facility in Alabama expected to remain open through mid 2002. The production capacity from the closed locations was primarily transferred and consolidated into the Company's existing manufacturing facilities in its remaining Indiana, Texas and New York locations, which were expanded, as necessary, to accommodate the production transfer. In addition to the plant consolidations announced during the year, the Company purchased an existing plant site for a "greenfield" insulated wire operation in Mexico. This plant is located in Durango, Mexico, which is approximately 600 miles south of the U.S./Mexican border. The startup of this Mexican facility began in the third quarter of 2001, and the Company anticipates that the plant will begin production by mid 2002. In addition to the capacity realignment, the Company also consolidated certain selling, general and administrative functions, including a corporate reorganization. As a result of these actions, along with the plant consolidations, 204 employees have been terminated and the Company anticipates an additional 38 will be terminated upon completion of the restructuring plan, all of whom have been notified by the Company. Unusual charges from plant closures and selling, general and administrative headcount reductions for the year ended December 31, 2001 were $7.4 million. The Company incurred additional costs of $5.8 million related to plant consolidations that was included in cost of goods sold for year ended December 31, 2001. During the year ended December 31, 2000, the Company incurred an unusual charge of $0.7 million related to the termination of certain administrative employees. In connection with the plant consolidations in 2001, the Company performed an analysis of the closed facilities and the machinery and equipment that was not moved and consolidated into existing facilities. Based on the results of this analysis, a non-cash impairment loss of $5.5 million was recorded, which represented the difference between management's estimate of the fair market value of the remaining facilities and equipment and the carrying value of those assets. There was no such charge in the comparable period in 2000. In connection with the decline in the average price of copper during 2001, the Company recorded a pre-tax, non-cash inventory valuation adjustment of $10.0 million to reduce the LIFO valuation of copper in inventory. There was no such charge in 2000. In 2001, the Company recorded a gain on the sale of property, plant and equipment of $0.3 million compared to a loss of $0.5 million in the comparable period in 2000. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net sales for the year ended December 31, 2000, were $564.3 million, representing an $82.6 million, or 17.1%, increase compared to 1999. This increase was the result of higher unit volume, the impact of an increase in the average cost and selling price of copper and the incremental sales from the acquisition of the Forissier Group in December 1999. Higher unit volume was attributable to several factors. Shipments of bare wire products increased from higher sales of heavy cable and tin-plated products to industrial customers and fine wire products to the electronics and data communications market. Sales of insulated lead wire to automotive customers increased from higher automotive industry-wide production levels and the Company's expanded penetration with existing customers. These unit volume increases were partially offset by a decrease in sales to the appliance market from slowing industry growth and customers' inventory reduction. The average price of copper based upon COMEX increased to $.84 per pound during 2000 from $0.72 per pound during 1999. The increase in sales from higher copper prices was partially offset by a higher percent of tolled copper sales. 15 Cost of goods sold as a percentage of sales increased to 74.3% for the year ended December 31, 2000, from 72.0% for the same period in 1999. This increase was primarily the result of the impact of higher copper prices as well as inefficiencies associated with reduced production levels in the fourth quarter of 2000. Because the Company's products are typically priced at a spread over the cost of copper, a higher copper price leads to a lower gross margin percentage but generally has no impact on gross margin dollars. Selling, general and administrative expenses were $47.1 million for the year ended December 31, 2000, compared to $40.5 million for 1999. This increase was due to the incremental costs from the acquisition of the Forissier Group, increased costs associated with the additional volume and non-cash compensation expense recognized in 2000 of $0.1 million, compared to non-cash compensation income recognized in 1999 of $1.5 million. Selling, general and administrative expenses as a percent of net sales improved from 8.4% for the year ended December 31, 1999 to 8.3% for 2000, which was primarily due to the effect of higher copper prices on net sales and partially offset by the net increase in non-cash compensation expense. Depreciation and amortization was $36.2 million for the year ended December 31, 2000, as compared to $35.5 million for the same period in 1999. The increase of $0.7 million was the result of additional depreciation and amortization of goodwill related to the acquisition of the Forissier Group. In 2000, the Company incurred a loss on the sale of property, plant and equipment of $543. There was no such charge in 1999. Also in 2000, the Company incurred a charge of $650 related to the termination of certain employees. There was no such charge in 1999. CRITICAL ACCOUNTING POLICIES The process of preparing financial statements in conformity with accounting principles generally accepted in the United States requires the Company to use estimates and assumptions regarding certain types of our assets, liabilities, revenues and expenses. The Company bases these estimates and assumptions upon the best information available at the time of the estimates or assumptions. Actual results could change materially from our estimates and assumptions. The following is a discussion of certain of our critical accounting policies and the related management estimates and assumptions necessary in determining the value of related assets or liabilities. A full description of our critical accounting policies is included in Note 2 to the Consolidated Financial Statements included herein. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Revenue Recognition Sales and related costs of goods sold are included in income when the goods are shipped to customers in accordance with the delivery terms. The Company offers its customers the right to return products that do not meet the specific requirements set forth in the customer's purchase order. The Company records a provision for the estimated amount of such returns based on historical experience and any notification received of pending returns. While such returns have historically been within the Company's expectations and the provisions established, the Company cannot guarantee that the same return rates will continue. Any significant increase in credit returns could have a material adverse impact on our operating results for the period or periods in which such returns materialize. Accounts Receivable The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the Company's review of their current credit information. The Company continuously monitors collections and payments from our customers and maintains a provision for estimated credit losses based upon the Company's historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been 16 within our expectations and the provisions established, the Company cannot guarantee that the historical credit loss rates will continue in the future. Since the Company has a number of relatively large customers, a significant change in the liquidity or financial position of one of these customers could have a material adverse impact on the collectability of our accounts receivables and our future operating results. Inventories Inventories are valued at the lower of cost, determined using the last-in, first out ("LIFO") method, or the current estimated market value of the inventory. Because the main component of the Company's products is copper, a world-wide traded commodity, the estimated fair market value of the inventory is subject to wide fluctuations. Any significant decline in the average COMEX price of copper can result in a non-cash inventory valuation adjustment. See Note 3 to the Company's Consolidated Financial Statements included herein. LIQUIDITY AND CAPITAL RESOURCES Inflation has not been a material factor affecting the Company's business. As a result of the copper price pass-through arrangements that the Company has with its customers, fluctuations in the price of copper, the principle raw material used by the Company, have not, nor are expected to have, a material impact on the Company's profitability. The Company is subject to normal inflationary pressures with its other raw materials purchased as well as its general operating expenses, such as salaries, employee benefits and facilities costs. Working Capital and Cash Flows Net cash provided by continuing operations was $9.2 million for the year ended December 31, 2001 compared to net cash generated by continuing operations of $43.8 million for the year ended December 31, 2000. This decrease was primarily the result of lower operating results and the additional one-time costs related to plant consolidations. Net cash used in discontinued operations was $5.2 million in 2001, compared to $9.2 million in 2000. Net cash used in investing activities was $23.4 million in 2001, compared to $18.2 million in 2000. Net cash used in investing activities in 2001 included $26.0 million invested in capital expenditures by continuing operations and $2.5 million in cash proceeds from the sale of property, plant and equipment. Net cash used in investing activities in 2000 included $3.9 million as the final settlement on the acquisition of the Forissier Group, $22.5 million invested in capital expenditures by continuing operations, $9.1 million received from the sale of property, plant and equipment and $1.0 million invested in capital expenditures by discontinued operations prior to the sale of the Company's Wire Harness Segment in the first quarter of 2000. Financing Arrangements On December 20, 2001, the Company entered into a Second Amended and Restated Credit Agreement (the "Credit Agreement") with certain financial institutions that replaced the Company's previous credit agreement. In connection with the Credit Agreement, the Company paid $1.4 million to satisfy its outstanding term balance on the prior credit agreement and incurred $2.5 million in financing costs. All outstanding letters of credit from the prior credit agreement were incorporated into the Credit Agreement. Borrowings under the Credit Agreement are collateralized by first priority mortgages and liens on all domestic assets of the Company. The Credit Agreement consists of a $70.0 million revolving credit facility, subject to certain borrowing base requirements, that will mature on January 15, 2005. The Credit Agreement provides that a portion of the Credit Agreement, not in excess of $35.0 million, is available for the issuance of letters of credit. At December 31, 2001, the Company had no borrowings outstanding under the Credit Agreement and $26.3 million in outstanding letters of credit. At February 28, 2002, based on the most recent borrowing base calculation, the Company had available borrowing capacity under the Credit Agreement of $56.4 million, of which $30.1 million was available for borrowing. The Company's obligations under the Credit Agreement bear 17 interest at floating rates and require interest payments on varying dates depending on the interest rate option selected by the Company. The Company has outstanding $150.0 million principal amount of 11.75% Senior Subordinated Notes due 2005 under an Indenture dated June 12, 1995, $150.0 million of 11.75% Series B Senior Subordinated Notes due June 2005 under an Indenture dated June 17, 1997, priced at 108.75% for an effective interest rate of 10.15% (collectively, the "11 3/4% Notes") and $5.0 million of 14% Senior Subordinated Notes (the "14% Notes") due June 1, 2005 (collectively, the "Senior Subordinated Notes"). The 11 3/4% Notes bear interest at the rate of 11.75% per annum, requiring semi-annual interest payments of $17.6 million on each June 1 and December 1. The 14% Notes bear interest at the rate of 14% per annum, requiring a semi-annual interest payment of $0.4 million on each June 1 and December 1. Neither the 11 3/4% nor the 14% Notes are subject to any sinking fund requirements. In connection with the Camden Acquisition, the Company assumed debt related to two Industrial Revenue Bonds (the "IRBs") totaling $15.5 million. The IRBs are due in August 2005 and March 2016 in the amounts of $9.0 million and $6.5 million, respectively. The IRBs bear interest at a rate per annum which is tied to the Tax Exempt Money Market Index. Rates change weekly and interest is paid monthly. The IRBs are collateralized by letters of credit totaling $15.5 million. As of December 31, 2001, the weighted average interest rate on the IRBs was 1.5%. Liquidity The principal raw material used in the Company's products is copper. The market price of copper is subject to significant fluctuations. Working capital needs change whenever the Company experiences a significant change in copper prices. A $0.10 per pound change in the price of copper changes the Company's working capital by approximately $3.2 million. The Company enters into contractual relationships with most of its customers to adjust its prices based upon the prevailing market prices on the COMEX. This approach is patterned after the Company's arrangement with its copper suppliers and is designed to remove the risk associated with fluctuating copper prices. The Company's primary sources of liquidity are cash flows from operations and borrowings under the Credit Agreement, which are subject to a borrowing base calculation. The major uses of cash in 2002 are expected to be for debt service requirements and capital expenditures. In 2002, debt service requirements are estimated at approximately $39.7 million while capital expenditures are estimated at approximately $18.0 million. Management believes that cash from operating activities, together with available borrowings under the Credit Agreement, if necessary, should be sufficient to permit the Company to meet these financial obligations. The following table sets forth our material existing cash contractual obligations at the end of 2001 for the periods shown (dollars in millions):
CONTRACTUAL OBLIGATIONS TOTAL WITHIN 1 YEAR 2-3 YEARS 4-5 YEARS THEREAFTER ----------------------- ------ ------------- --------- --------- ---------- Debt(1)................................... $320.6 $0.1 $ -- $314.0 $6.5 Capital lease obligations................. 4.8 1.6 1.8 0.4 1.0 Operating leases.......................... 8.5 2.9 3.7 1.6 0.3 ------ ---- ---- ------ ---- Total contractual cash obligations........ $333.9 $4.6 $5.5 $316.0 $7.8 ====== ==== ==== ====== ====
--------------- (1) Debt obligations are exclusive of interest. See "Liquidity and Capital Resources -- Financing Arrangements" for a further discussion of effective interest rates. 18 RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 supercedes Accounting Principles Board Opinion ("APB") No. 16, "Business Combinations." The most significant changes made by SFAS No. 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill, and (3) requiring unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). SFAS No. 142 supercedes APB No. 17, "Intangible Assets." SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS No. 142 are: (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and Assets to be Disposed of" and the accounting and reporting provisions of APB No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of SFAS No. 144 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS No. 144 are: (1) removes goodwill from its scope and, therefore, eliminates the requirements of SFAS No. 121 to allocate goodwill to long-lived assets to be tested for impairment, and (2) describes a probability-weighted cash flow estimation approach to deal with situations in which alternative courses of action to recover the carrying amount of long-lived assets are under consideration or a range is estimated for the amount of possible future cash flows. The Company has not yet determined the effect SFAS No.'s 141, 142 and 144 will have on its consolidated financial position or results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not ordinarily hold market risk sensitive instruments for trading purposes. The Company does, however, recognize market risk from interest rate, foreign currency exchange and commodity price exposure. INTEREST RATE RISK At December 31, 2001, approximately $15.5 million of the Company's long-term debt, specifically, borrowings outstanding under the IRBs, bears interest at variable rates. Given the current amount of long-term debt subject to variable interest rates, the Company does not believe that the associated interest rate risk is material and is not currently engaged in any hedging activities. FOREIGN CURRENCY RISK The Company has operations in the Philippines, France and Italy and recently acquired a facility in Mexico that will begin production in mid 2002. The Company's operations may, therefore, be subject to volatility because of currency fluctuations. Sales and expenses are denominated in local currencies for the French and Italian operations and in the U.S. Dollar for the Philippines operation. The U.S. Dollar will also be 19 the functional currency of the Mexican operation. As a result, these operations are subject to market risk with respect to fluctuations in the relative value of currencies. The Company evaluates from time-to-time various currency hedging programs that could reduce the risk. COMMODITY PRICE RISK The principal raw material used by the Company is copper, which is purchased in the form of 5/16-inch rod from the major copper producers in North America and Japan. Copper rod prices are based on market prices, which are generally established by reference to the New York Mercantile Exchange, Inc. ("COMEX") prices, plus a premium charged to convert copper cathode to copper rod and deliver it to the required location. As a world traded commodity, copper prices have historically been subject to fluctuations. While fluctuations in the price of copper may directly affect the per unit prices of the Company's products, these fluctuations have not had, nor are expected to have, a material impact on the Company's profitability due to copper price pass-through arrangements that the Company has with its customers. These sales arrangements are based on similar variations of monthly copper price formulas. Use of these copper price formulas minimizes the differences between raw material copper costs charged to the cost of sales and the pass-through pricing charged to customers. ITEM 8. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS
PAGE ---- INTERNATIONAL WIRE GROUP, INC Report of Independent Accountants........................... 21 Consolidated Balance Sheets as of December 31, 2001 and 2000...................................................... 22 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999.......................... 23 Consolidated Statements of Stockholder's Equity for the years ended December 31, 2001, 2000 and 1999.............. 24 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.......................... 25 Notes to Consolidated Financial Statements.................. 26 Consolidated Financial Statement Schedule for the years ended December 31, 2001, 2000 and 1999: Schedule II -- Valuation and Qualifying Accounts.......... 49
20 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and shareholder of International Wire Group, Inc.: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of International Wire Group, Inc. and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 2 to the consolidated financial statements, the Company changed its method of reporting start-up activities in 1999. /s/ PricewaterhouseCoopers LLP Dallas, Texas February 18, 2002 21 INTERNATIONAL WIRE GROUP, INC. CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, --------------------- 2001 2000 --------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................. $ 8,017 $ 32,244 Accounts receivable, less allowance of $4,065 and $2,760................................................. 62,500 82,339 Inventories............................................... 58,201 83,527 Prepaid expenses and other................................ 12,879 7,109 Deferred income taxes..................................... 15,228 21,054 -------- -------- Total current assets................................. 156,825 226,273 Property, plant and equipment, net........................ 138,784 148,414 Deferred financing costs, net............................. 6,923 5,810 Deferred income taxes..................................... 11,198 -- Intangible assets, net.................................... 193,627 201,611 Other assets.............................................. 4,586 3,626 -------- -------- Total assets......................................... $511,943 $585,734 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current maturities of long-term obligations............... $ 3,049 $ 4,312 Accounts payable.......................................... 23,382 42,654 Accrued and other liabilities............................. 22,001 18,488 Accrued payroll and payroll related items................. 5,138 11,740 Customers' deposits....................................... 15,778 19,739 Accrued interest.......................................... 2,937 3,195 -------- -------- Total current liabilities............................ 72,285 100,128 Long-term obligations, less current maturities............ 328,743 331,121 Deferred income taxes..................................... -- 12,971 Other long-term liabilities............................... 33,334 33,765 -------- -------- Total liabilities.................................... 434,362 477,985 Stockholder's equity: Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding................................. 0 0 Contributed capital....................................... 236,331 246,724 Carryover of predecessor basis............................ (67,762) (67,762) Accumulated deficit....................................... (87,493) (69,989) Accumulated other comprehensive loss...................... (3,495) (1,224) -------- -------- Total stockholder's equity........................... 77,581 107,749 -------- -------- Total liabilities and stockholder's equity........... $511,943 $585,734 ======== ========
See accompanying notes to the consolidated financial statements 22 INTERNATIONAL WIRE GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, --------------------------------- 2001 2000 1999 --------- --------- --------- (IN THOUSANDS) Net sales................................................... $425,130 $564,250 $481,665 Operating expenses: Cost of goods sold........................................ 339,295 419,172 346,975 Selling, general and administrative expenses including non-cash compensation expense (income) of ($10,393), $80 and ($1,542), respectively......................... 23,497 47,123 40,504 Depreciation and amortization............................. 36,475 36,206 35,537 Impairment, unusual and plant closing charges............. 12,855 650 -- Inventory valuation adjustment............................ 10,000 -- -- (Gain)/loss on sale of property, plant and equipment...... (344) 543 -- -------- -------- -------- Operating income............................................ 3,352 60,556 58,649 Other income (expense): Interest expense.......................................... (35,237) (40,804) (43,955) Amortization of deferred financing costs.................. (1,346) (2,097) (2,521) Other, net................................................ (318) (222) -- -------- -------- -------- Income (loss) from continuing operations before income tax provision (benefit), cumulative effect of change in accounting principle and extraordinary item............... (33,549) 17,433 12,173 Income tax provision (benefit).............................. (18,895) 7,799 4,613 -------- -------- -------- Income (loss) from continuing operations before cumulative effect of change in accounting principle and extraordinary item...................................................... (14,654) 9,634 7,560 Income (loss) from discontinued operations, net of income taxes of ($2,150), ($1,261) and $4,355, respectively...... (2,850) (157) 6,364 -------- -------- -------- Income (loss) before cumulative effect of change in accounting principle and extraordinary item............... (17,504) 9,477 13,924 Cumulative effect of change in accounting for start-up costs, net of tax benefit of $592......................... -- -- (818) -------- -------- -------- Income (loss) before extraordinary item..................... (17,504) 9,477 13,106 Extraordinary item -- loss related to early extinguishment of debt, net of income tax benefit of $2,073.............. -- (2,747) -- -------- -------- -------- Net income (loss)................................. $(17,504) $ 6,730 $ 13,106 ======== ======== ========
See accompanying notes to the consolidated financial statements 23 INTERNATIONAL WIRE GROUP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 ---------------------------------------------------------------------------- ACCUMULATED OTHER CARRYOVER OF COMPREHENSIVE COMMON CONTRIBUTED PREDECESSOR ACCUMULATED INCOME STOCK CAPITAL BASIS DEFICIT (LOSS) TOTAL ------ ----------- ------------ ----------- ------------- -------- (IN THOUSANDS) BALANCE DECEMBER 31, 1999.................... $0 $124,751 $(67,762) $(76,719) $ -- $(19,730) Capital contributed....... -- 121,893 -- -- -- 121,893 Non-cash compensation expense................. -- 80 -- -- -- 80 Comprehensive income (loss): Net income.............. -- -- -- 6,730 -- 6,730 Foreign currency translation adjustments.......... -- -- -- -- (1,224) (1,224) -- -------- -------- -------- ------- -------- BALANCE DECEMBER 31, 2000.................... 0 246,724 (67,762) (69,989) (1,224) 107,749 Non-cash compensation income.................. -- (10,393) -- -- -- (10,393) Comprehensive income (loss): Net income (loss)....... -- -- -- (17,504) -- (17,504) Foreign currency translation adjustments.......... -- -- -- -- (2,271) (2,271) -- -------- -------- -------- ------- -------- BALANCE DECEMBER 31, 2001.................... $0 $236,331 $(67,762) $(87,493) $(3,495) $ 77,581 == ======== ======== ======== ======= ========
See accompanying notes to the consolidated financial statements 24 INTERNATIONAL WIRE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, --------------------------------- 2001 2000 1999 --------- ---------- -------- (IN THOUSANDS) Cash flows provided by (used in) operating activities: Net income (loss)......................................... $(17,504) $ 6,730 $13,106 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation........................................... 27,465 27,336 26,905 Amortization........................................... 9,010 8,870 8,632 Amortization of deferred financing costs............... 1,346 2,097 2,521 (Gain)/loss on sale of property, plant and equipment... (344) 543 -- Impairment of property, plant and equipment............ 5,468 -- -- (Income) loss from discontinued operations............. 2,850 157 (6,364) Cumulative effect of change in accounting for start-up costs................................................ -- -- 818 Extraordinary loss on early extinguishment of debt..... -- 2,747 -- Non-cash compensation expense (income)................. (10,393) 80 (1,542) Deferred income taxes.................................. (16,193) (560) 2,636 Inventory valuation adjustment......................... 10,000 -- -- Change in assets and liabilities, net of acquisitions: Accounts receivable.................................. 19,093 3,655 (10,294) Inventories.......................................... 14,957 (12,596) (1,210) Prepaid expenses and other........................... (4,588) (455) (7,602) Accounts payable..................................... (18,923) 7,901 8,145 Accrued and other liabilities........................ (315) 2,262 (7,305) Accrued payroll and payroll related items............ (6,602) (223) (336) Customers' deposits.................................. (3,961) (1,248) (1,601) Accrued interest..................................... (1,869) (850) 367 Other long-term liabilities.......................... (347) (2,639) 61 -------- --------- ------- Net cash provided by (used in) continuing operations...................................... 9,150 43,807 26,937 Net cash provided by (used in) discontinued operations........................................ (5,220) (9,197) 24,538 -------- --------- ------- Net cash from operating activities................ 3,930 34,610 51,475 -------- --------- ------- Cash flows used in investing activities: Acquisitions, net of cash acquired........................ -- (3,861) (20,000) Capital expenditures by continuing operations............. (25,968) (22,469) (19,883) Proceeds from sale of property, plant and equipment....... 2,533 9,147 -- Capital expenditures by discontinued operations........... -- (982) (10,623) -------- --------- ------- Net cash used in investing activities............. (23,435) (18,165) (50,506) -------- --------- ------- Cash flows provided by (used in) financing activities: Equity proceeds........................................... -- 66 42 Proceeds from issuance of long-term obligations........... -- -- 25,000 Repayment of long-term obligations........................ (2,030) (200,255) (7,261) Borrowing (repayment) on revolver......................... -- -- (9,000) Repurchase of stock of Holding............................ -- -- (230) Cash proceeds from sale of the Wire Harness Segment, net of selling expenses.................................... -- 209,298 -- Financing fees and other.................................. (2,459) (699) (2,095) -------- --------- ------- Net cash from financing activities................ (4,489) 8,410 6,456 -------- --------- ------- Effect of exchange rate changes on cash and cash equivalents............................................... (233) (36) -- -------- --------- ------- Net change in cash and cash equivalents........... (24,227) 24,819 7,425 Cash and cash equivalents at beginning of the period........ 32,244 7,425 -- -------- --------- ------- Cash and cash equivalents at end of the period.............. $ 8,017 $ 32,244 $ 7,425 ======== ========= =======
See accompanying notes to the consolidated financial statements 25 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN THOUSANDS, EXCEPT SHARE DATA) 1. COMPANY BACKGROUND, ACQUISITIONS AND DIVESTITURES International Wire Group, Inc. (the "Company"), a Delaware corporation, through its subsidiaries, is a leading designer and manufacturer of wire products, including bare and tin-plated copper wire and insulated wire. The Company's products include a broad spectrum of copper wire configurations and gauges with a variety of electrical and conductive characteristics and are utilized by a wide variety of customers primarily in the appliance, automotive, electronics and data communications and general industrial/energy industries. The Company manufactures and distributes its products at 23 facilities located in the United States, Italy, the Philippines and France. The Company was formed to participate in the transactions contemplated by the Acquisitions (as described below). On June 12, 1995, Wirekraft Holdings Corp. ("Wirekraft"), Omega Wire Corp. ("Omega"), International Wire Holding Company ("Holding"), the sole common stockholder of Group, Wirekraft Acquisition Company and certain shareholders of Wirekraft and Omega entered into a series of acquisitions and mergers (the "Acquisitions") pursuant to which Group acquired all of the common equity securities (and all securities convertible into such securities) of Wirekraft and all of the common equity securities of Omega. In accordance with EITF 88-16, "Basis in Leveraged Buy Out Transactions," the Acquisitions have been accounted for at "predecessor basis." In 1998, the Company made two strategic acquisitions, the acquisition of the assets of Spargo Wire Company, Inc. (the "Spargo Acquisition") and the acquisition of Italtrecce S.r.l. (the "Italtrecce Acquisition"). The acquisitions were accounted for using the purchase method of accounting. The total consideration paid in connection with these acquisitions, including fees and expenses, was $7,821. In December 1999, the Company acquired the business of a group of three French wire and cable manufacturers (collectively, the "Forissier Group"). Two of the companies manufacture and market specialty braids, rope and cable products and the third company manufactures and markets insulated wire products. The total consideration paid in connection with these acquisitions, including fees and expenses, was $23,861. This acquisition was accounted for using the purchase method of accounting whereby the total acquisition cost has been allocated to the consolidated assets and liabilities based upon their estimated respective fair values. In March 2000, the Company consummated the sale of its Wire Harness Segment to Viasystems International, Inc. ("Viasystems") for $210,798 in cash (the "Wire Harness Sale"). In connection therewith, the Company entered into an agreement to supply Viasystems' wire harness business with substantially all of their insulated wire requirements through 2003, which is a continuation of existing practice. See Note 6 for further discussion of the Wire Harness Sale. In August 2001, the Company furthered its international expansion with the purchase of a manufacturing facility in Durango, Mexico. Management believes that this new facility, approximately 600 miles south of the U.S./Mexican border, will allow the Company to expand its relationships with existing global customers in North America and seek new opportunities in Central and South America. Production at this new facility is expected to begin in mid 2002. 2. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 26 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REVENUE RECOGNITION Sales and related cost of goods sold are included in income when goods are shipped to customers in accordance with the delivery terms. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out ("LIFO") method. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method. The average estimated lives utilized in calculating depreciation are as follows: building -- 25 to 40 years; building improvements -- 15 years; machinery and equipment -- 3 to 11 years; and furniture and fixtures -- 5 years. Leasehold improvements are amortized over the shorter of the term of the respective lease or the life of the respective improvement. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the statement of operations. INTANGIBLE ASSETS Intangible assets consist principally of goodwill arising from the excess of cost over the value of net assets acquired which was amortized using the straight-line method over a range of twenty to forty years. Accumulated amortization aggregated $40,950, $33,991 at December 31, 2001 and 2000, respectively. Beginning on January 1, 2002, the Company will adopt Statement of Financial Accounting Standards ("SFAS") No. 142, "Intangible Assets" as defined herein. In accordance with SFAS 142, the Company will identify intangible assets with finite lives and will continue to amortize these assets over their defined lives. Intangible assets with indefinite lives, such as goodwill, will no longer be amortized. IMPAIRMENT OF LONG-LIVED ASSETS The Company has periodically assessed the recoverability of long-lived assets (including intangible assets) based on its current and anticipated future undiscounted cash flows. In addition, the Company's policy for the recognition and measurement of any impairment of long-lived assets has been to assess the current and anticipated future cash flows associated with the impaired asset. An impairment occurs when the cash flows (excluding interest) do not exceed the carrying amount of the asset. The amount of the impairment loss is the difference between the carrying amount of the asset and its estimated fair value. Beginning on January 1, 2002, the Company will adopt SFAS No. 144, "Accounting for the Impairment of Disposal of Long-lived Assets" as described herein. In accordance with SFAS 144, goodwill will no longer be allocated to long-lived assets to be tested for impairment, and a probability-weighted cash flow estimation approach will be used when situations occur in which alternative courses of action to recover the carrying amount of long-lived assets are under consideration or a range is estimated for the amount of possible future cash flows. DEFERRED FINANCING COSTS Deferred financing costs, consisting of fees and other expenses associated with debt financing are amortized over the term of the related debt using the straight-line method, which approximates the effective interest method. The Company incurred additional deferred financing costs of $2,459 in 2001 in connection 27 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) with the execution of the Second Amended and Restated Credit Agreement (the "Credit Agreement"). Accumulated amortization aggregated $16,848 and $15,501 at December 31, 2001 and 2000, respectively. DEFERRED INCOME TAXES The Company accounts for certain items of income and expense in different periods for financial reporting and income tax purposes. Provisions for deferred income taxes are made in recognition of such temporary differences, where applicable. A valuation allowance is established against deferred tax assets unless the Company believes it is more likely than not that the benefit will be realized. NON-CASH COMPENSATION EXPENSE (INCOME) The Company records non-cash compensation which reflects the difference between the cost of Holding's Class A common stock, which can be converted into shares of Holding common stock at a variable rate, and the value of the common shares at the time of the valuation. Contributed capital is increased for non-cash compensation expense and decreased for non-cash compensation income. FOREIGN CURRENCY TRANSLATION The Company has operations in the Philippines, Italy and France and will begin operations in Mexico in 2002. Local currencies are the functional currency for all of the Company's foreign subsidiaries located in France and Italy. Accordingly, assets and liabilities of these foreign subsidiaries are translated at the rates of exchange in effect at the balance sheet date. Income and expense items of these subsidiaries are translated at average monthly rates of exchange. The resultant translation gains and losses are reported in other comprehensive income/loss. The U.S. Dollar is the functional currency for the operations in the Philippines and is expected to be the functional currency for the operations in Mexico. All gains and losses from remeasurement and transactions are determined using a combination of current and historical rates and are included in net income. Exchange gains and losses arising from transactions in currencies other than the functional currency of the subsidiary involved are included in income. To date, the effect of such amounts on net income has not been material. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments, excluding the Senior Notes (as hereinafter defined) are carried at amounts that approximate fair value. The Company has estimated the fair market value of the Senior Notes using current market data. The fair market value of the Senior Notes was approximately $250,500 and $293,250 at December 31, 2001 and 2000, respectively. ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with generally accepted accounting principles 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. STATEMENT OF CASH FLOWS For purposes of the consolidated statement of cash flows, the Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents. Interest paid for the 28 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) years ended December 31, 2001, 2000 and 1999, was $37,106, $41,654 and $49,480, respectively. Net taxes paid (refunded) for the years ended December 31, 2001, 2000 and 1999 were ($3,816), $12,340 and ($6), respectively. In fiscal 2001, 2000 and 1999, the Company recorded capital lease obligations of $2,274, $873 and $320, respectively, for property, plant and equipment. SIGNIFICANT CUSTOMER For the years ended December 31, 2001, 2000 and 1999, the Company had sales to one customer that exceeded 10% of consolidated net sales from continuing operations. Sales to this customer represented 12%, 13% and 15% of net sales for each year, respectively. RECLASSIFICATION OF FINANCIAL INFORMATION Certain items in the prior years' financial statements have been reclassified to conform with the current period presentation. CHANGE IN ACCOUNTING PRINCIPLE In April 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 is effective for financial statements for fiscal years beginning after December 15, 1998. The Company adopted SOP 98-5 effective January 1, 1999. The Company had $1,410 in net capitalized start-up costs remaining from continuing operations at December 31, 1998, which the Company expensed in accordance with SOP 98-5 at January 1, 1999. RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 which supercedes Accounting Principles Board Opinion ("APB") No. 16, "Business Combinations." The most significant changes made by SFAS No. 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill, and (3) requiring unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). SFAS No. 142 which supercedes APB No. 17, "Intangible Assets." SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS No. 142 are: (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and Assets to be Disposed of" and the accounting and reporting provisions of APB No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, 29 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of SFAS No. 144 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS No. 144 are: (1) removes goodwill from its scope and, therefore, eliminates the requirements of SFAS No. 121 to allocate goodwill to long-lived assets to be tested for impairment, and (2) describes a probability-weighted cash flow estimation approach to deal with situations in which alternative courses of action to recover the carrying amount of long-lived assets are under consideration or a range is estimated for the amount of possible future cash flows. The Company has not yet determined the effect SFAS No.'s 141, 142 and 144 will have on its consolidated financial position or results of operations. 3. INVENTORIES The composition of inventories is as follows:
DECEMBER 31, ----------------- 2001 2000 ------- ------- Raw materials............................................... $12,814 $28,402 Work-in process............................................. 18,667 26,414 Finished goods.............................................. 26,720 28,711 ------- ------- Total inventories.................................... $58,201 $83,527 ======= =======
In connection with the decline in the average price of copper during 2001, the Company recorded a pre-tax, non-cash inventory valuation charge of $10,000 to reduce the LIFO valuation of copper in inventory. With the inventory valuation adjustment, the current cost of inventories at December 31, 2001 and 2000 approximated the carrying cost. 4. PROPERTY, PLANT AND EQUIPMENT The composition of property, plant and equipment is as follows:
DECEMBER 31, --------------------- 2001 2000 --------- --------- Land........................................................ $ 4,382 $ 3,400 Buildings and improvements.................................. 57,746 50,423 Machinery and equipment..................................... 245,472 231,988 Construction in progress.................................... 5,192 3,332 --------- --------- 312,792 289,143 Less: accumulated depreciation.............................. (174,008) (140,729) --------- --------- $ 138,784 $ 148,414 ========= =========
5. FINANCING COSTS In 2001, the Company recorded deferred financing costs of $2,459 related to the December 2001 execution of the Credit Agreement (See Note 7). In 2000, the Company recorded additional deferred financing costs of $699 related to the December 1999 amendment to the Company's credit agreement in place at the time. In March 2000, the Company repaid a substantial portion of the outstanding balance of the credit 30 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) agreement then in place with the proceeds received from the Wire Harness Sale (See Note 6 for further discussion of the Wire Harness Sale). Accordingly, the Company recorded an extraordinary loss of $2,747, net of income tax benefit, related to the write-off of deferred financing fees. 6. RELATED PARTY TRANSACTIONS AND DISCONTINUED OPERATIONS On March 29, 2000, the Company consummated the sale of its Wire Harness Segment to Viasystems for $210,798 in cash. The Company and Viasystems are commonly controlled by affiliates of Hicks, Muse. As such, the Company has accounted for the Wire Harness Sale on a basis consistent with the accounting for a transfer of assets between commonly owned entities. The Company has recorded an addition to contributed capital related to the transaction of $121,713, which represents the excess of the proceeds over the net book value of the assets disposed plus the related expenses of $1,500, and estimated taxes of $7,000. The results of operations of the Wire Harness Segment have been reclassified to discontinued operations for all periods presented. The purchase price was determined by senior management of both companies. In addition, each of the boards of directors received opinions from nationally recognized financial advisors that the purchase price was fair, from a financial point of view, to each of the respective parties. In connection with the Wire Harness Sale, the Company entered into an agreement to supply Viasystems' wire harness business with substantially all of their insulated wire requirements through 2003, which is a continuation of existing practice. For the years ended December 31, 2001, 2000 and 1999, the Company had sales to Viasystems' wire harness business of $34,467, $30,401 and $29,021, respectively. The Company had outstanding accounts receivable from Viasystems related to those sales of $12,017 and $3,830 at December 31, 2001 and 2000. Additionally, the Company agreed to indemnify Viasystems for certain claims and litigation including any current or future claims related to the case titled Whirlpool Corporation v. Wirekraft Industries, Inc. ("Whirlpool Case"), any current or future liabilities associated with the Internal Revenue Service ("IRS") examination of the U.S. income tax return of Kirtland Indiana, Limited Partnership for the tax period ended December 21, 1992 (the "IRS Examination"), and certain product liability claims, as described in the purchase agreement (the "Wire Harness Product Liability Claims"). During the third quarter of 2000, the Company and Viasystems reached a settlement in the Whirlpool Case and agreed to pay the plaintiff $3,650. The Company recognized a charge to income (loss) from discontinued operations of $2,081, net of income $1,569 tax benefit, as a result of this settlement. During the fourth quarter of 2000, the Company and Viasystems reached a settlement with the IRS related to the IRS Examination and agreed to pay $2,026, which had been provided for in a prior year. In the fourth quarter of 2000, the Company recognized a charge to income (loss) from discontinued operations of $1,710, net of $1,290 income tax benefit, as a result of its indemnification obligation related to the Wire Harness Product Liability Claims. During 2001, the Company recorded a net charge to income (loss) from discontinued operations of $2,850, net of $2,150 tax benefit, related to the Wire Harness Product Liability Claims, as described in Note 13. As of December 31, 2001 and 2000, the reserve for the Company's indemnification liability related to the Wire Harness Product Liability Claims was $9,049 and $5,069, respectively. The Company believes that final resolution of the remaining matters will not have a material adverse effect on the Company and that adequate amounts of reserves have been established. For the period ended March 29, 2000 and the year ended December 31, 1999, the Wire Harness Segment reported net sales of $50,005 and $191,046, respectively. A portion of the Company's interest expense has been allocated to discontinued operations based upon the intercompany debt balances attributable to the Wire Harness Segment. The interest expense allocated to discontinued operations for the period ended March 29, 2000 and the year ended December 31, 1999 was $5 and $5,884, respectively. 31 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In connection with the Acquisitions and the related financing, the Company entered into a Monitoring and Oversight Agreement ("Agreement") with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), an affiliate of the Company. The Agreement provides that the Company shall pay Hicks Muse Partners an annual fee of $500, for ten years for monitoring and oversight services adjusted annually at the end of each fiscal year to an amount equal to 0.1% of the consolidated net sales of the Company, but in no event less than $500 annually. The expense related to the Agreement totaled $500, $639 and $635 for 2001, 2000 and 1999, respectively. In July 2001, James N. Mills resigned as Chief Executive Officer of Holding and the Company and remained on the board of directors through February 2002. In August 2001, the Company sold certain corporate assets to Mr. Mills for $1,150. Prior to the sale of the assets, the Company obtained an independent appraisal of the assets which supported the sales price. The assets had a carrying value of $1,001 and the Company recorded a gain on the sale of property, plant and equipment in the amount of $149 related to the transaction. 7. LONG-TERM OBLIGATIONS The composition of long-term obligations at December 31, 2001 and 2000 is as follows:
2001 2000 -------- -------- Second Amended and Restated Credit Agreement: Revolving credit facility................................. $ -- $ -- Term facility............................................. -- 2,273 Senior Subordinated Notes................................... 150,000 150,000 Series B Senior Subordinated Notes.......................... 150,000 150,000 Series B Senior Subordinated Notes Premium.................. 6,912 8,523 Industrial revenue bonds.................................... 15,500 15,500 Other....................................................... 9,380 9,137 -------- -------- 331,792 335,433 Less, current maturities.................................... 3,049 4,312 -------- -------- $328,743 $331,121 ======== ========
The schedule of principal payments (excluding unamortized premium) for long-term obligations at December 31, 2001 is as follows: 2002........................................................ $ 1,377 2003........................................................ 1,274 2004........................................................ 336 2005........................................................ 314,136 2006........................................................ 187 Thereafter.................................................. 7,570 -------- Total................................................ $324,880 ========
SECOND AMENDED AND RESTATED CREDIT AGREEMENT On December 20, 2001, the Company entered into the Second Amended and Restated Credit Agreement (the "Credit Agreement") with certain financial institutions that replaced the Company's Amended and Restated Credit Agreement. In connection with the Credit Agreement, the Company paid $1,420 to satisfy its 32 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) outstanding term balance on the prior credit agreement and incurred $2,459 in financing costs. All outstanding letters of credit from the prior credit agreement were incorporated into the Credit Agreement. Borrowings under the Credit Agreement are collateralized by first priority mortgages and liens on all domestic assets of the Company. In addition, borrowings under the Credit Agreement are guaranteed by Holding. The Credit Agreement consists of a $70,000 revolving credit facility, subject to certain borrowing base requirements, that will mature on January 15, 2005. The Credit Agreement provides that a portion of the Credit Agreement, not in excess of $35,000, is available for the issuance of letters of credit. At December 31, 2001, the Company had no borrowings outstanding under the Credit Agreement and $26,316 in outstanding letters of credit. The Company's obligations under the Credit Agreement under the Revolver bear interest, at the option of the Company, at a rate per annum equal to (a) the Alternate Base Rate (as defined in the Credit Agreement) plus 2.25% or (b) the Eurodollar Rate (as defined in the Credit Agreement) plus 3.25%. The Alternate Base Rate and Eurodollar Rate margins are established quarterly based on a formula as defined in the Credit Agreement. Interest payment dates vary depending on the interest rate option to which the Credit Agreement is tied, but generally interest is payable quarterly. The Credit Agreement contains several financial covenants which, among other things, require the Company to maintain certain financial ratios and restrict the Company's ability to incur indebtedness, make capital expenditures and pay dividends. There was no outstanding borrowing under the credit agreement at December 31, 2001. The weighted average interest rate on outstanding borrowings under the Company's Amended and Restated Credit Agreement was 7.44% at December 31, 2000. SENIOR SUBORDINATED NOTES AND SERIES B SENIOR SUBORDINATED NOTES The Senior Subordinated Notes issued in connection with the Acquisitions and the Series B Notes issued in connection with the refinancing of the Company's credit facility in 1997 (collectively, the "Senior Notes") were issued under similar indentures (the "Indentures") dated June 12, 1995 and June 17, 1997, respectively. The Senior Notes represent unsecured general obligations of the Company and are subordinated to all Senior Debt (as defined in the Indentures) of the Company. The Senior Notes are fully and unconditionally (as well as jointly and severally) guaranteed on an unsecured, senior subordinated basis by each subsidiary of the Company (the "Guarantor Subsidiaries") other than IWG-Philippines, Inc., IWG International, Inc., Italtrecce-Societa Italiana Trecce & Affini S.r.l., International Wire SAS, International Wire Group SAS, Tresse Metallique J. Forissier, S.A., Cablerie E. Charbonnet, S.A., IWG Services Co., S de RC de CV, IWG Durango, S de RL de CV (the "Non-Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries is wholly owned by the Company. The Senior Notes mature on June 1, 2005. Interest on the Senior Notes is payable semi-annually on each June 1 and December 1. The Senior Notes bear interest at the rate of 11.75% per annum. The Senior Notes are redeemable, at the Company's option, at the redemption price of 103.9% at December 31, 2001. The redemption price decreases gradually to 100% at June 1, 2003, and thereafter, with accrued interest. The Senior Notes restrict, among other things, the incurrence of additional indebtedness by the Company, the payment of dividends and other distributions in respect of the Company's capital stock, the payment of dividends and other distributions by the Company's subsidiaries, the creation of liens on the properties and the assets of the Company to secure certain subordinated debt and certain mergers, sales of assets and transactions with affiliates. 33 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INDUSTRIAL REVENUE BONDS In connection with a previous acquisition, the Company assumed debt related to two Industrial Revenue Bonds (the "IRB's") totaling $15,500. The IRB's are due in August, 2005 and March 2016 in the amounts of $9,000 and $6,500, respectively. The IRB's bear interest at a rate per annum which is tied to the Tax Exempt Money Market Index which resulted in an effective rate of 1.5% and 4.39% at December 31, 2001 and 2000, respectively. Rates change weekly and interest is paid monthly. The IRB's are collateralized by letters of credit totaling $15,681. 8. INCOME TAXES The Company accounts for income taxes in accordance with the provisions of SFAS No. 109. The provision (benefit) for income taxes is as follows:
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 -------- ------- ------ Current: Federal............................................... $ (3,124) $ 6,337 $1,346 State................................................. 392 1,158 437 Foreign............................................... 30 864 194 -------- ------- ------ (2,702) 8,359 1,977 -------- ------- ------ Deferred: Federal............................................... (13,198) (478) 2,121 State................................................. (2,954) (80) 515 Foreign............................................... (41) (2) -- -------- ------- ------ (16,193) (560) 2,636 -------- ------- ------ Income tax provision (benefit) for continuing operations....................................... (18,895) 7,799 4,613 -------- ------- ------ Tax expense (benefit) on discontinued operations........ (2,150) (1,261) 4,355 Tax benefit on change in accounting principle........... -- -- (592) Tax benefit on extraordinary item....................... -- (2,073) -- -------- ------- ------ Total provision (benefit)........................ $(21,045) $ 4,465 $8,376 ======== ======= ======
The components of income from continuing operations before income taxes, cumulative effect of change in accounting principle and extraordinary item were as follows:
YEAR ENDED DECEMBER 31, ---------------------------- 2001 2000 1999 -------- ------- ------- Domestic............................................... $(37,844) $ 9,280 $11,000 Foreign................................................ 4,295 8,153 1,173 -------- ------- ------- Income (loss) from continuing operations before income taxes provision (benefit), cumulative effect of change in accounting principle and extraordinary item................................................. $(33,549) $17,433 $12,173 ======== ======= =======
34 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reconciliation between the statutory income tax rate and effective tax rate is summarized below:
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 -------- ------- ------ U.S. Federal statutory rate at 35%.......................... $(11,742) $ 6,102 $4,261 State taxes, net of federal effect.......................... (1,665) 701 619 Foreign taxes............................................... (1,001) (1,992) (218) Nondeductible expenses...................................... 52 412 142 Nondeductible amortization of intangibles................... 1,407 1,268 1,220 Nondeductible compensation expense (income)................. (3,638) 28 (540) Other....................................................... (2,308) 1,280 (871) -------- ------- ------ $(18,895) $ 7,799 $4,613 ======== ======= ======
The tax effects of significant temporary differences representing deferred tax assets and liabilities are as follows:
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 ------- ------- ------- Deferred tax assets: Accounts receivable reserves.............................. $ 1,518 $ 862 $ 1,110 Inventories............................................... 5,419 5,742 5,872 Accrued liabilities not yet deductible.................... 8,291 8,849 194 Net operating loss carryforward........................... 17,786 -- 6,402 AMT credit carryforward................................... 2,936 5,286 1,858 Postretirement benefits................................... 2,562 2,638 2,690 Capital loss.............................................. -- 3,213 -- Other..................................................... 315 315 215 ------- ------- ------- 38,827 26,905 18,341 Valuation allowance....................................... -- (3,213) -- ------- ------- ------- 38,827 23,692 18,341 Deferred tax liabilities: Depreciation and amortization............................. 12,401 15,609 24,677 ------- ------- ------- Net deferred tax asset (liability)..................... $26,426 $ 8,083 $(6,336) ======= ======= =======
The Company's net operating loss expires in periods ranging from the year 2010 through the year 2021. The Company has no present intention of remitting undistributed earnings of its foreign subsidiaries and, accordingly, no deferred tax liability has been established relative to these earnings. In connection with the Wire Harness Sale, the Company agreed to indemnify Viasystems for any current or future liabilities associated with the IRS Examination. During the fourth quarter of 2000, the Company and Viasystems reached a settlement with the IRS related to the IRS Examination and agreed to pay $2,026 (see Note 6 for further discussion of the Wire Harness Sale). 9. IMPAIRMENT, UNUSUAL AND PLANT CLOSING CHARGES During the first quarter of 2001, the Company announced its plan for a realignment of its insulated wire production and initiated the closure of three of its manufacturing facilities located in Alabama and Indiana. 35 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During the second quarter of 2001, the Company announced the closures of two additional facilities, the third and final Alabama facility and a second plant in Indiana. In the third quarter of 2001, the Company announced the consolidation of certain selling, general and administrative functions as well as a corporate reorganization. In the fourth quarter of 2001, the Company announced its plan for a realignment and consolidation of its bare wire production and initiated the closure of two facilities located in Arkansas. In addition, the Company announced other administrative reorganizations in the fourth quarter. The Company completed the closure of six of the facilities by the end of 2001, with one facility in Alabama expected to remain open through mid 2002. The production capacity from the closed locations was primarily transferred and consolidated into the Company's existing manufacturing facilities in Indiana, Texas and New York, which were expanded, as necessary, to accommodate the production transfer. In addition to the plant consolidations announced during the year, the Company purchased an existing plant site for a "greenfield" insulated wire operation in Mexico. This plant is located in Durango, Mexico, which is approximately 600 miles south of the U.S./Mexican border. The startup of this Mexican facility began in the third quarter of 2001, and the Company anticipates that the plant will begin production by mid 2002. As a result of these actions, 204 employees have been terminated and the Company anticipates an additional 38 will be terminated upon completion of the restructuring plan, all of whom have been notified by the Company. The one-time unusual charges from plant closures, selling, general and administrative headcount reductions and the corporate reorganization that was charged to impairment, unusual and plant closing costs for the year ended December 31, 2001 were $7,387. In 2000, the Company recorded a one-time unusual charge of $650 for severance costs related to the relocation of certain administrative functions. A summary of activity related to plant closings is as follows:
CURRENT PERIOD ACTIVITY BALANCE AT --------------------------------- BALANCE AT DECEMBER 31, INSULATED BARE WIRE DECEMBER 31, 2000 CORPORATE PRODUCTS PRODUCTS 2001 ------------ --------- --------- --------- ------------ Balance, beginning of period........... $ -- $ 626 $ -- $ -- $ 626 Charges to operations: Facility shut-down costs............. -- 396 1,506 1,579 3,481 Personnel and severance costs........ 650 2,104 1,581 221 3,906 ---- ------- ------- ------ ------- 650 2,500 3,087 1,800 7,387 ---- ------- ------- ------ ------- Cash payments: Facility shut-down costs............. -- (36) (766) (268) (1,070) Personnel and severance costs........ (24) (1,170) (1,081) (164) (2,415) ---- ------- ------- ------ ------- (24) (1,206) (1,847) (432) (3,485) ---- ------- ------- ------ ------- Balance, end of period................. $626 $ 1,920 $ 1,240 $1,368 $ 4,528 ==== ======= ======= ====== =======
In addition to the accruals for plant closings the Company incurred additional one-time unusual costs incremental to its on-going operations of $5,758 related to plant consolidations that was included in cost of goods sold for year ended December 31, 2001. These costs include inefficiencies incurred during the transition of production capacity and other incremental costs related to the transferred production lines. In connection with the plant consolidations in 2001, the Company performed an analysis of the closed facilities and the machinery and equipment that was not moved and consolidated into existing facilities. Based on the results of this analysis, the Company recorded a non-cash impairment loss of $5,468 which represented the difference between management's estimate of the fair market value of the remaining facilities and equipment and the carrying value of those assets. 36 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. RETIREMENT BENEFITS AND STOCK OPTION PLANS The Company sponsors a number of defined contribution retirement plans, which provide retirement benefits for eligible employees. Company contribution expense related to these retirement plans for the years ended December 31, 2001, 2000 and 1999 amounted to approximately $1,449, $3,039 and $3,576, respectively. Holding's Qualified and Non-Qualified Stock Option Plan (the "Option Plan") provides for the granting of up to 4,795,322 shares of common stock to officers and key employees of Holding and the Company. Under the Option Plan, options granted approximate market value of the common stock at the date of grant. Such options vest ratably over a five-year period commencing on the first anniversary date after the date of grant, and vested options are exercisable at the discretion of the committee appointed to administer the Option Plan. Generally, an option may be exercised only if the holder is an officer or employee of Holding or the Company at the time of exercise. Options granted under the Option Plan are not transferable, except by will and the laws of descent and distribution. Holding and the Company also granted Performance Options (the "Performance Options") to certain key executives in 1996 and 1995. The Performance Options are exercisable only on the occurrence of certain events. The exercise price for the Performance Options is initially equal to $1.00 per share and, effective each anniversary of the grant date, the per share exercise price for the Performance Options is equal to the per share exercise price for the prior year multiplied by 1.09. The Performance Options terminate on the tenth anniversary date of the date of grant. In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for the Option Plan. Accordingly, no compensation cost has been recognized for the Option Plan and the Performance Options. There may be compensation expense in future periods to the extent that the fair value of the stock exceeds the exercise price of the Performance Options. Had compensation cost for the Option Plan and the Performance Options been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, the Company's net income (loss) would approximate the following:
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 -------- ------ ------- As reported............................................. $(17,504) $6,730 $13,106 Pro forma............................................... $(17,743) $6,489 $12,918
The minimum value of each option grant is estimated on the date of grant with the following assumptions: (i) risk-free interest rates of 6.4% and 6.0% in 2000 and 1999, respectively; and (ii) expected life of 10 years. There were no options granted during the year ended December 31, 2001. The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. Additional awards in future years are anticipated. 37 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Changes in the status of the Option Plan are summarized below:
WEIGHTED AVERAGE EXERCISE PRICE OPTIONS OPTIONS PER SHARE GRANTED VESTED ---------------- ---------- --------- December 31, 1998..................................... $1.14 4,396,452 1,921,452 Granted............................................. $2.24 400,000 -- Vested.............................................. $1.11 -- 755,000 Exercised........................................... $1.40 (30,000) (30,000) Forfeitures......................................... $1.33 (570,000) (140,000) ---------- --------- December 31, 1999..................................... $1.22 4,196,452 2,506,452 Granted............................................. $2.24 420,000 -- Vested.............................................. $1.22 -- 809,584 Exercised........................................... $1.00 (66,250) (66,250) Forfeitures......................................... $1.67 (365,689) (5,273) ---------- --------- December 31, 2000..................................... $1.29 4,184,513 3,244,513 Granted............................................. -- -- -- Vested.............................................. $1.33 -- 264,000 Forfeitures......................................... $1.67 (1,035,274) (590,274) ---------- --------- December 31, 2001..................................... $1.16 3,149,239 2,918,239 ========== =========
The weighted average grant-date fair value of options granted during 2000 and 1999 was $1.20 and $1.26, respectively. There were no options granted during 2001. Of the 3,149,239 options outstanding under the Option Plan at December 31, 2001, 2,530,000 have an exercise price at $1.00 per share, 170,000 at $1.40 per share, 34,239 at $1.63 per share, 200,000 at $1.81 per share and 215,000 at $2.24 per share and have remaining contractual lives of between 4 and 9 years. The weighted average exercise price of options vested at December 31, 2001 is $1.10 per share. Changes in the status of the Performance Options are summarized below:
WEIGHTED AVERAGE EXERCISE PRICE OPTIONS OPTIONS PER SHARE GRANTED VESTED ---------------- --------- ------- December 31, 1998................................. $1.26 3,852,516 -- Reissued........................................ $1.26 350,228 -- --------- ---- December 31, 1999................................. $1.38 4,202,744 -- ========= ==== Granted......................................... $ -- -- -- --------- ---- December 31, 2000................................. $1.50 4,202,744 -- ========= ==== Granted......................................... $ -- -- -- --------- ---- December 31, 2001................................. $1.64 4,202,744 -- ========= ====
Of the Performance Options outstanding at December 31, 2001, 2,966,178 and 1,236,566 have exercise prices of $1.68 and $1.54 respectively, and have weighted average remaining contractual lives of between 4 and 5 years. Certain performance options were forfeited in 1998 and were reissued to certain officers of the Company in 1999. 38 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In addition to the options granted to officers and key employees through the Option Plan, the Company also granted options to purchase 300,000 shares of Holding Common Stock at $1.00 per share to directors of the Company. These options were issued and vested in 1995. Holding Class A common stock may be converted into shares of Holding common stock (i) at the option of any holder thereof at any time, (ii) at the option of Holding upon the occurrence of a Triggering Event (as defined), and (iii) mandatorily at March 31, 2005. Each share of Holding's Class A common stock is convertible into a fraction of a share of Holding common stock based on a formula set forth in the Company's Certificate of Incorporation. During the years ended December 31, 2001, 2000 and 1999, the Company recorded non-cash compensation expense (income) of ($10,393), $80 and ($1,542), respectively, which reflects the difference between the cost of the Class A common stock and the value as converted Holding Common Stock at those dates. 11. COMMITMENTS AND CONTINGENCIES The Company leases certain property, transportation vehicles and other equipment. Total rental expense under operating leases was $5,012, $5,861 and $5,488 for the years ended December 31, 2001, 2000 and 1999, respectively. Future minimum lease payments under capital and operating leases for the years ended December 31 are:
CAPITAL OPERATING ------- --------- 2002........................................................ $1,569 $2,885 2003........................................................ 1,418 2,065 2004........................................................ 415 1,652 2005........................................................ 201 932 2006........................................................ 210 640 Thereafter.................................................. 988 321 ------ ------ Total minimum lease payments.............................. 4,801 $8,495 ====== Less amount representing interest......................... (473) ------ Present value of net minimum lease payments............... $4,328 ======
The Company is subject to legal proceedings and claims that arise in the normal course of business. In the opinion of management, the ultimate liabilities with respect to these actions will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. 12. BUSINESS SEGMENT INFORMATION The Company conducts its operations through one business segment. The following is sales and long-lived asset information by geographic area as of and for the years ended December 31:
SALES LONG-LIVED ASSETS ------------------------------ ------------------- 2001 2000 1999 2001 2000 -------- -------- -------- -------- -------- United States........................... $367,211 $498,850 $460,904 $318,040 $325,117 Foreign................................. 57,919 65,400 20,761 37,078 34,344 -------- -------- -------- -------- -------- $425,130 $564,250 $481,665 $355,118 $359,461 ======== ======== ======== ======== ========
39 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Foreign sales are based on the country in which the legal subsidiary is domiciled. Sales from no single foreign country were material to the consolidated sales of the Company. 13. LITIGATION The Company is a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to the operations of the Company. The Company does not believe that such proceedings and actions would materially affect the Company. During 2001, the Company reached settlements with various claimants, including certain claims related to product liability claims of the Company's former Wire Harness Segment. See Note 6 for a further discussion of these claims. 14. GUARANTOR SUBSIDIARIES The Senior Notes are fully and unconditionally (as well as jointly and severally) guaranteed on an unsecured, senior subordinated basis by each subsidiary of the Company other than the Non-Guarantor Subsidiaries. Each of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries is wholly owned by the Company. The following condensed, consolidating financial statements of the Company include the accounts of the Company, the combined accounts of the Guarantor Subsidiaries and the combined accounts of the Non-Guarantor Subsidiaries. Given the size of the Non-Guarantor Subsidiaries relative to the Company on a consolidated basis, separate financial statements of the respective Guarantor Subsidiaries are not presented because management has determined that such information is not material in assessing the Guarantor Subsidiaries. 40 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2001 -------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ------------ ASSETS Cash.................................. $ -- $ 5,306 $ 2,711 $ -- $ 8,017 Accounts receivable................... -- 49,843 12,657 -- 62,500 Inventories........................... -- 48,722 9,479 -- 58,201 Other current assets.................. -- 27,468 639 -- 28,107 -------- -------- ------- --------- -------- Total current assets........... -- 131,339 25,486 -- 156,825 Property, plant and equipment, net.... -- 113,706 25,078 -- 138,784 Investment in subsidiaries............ 442,414 -- -- (442,414) -- Intangible and other assets........... 30,479 173,855 12,000 -- 216,334 -------- -------- ------- --------- -------- Total assets................... $472,893 $418,900 $62,564 $(442,414) $511,943 ======== ======== ======= ========= ======== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Current liabilities................... $ 4,539 $ 62,292 $ 5,454 $ -- $ 72,285 Long term obligations, less current maturities.......................... 310,285 18,458 -- -- 328,743 Other long-term liabilities........... -- 32,264 1,070 -- 33,334 Intercompany (receivable) payable..... 9,231 (57,784) 48,553 -- -- -------- -------- ------- --------- -------- Total liabilities.............. 324,055 55,230 55,077 -- 434,362 Stockholder's equity (deficit): Common stock........................ 0 0 0 0 0 Contributed capital................. 236,331 308,993 -- (308,993) 236,331 Carryover of predecessor basis...... -- (67,762) -- -- (67,762) Retained earnings (accumulated deficit)......................... (87,493) 122,439 10,982 (133,421) (87,493) Other comprehensive loss............ -- -- (3,495) -- (3,495) -------- -------- ------- --------- -------- Total stockholder's equity (deficit)................... 148,838 363,670 7,487 (442,414) 77,581 -------- -------- ------- --------- -------- Total liabilities and stockholder's equity (deficit)................... $472,893 $418,900 $62,564 $(442,414) $511,943 ======== ======== ======= ========= ========
41 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001 -------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ------------ Net sales............................. $ -- $367,211 $57,919 $ -- $425,130 Operating expenses: Cost of goods sold.................. -- 295,572 43,723 -- 339,295 Selling, general and administrative expenses, including non-cash compensation income of $(10,393)........................ -- 19,259 4,238 -- 23,497 Depreciation and amortization....... 576 31,834 4,065 -- 36,475 Inventory valuation................. -- 10,000 -- -- 10,000 Gain (loss) on sale of property, plant and equipment.............. -- 936 (1,280) -- (344) Unusual item........................ -- 12,855 -- -- 12,855 -------- -------- ------- ------- -------- Operating income (loss)............... (576) (3,245) 7,173 -- 3,352 Other income (expense): Interest expense.................... 1,757 (35,714) (1,280) -- (35,237) Amortization of deferred financing costs............................ (1,346) -- -- -- (1,346) Other............................... -- -- (318) -- (318) Equity in net income (loss) of Subsidiaries..................... (17,339) -- -- 17,339 -- -------- -------- ------- ------- -------- Income (loss) from continuing operations before income tax provision (benefit)................. (17,504) (38,959) 5,575 17,339 (33,549) Income tax provision (benefit)........ -- (19,337) 442 -- (18,895) -------- -------- ------- ------- -------- Income (loss) from continuing operations before extraordinary item................................ (17,504) (19,622) 5,133 17,339 (14,654) Income (loss) from discontinued operations, net of income tax benefit of $1,261................... -- (2,850) -- -- (2,850) -------- -------- ------- ------- -------- Net income (loss)..................... $(17,504) $(22,472) $ 5,133 $17,339 $(17,504) ======== ======== ======= ======= ========
42 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------- --------- --------- ------------ ------------ Net cash from operating activities.... $ 111 $ (2,614) $ 6,433 $ -- $ 3,930 Cash flows used in investing activities: Capital expenditures................ -- (18,007) (7,961) -- (25,968) Proceeds............................ -- 2,533 -- -- 2,533 ------- -------- ------- ------------ -------- Net cash used in investing activities.......................... -- (15,474) (7,961) -- (23,435) ------- -------- ------- ------------ -------- Cash flows provided by (used in) financing activities: Repayment of long-term obligations...................... (2,644) 614 -- -- (2,030) Financing fees and other............ -- (2,459) -- -- (2,459) ------- -------- ------- ------------ -------- Net cash from (used in) financing activities.......................... (2,644) (1,845) -- -- (4,489) ------- -------- ------- ------------ -------- Effect of exchange rate changes on cash and cash equivalents........... -- -- (233) -- (233) ------- -------- ------- ------------ -------- Net change in cash.................... $(2,533) $(19,933) $(1,761) $ -- $(24,227) ======= ======== ======= ============ ========
43 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000 -------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ------------ ASSETS Cash.................................. $ -- $ 27,772 $ 4,472 $ -- $ 32,244 Accounts receivable................... -- 66,362 15,977 -- 82,339 Inventories........................... -- 73,573 9,954 -- 83,527 Other current assets.................. -- 26,937 1,226 -- 28,163 -------- -------- ------- --------- -------- Total current assets........... -- 194,644 31,629 -- 226,273 Property, plant and equipment, net.... -- 127,661 20,753 -- 148,414 Investment in subsidiaries............ 461,033 -- -- (461,033) -- Intangible and other assets........... 8,357 189,099 13,591 -- 211,047 -------- -------- ------- --------- -------- Total assets................... $469,390 $511,404 $65,973 $(461,033) $585,734 ======== ======== ======= ========= ======== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) Current liabilities................... $ 5,942 $ 84,003 $10,183 $ -- $100,128 Long term obligations, less current maturities.......................... 313,049 18,072 -- -- 331,121 Other long-term liabilities........... -- 45,472 1,264 -- 46,736 Intercompany (receivable) payable..... (26,336) (10,589) 36,925 -- -- -------- -------- ------- --------- -------- Total liabilities.............. 292,655 136,958 48,372 -- 477,985 Stockholder's equity (deficit): Common stock........................ 0 0 0 0 0 Contributed capital................. 246,724 297,106 11,887 (308,993) 246,724 Carryover of predecessor basis...... -- (67,762) -- -- (67,762) Retained earnings (accumulated deficit)......................... (69,989) 145,102 6,938 (152,040) (69,989) Other comprehensive loss............ -- -- (1,224) -- (1,224) -------- -------- ------- --------- -------- Total stockholder's equity (deficit)................... 176,735 374,446 17,601 (461,033) 107,749 -------- -------- ------- --------- -------- Total liabilities and stockholder's equity (deficit)................... $469,390 $511,404 $65,973 $(461,033) $585,734 ======== ======== ======= ========= ========
44 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000 -------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ------------ Net sales............................. $ -- $498,850 $65,400 $ -- $564,250 Operating expenses: Cost of goods sold.................. -- 372,082 47,090 -- 419,172 Selling, general and administrative expenses, including non-cash compensation expense of $80...... 80 42,642 4,401 -- 47,123 Depreciation and amortization....... 637 31,624 3,945 -- 36,206 Loss on sale of property, plant and equipment........................ -- 543 -- -- 543 Unusual item........................ -- 650 -- -- 650 -------- -------- ------- -------- -------- Operating income (loss)............... (717) 51,309 9,964 -- 60,556 Other income (expense): Interest expense.................... (38,064) (1,050) (1,690) -- (40,804) Amortization of deferred financing costs............................ (2,097) -- -- -- (2,097) Other............................... (209) 108 (121) -- (222) Equity in net income of subsidiaries..................... 47,817 -- -- (47,817) -- -------- -------- ------- -------- -------- Income from continuing operations before income tax provision (benefit) and extraordinary item.... 6,730 50,367 8,153 (47,817) 17,433 Income tax provision.................. -- 6,937 862 -- 7,799 -------- -------- ------- -------- -------- Income from continuing operations before extraordinary item........... 6,730 43,430 7,291 (47,817) 9,634 Income from discontinued operations, net of income tax benefit of $1,261.............................. -- (10,940) 10,783 -- (157) -------- -------- ------- -------- -------- Income before cumulative effect of change in accounting principle...... 6,730 32,490 18,074 (47,817) 9,477 Extraordinary item, net of tax benefit of $2,073........................... -- (2,747) -- -- (2,747) -------- -------- ------- -------- -------- Net income............................ $ 6,730 $ 29,743 $18,074 $(47,817) $ 6,730 ======== ======== ======= ======== ========
45 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000 --------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED --------- --------- --------- ------------ ------------ Net cash from operating activities... $ (8,927) $ 33,796 $ 3,954 $ 5,787 $ 34,610 --------- -------- ------- ------- --------- Cash flows used in investing activities: Acquisitions, net of cash.......... -- (3,861) -- -- (3,861) Capital expenditures by continuing operations...................... -- (17,799) (4,670) -- (22,469) Proceeds from sale of property, plant and equipment............. -- 9,147 -- -- 9,147 Capital expenditures by discontinued operations......... -- (125) (857) -- (982) --------- -------- ------- ------- --------- Net cash used in investing Activities......................... -- (12,638) (5,527) -- (18,165) --------- -------- ------- ------- --------- Cash flows provided by (used in) financing activities: Equity proceeds.................... 66 -- 5,787 (5,787) 66 Repayment of long-term obligations..................... (199,738) (517) -- -- (200,255) Cash proceeds from sale of Wire Harness Segment, net of fees.... 209,298 -- -- -- 209,298 Financing fees and other........... (699) -- -- -- (699) --------- -------- ------- ------- --------- Net cash from (used in) financing activities......................... 8,927 (517) 5,787 (5,787) 8,410 --------- -------- ------- ------- --------- Effect of exchange rate changes on cash and cash equivalents.......... -- -- (36) -- (36) --------- -------- ------- ------- --------- Net change in cash................... $ -- $ 20,641 $ 4,178 $ -- $ 24,819 ========= ======== ======= ======= =========
46 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 -------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ------------ Net sales............................ $ -- $460,904 $20,761 $ -- $481,665 Operating expenses: Cost of goods sold................. -- 331,372 15,603 -- 346,975 Selling, general and administrative expenses, including non-cash compensation income of $1,542.......................... (1,542) 41,494 552 -- 40,504 Depreciation and amortization...... 635 31,491 3,411 -- 35,537 -------- -------- ------- -------- -------- Operating income (loss).............. 907 56,547 1,195 -- 58,649 Other income (expense): Interest expense................... (42,989) (944) (22) -- (43,955) Amortization of deferred financing costs........................... (2,521) -- -- -- (2,521) Equity in net income of subsidiaries.................... 57,709 -- -- (57,709) -- -------- -------- ------- -------- -------- Income from continuing operations before income tax provision (benefit) and cumulative effect of change in accounting principle..... 13,106 55,603 1,173 (57,709) 12,173 Income tax provision................. -- 4,420 193 -- 4,613 -------- -------- ------- -------- -------- Income (loss) from continuing operations before cumulative effect of change in accounting principle.......................... 13,106 51,183 980 (57,709) 7,560 Income from discontinued operations, net of income tax of $4,355........ -- 759 5,605 -- 6,364 -------- -------- ------- -------- -------- Income (loss) before cumulative effect of change in accounting principle.......................... 13,106 51,942 6,585 (57,709) 13,924 Cumulative effect of change in accounting for start-up costs, net of tax benefit of $592............. -- (818) -- -- (818) -------- -------- ------- -------- -------- Net income........................... $ 13,106 $ 51,124 $ 6,585 $(57,709) $ 13,106 ======== ======== ======= ======== ========
47 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 -------------------------------------------------------------- TOTAL TOTAL NON- COMPANY GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ------------ Net cash from operating activities.... $ (7,772) $ 50,195 $ 4,303 $ 4,749 $ 51,475 Cash flows used in investing activities: Acquisitions, net of cash........... -- (20,000) -- -- (20,000) Capital expenditures by continuing operations....................... -- (17,652) (2,231) -- (19,883) Capital expenditures by discontinued operations....................... -- (4,444) (6,179) -- (10,623) -------- -------- ------- ------- -------- Net cash used in investing activities.......................... -- (42,096) (8,410) -- (50,506) -------- -------- ------- ------- -------- Cash flows provided by (used in) financing activities: Equity proceeds..................... 42 -- 4,749 (4,749) 42 Repurchase of stock of Holding...... (230) -- -- -- (230) Proceeds from issuance of long-term obligations...................... 25,000 -- -- -- 25,000 Borrowing (repayment) of long-term obligations and revolver......... (14,945) (968) (348) -- (16,261) Financing fees and other............ (2,095) -- -- -- (2,095) -------- -------- ------- ------- -------- Net cash from (used in) financing activities.......................... 7,772 (968) 4,401 (4,749) 6,456 -------- -------- ------- ------- -------- Net change in cash.................... $ -- $ 7,131 $ 294 $ -- $ 7,425 ======== ======== ======= ======= ========
48 INTERNATIONAL WIRE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL COLLECTION OF ACCOUNTS -- DEDUCTED FROM BALANCE AT PREVIOUSLY ACQUISITIONS BALANCE AT ACCOUNTS RECEIVABLES IN THE BEGINNING WRITTEN OFF AND END OF BALANCE SHEET OF PERIOD PROVISION WRITE-OFFS ACCOUNTS DISPOSALS PERIOD --------------------------- ---------- --------- ---------- ------------- ------------ ---------- (IN THOUSANDS) Year ended December 31, 1999....... $2,633 $ 679 $(608) $-- $ 175 $2,879 Year ended December 31, 2000....... $2,879 $ 555 $(228) $-- $(446) $2,760 Year ended December 31, 2001....... $2,760 $2,183 $(878) $-- $ -- $4,065
49 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Set forth below are the names and positions of the directors and executive officers of Holding and the Company. All directors hold office until the next annual meeting of stockholders of Holding and the Company, and until their successors are duly elected and qualified. All officers serve at the pleasure of the Board of Directors.
NAME AGE POSITION(S) ---- --- ----------- Charles W. Tate................ 57 Chairman of the Board of Holding and the Company David M. Sindelar.............. 44 Chief Executive Officer, President and Director of Holding and Chief Executive Officer and Director of the Company Jack D. Furst.................. 43 Director of Holding and the Company John A. Gavin.................. 70 Director of Holding and the Company Thomas P. Danis................ 55 Director of Holding and the Company Richard W. Vieser.............. 74 Director of Holding and the Company Joseph M. Fiamingo............. 52 Chairman and Director of Holding and the Company Rodney D. Kent................. 54 Director of Holding and Director, President and Chief Operating Officer of the Company Glenn J. Holler................ 54 Senior Vice President and Chief Financial Officer of Holding and the Company Donald F. DeKay................ 47 Vice President -- Finance of the Company Chrysant E. Makarushka......... 61 Vice President -- Purchasing and Logistics of the Company
Charles W. Tate was named Chairman of the Board of Holding and the Company in February 2002. He also served as a Director of Holding and the Company since April 1995. Mr. Tate is a Partner of Hicks Muse. Before joining Hicks Muse as a Managing Director and Principal in 1991, Mr. Tate had over 19 years of experience in investment and merchant banking with Morgan Stanley & Co. Incorporated, including ten years in the mergers and acquisitions department and the last two and one-half years as a Managing Director in Morgan Stanley & Co. Incorporated's merchant banking group. Mr. Tate also serves as a director of International Outdoor Advertising Holding Company, International Seed Holdings ApS, Venezuela Cable Service Holding Ltd., Stoneville Pedigreed Seed Company, Mahendra Hybrid Seeds Limited and four companies in Mexico (Vidrio Formas, S.A. de C.V., Grupo Minsa, S.A. de C.V., Almacenadora Mercader S.A., and Fomento e Ingenieria en Comercializacion, S.A. de C.V.), Claxson Interactive Group, Hillsdown Holdings Limited and Ibero-American Media Partners II Ltd. David M. Sindelar has been Chief Executive Officer and President of Holding and Chief Executive Officer of the Company since July 2001 and a Director of Holding and the Company since August 2001. He also served as Senior Vice President and Chief Financial Officer of the Company and of Holding from April 1995 through July 2001. Mr. Sindelar also serves as Chief Executive Officer of Viasystems Group, Inc. and LLS Corp. In January 2002, LLS Corp. voluntarily filed petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Mr. Sindelar is a director of LLS Corp. Mr. Sindelar was Senior Vice President and Chief Financial Officer of Berg Electronics Corp. from March 1993 through October 1998 and of Crain Industries, Inc. and Crain Holdings Corp. from August 1995 through December 1997 and of Jackson Holding Company from February 1993 through August 1995. 50 Jack D. Furst is a Director of Holding and the Company and has held such positions since April 1995. Mr. Furst is a Partner of Hicks Muse and has held such position since 1989. Mr. Furst has approximately 18 years of experience in leveraged acquisitions and private investments. At Hicks Muse, Mr. Furst is involved in all aspects of its business and has been actively involved in originating, structuring and monitoring its investments. Mr. Furst is primarily responsible for managing the relationship with Hanley Partners, formerly Mills & Partners. Prior to joining Hicks Muse, Mr. Furst was a Vice President and subsequently a Partner of Hicks & Haas Incorporated, a Dallas based private investment firm from 1987 to May 1989. From 1984 to 1986, Mr. Furst was a merger and acquisition/corporate finance specialist for The First Boston Corporation in New York. Before joining First Boston, Mr. Furst was a financial consultant at Price Waterhouse. Mr. Furst serves on the board of directors of Cooperative Computing, Inc., Globix Corporation, International Seed Holdings, Home Interiors & Gifts, Inc., Microtune, Inc., The Realm, Inc., Viasystems Group, Inc. and LLS Corp. John A. Gavin is a director of Holding and the Company and has held such positions since June 1995. Mr. Gavin is the founder and Chairman of the Board of Gamma Holdings, an international capital and consulting firm established in 1968. He is a member of the Latin America Strategy Board of Hicks Muse and was a Partner and Managing Director of Hicks, Muse, Tate & Furst (Latin America), incorporated from 1995 through 2001. From 1987 to 1990, Mr. Gavin was President of Univisa Satellite Communications, a part of a Spanish-speaking broadcast network. Prior thereto, Mr. Gavin served as a Vice President of Atlantic Richfield Company from 1986 and a director from 1988. From 1981 to 1986, Mr. Gavin served as the United States Ambassador to Mexico. Mr. Gavin also serves as a director of Apex Mortgage Capital, and Claxson, S.A. and as a Director and Trustee of The TCW Galileo Funds, The Hotchkis and Wiley Funds and Causeway Capital Management. Thomas P. Danis is a director of Holding and the Company and has held such positions since June 1995. Mr. Danis is an executive officer of Aon Group a company engaged in the insurance brokerage business headquartered in Chicago, Illinois. In 1979, Mr. Danis co-founded an insurance brokerage firm, a joint venture with Corroon & Black. He then joined AON Group in 1992 where he has held several executive positions. Mr. Danis also serves as a director of several mid-market companies. Richard W. Vieser is a director of Holding and the Company and has held such positions since September 1995. Mr. Vieser is the retired Chairman of the Board, Chief Executive Officer and President of Lear Siegler, Inc. (a diversified manufacturing company), the former Chairman of the Board and Chief Executive Officer of FL Industries, Inc. and FL Aerospace (also diversified manufacturing companies) and the former President and Chief Operating Officer of McGraw-Edison Co. He is the Chairman of the Board of Varian Medical Systems and is also a director of Harvard Industries, Inc., Viasystems Group, Inc. and Apogent Technologies, Inc. (formally Sybron International Corporation). Joseph M. Fiamingo is Chairman of Holding and the Company and has held such positions since May 2000. Mr. Fiamingo also serves as a director of Holding and the Company and has held such positions since October 1996. Previously, Mr. Fiamingo held the position of President and Chief Operating Officer of the Company from September 1996, Vice President of Operations and Technology of the Company from June 1996 and President and Chief Operating Officer of Wirekraft from October 1995. Mr. Fiamingo also serves as President and Chief Operating Officer of LLS Corp. In January 2002, LLS Corp. voluntarily filed petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Prior thereto, Mr. Fiamingo was employed by General Cable Corporation from 1972 to 1995 where he held various senior management level positions including President and Vice President and General Manager of several divisions of General Cable and most recently, Executive Vice President of Operations. Rodney D. Kent is President and Chief Operating Officer of the Company and has held such positions since May 2000. Mr. Kent also serves as a director of Holding and the Company. Prior to being named as President and Chief Operating Officer, Mr. Kent served as President of the Company's Bare Wire division since April 1995. Mr. Kent also serves as President and Chief Executive Officer of Omega and has held such positions since 1983. Mr. Kent served as Assistant to the President of Omega from 1974 to 1983. Prior to 51 joining Omega, Mr. Kent was employed with Flexo Wire from 1973 to 1974 and Camden Wire Company from 1970 to 1973. Mr. Kent also serves as a director of Oneida Savings Bank. Glenn J. Holler was named Senior Vice President & Chief Financial Officer of Holding and the Company in July 2001. He also served as Vice President -- Finance from August 1996 through July 2001. Prior to joining the Company, Mr. Holler was employed by Vigoro Industries, Inc. as Vice President, Finance from 1994 to 1996. From 1983 to 1994, Mr. Holler held several positions at Moog Automotive, Inc. including Vice President -- Finance and Senior Vice President -- Finance. Donald F. DeKay is Vice President -- Finance of the Company and has held such position since July 2001. Prior to being named Vice President -- Finance of the Company, Mr. DeKay served as Vice President -- Finance of the Company's Bare Wire division since April 1995. Mr. DeKay served as Vice President -- Finance of Omega from 1988 to 1995 and Controller of Omega from 1983 to 1988. Prior to joining the Company, Mr. DeKay was employed by Price Waterhouse from 1978 to 1983. Chrysant E. Makarushka is Vice President -- Purchasing and Logistics and has held such position since July 2000. Prior to being named Vice President -- Purchasing and Logistics, Mr. Makarushka served as Director of Metals Management for the Company from 1995 to 2000. Mr. Makarushka served as Director of Procurement and Human Resources for Omega from 1989 to 1995. Prior to joining the Company, Mr. Makarushka was employed by Rome Cable from 1981 to 1989. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the cash and non-cash compensation earned by the Chief Executive Officer, the former Chief Executive Officer and the four other most highly compensated executive officers of Holding and the Company (the "Named Executive Officers"). Such compensation was paid by or on behalf of the Company during the years ended December 31, 2001, 2000 and 1999. The bonuses included in annual compensation were paid subsequent to year-end. As of the date hereof, the Company has not granted any stock appreciation rights. SUMMARY ANNUAL COMPENSATION
LONG-TERM COMPENSATION AWARDS SECURITIES UNDERLYING ALL OTHER YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1) ---- --------- -------- ------------ ------------------ David M. Sindelar....................... 2001 300,000 -- -- -- Chief Executive Officer and 2000 300,000 300,000 -- -- President of Holding and Chief 1999 300,000 300,000 175,000 -- Executive Officer of the Company Rodney D. Kent.......................... 2001 392,155(2) -- -- 141,201(3) President and Chief Operating Officer 2000 401,745(2) 227,305 -- 132,692(3) of the Company 1999 402,155(2) 227,305 -- 112,583(3) Glenn J. Holler......................... 2001 260,000 -- -- -- Senior Vice President and Chief 2000 250,667 125,345 -- -- Financial Officer of Holding and the 1999 234,667 117,354 -- -- Company Donald F. DeKay......................... 2001 200,200 -- -- -- Vice President -- Finance of 2000 169,659 67,004 -- -- the Company 1999 91,520 38,317 -- -- Chrysant E. Makarushka.................. 2001 168,860 -- -- -- Vice President -- Purchasing and 2000 135,570 27,087 -- -- Logistics of the Company 1999 116,470 23,449 -- --
52
LONG-TERM COMPENSATION AWARDS SECURITIES UNDERLYING ALL OTHER YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1) ---- --------- -------- ------------ ------------------ James N. Mills(4).................. 2001 685,000 -- -- -- Former Chief Executive Officer 2000 685,000 685,000 -- -- of Holding and the Company 1999 685,000 685,000 175,228 --
--------------- (1) The Company provides to certain executive officers, a car allowance, reimbursement for club memberships, insurance policies and certain other benefits. The aggregate incremental cost of these benefits to the Company for each officer do not exceed the lesser of $60,000 or 10% of the total annual salary and bonus reported for each officer. (2) Includes $52,455, $52,045 and $52,455 in annual deferred compensation earned by Mr. Kent in 2001, 2000 and 1999, respectively, pursuant to his employment agreement. (3) Represents (i) $41,867, $44,192 and $34,904 in premiums paid on life insurance policies for the benefit of Mr. Kent in 2001, 2000 and 1999, respectively and (ii) $99,334, $88,090 and $77,679 in annual interest accruals related to deferred compensation earned by Mr. Kent in 2001, 2000 and 1999, respectively, pursuant to his employment agreement. (4) As of July 2001, Mr. Mills resigned as Chief Executive Officer of Holding and the Company. Mr. Mills remained as a Director of Holding and the Company until his resignation in February 2002. Mr. Mills continued to receive his salary throughout the remainder of the year in 2001 in accordance with his employment agreement. OPTION GRANTS IN LAST FISCAL YEAR There were no options granted to Named Executive Officers in the current fiscal year. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES No options were exercised by the Named Executive Officers during fiscal 2001. The following table summarizes the number and value of unexercised options as of December 31, 2001.
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END ACQUIRED ON VALUE --------------------------- --------------------------- EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE NAME (#) ($) ($) (#) ($) ($) ---- ----------- -------- ----------- ------------- ----------- ------------- David M. Sindelar......... -- $0 -- 1,225,804 $0 $0 Rodney D. Kent............ -- $0 400,000 -- $0 $0 Glenn J. Holler........... -- $0 250,000 -- $0 $0 Donald F. DeKay........... -- $0 150,000 -- $0 $0 Chrysant E. Makarushka.... -- $0 75,000 -- $0 $0 James N. Mills............ -- $0 -- 1,576,027 $0 $0
EMPLOYMENT AGREEMENTS David M. Sindelar Employment Agreement. Mr. David M. Sindelar entered into an employment agreement with Holding and the Company on June 12, 1995, which expires on June 11, 2002. The employment agreement is extended automatically for one-year periods provided that neither Mr. Sindelar nor the Company elects to terminate the agreement. Pursuant to such employment agreement, as amended, Mr. Sindelar is required to devote such business time and attention to the transaction of the Company's business as is reasonably necessary to discharge his duties under the employment agreement. Subject to the foregoing limitation on his activities, Mr. Sindelar is free to participate in other business endeavors. 53 The compensation provided to Mr. Sindelar under his employment agreement includes an annual base salary of not less than $150,000, subject to adjustment at the sole discretion of the Board of Directors of Holding, and such benefits as are customarily accorded the executives of Holding and the Company for as long as the employment agreement is in force. In addition, Mr. Sindelar is entitled to an annual bonus in an amount to be determined at the sole discretion of the Board of Directors of Holding. Mr. Sindelar's employment agreement also provides that if Mr. Sindelar's employment is terminated without cause, Mr. Sindelar will continue to receive his then current salary for the longer of the remainder of the employment period or 18 months following such termination. In addition, Mr. Sindelar's employment agreement provides that if Mr. Sindelar is terminated due to death or disability, Mr. Sindelar's estate, heirs, or beneficiaries, as applicable, will receive, in addition to any other benefits provided under any benefit plan, his then current salary for a period of 18 months from the date of termination. Rodney D. Kent Employment Agreement. Mr. Kent entered into an employment agreement with Omega on March 14, 1995. Pursuant to such employment agreement, as amended, Mr. Kent will serve as President and Chief Operating Officer of the Company through March 28, 2003. Mr. Kent is required to devote substantially all of his business time and attention to the performance of his duties under the employment agreement. The employment agreement is extended automatically for one-year periods provided the neither Mr. Kent nor the Company elects to terminate the agreement. The compensation provided to Mr. Kent under his employment agreement includes an annual base salary of not less than $349,700, subject to increase at the sole discretion of the Board of Directors of Omega, and certain other benefits for as long as the employment agreement is in force. In addition, during each year of employment, an additional 15% of the annual base salary is credited to a deferred compensation account for the benefit of Mr. Kent, which deferred compensation account is annually credited with an interest accrual of 8% on the balance of the account for the prior year. Further, Mr. Kent is entitled to an annual bonus in an amount to be determined at the sole discretion of the Chairman of the Board of Holding of up to sixty-five percent of his annual base salary. Mr. Kent's employment agreement also provides that if Mr. Kent's employment is terminated by Omega without cause or due to disability or death, Mr. Kent or his estate, heirs or beneficiaries, as applicable, will receive, in addition to any other benefits provided him or them under any benefit plan, Mr. Kent's then current salary for a period of 24 months from Mr. Kent's termination without cause or his disability or death. In the event that Mr. Kent terminates his employment and receives a bona fide offer of employment from a competitor of the Company, Mr. Kent will receive, in addition to any other benefits provided under any benefit plan, Mr. Kent's then current salary for a period of 24 months from such termination, but only in the event that Omega elects to enforce certain non-competition provisions of the employment agreement. Glenn J. Holler Employment Agreement. Mr. Glenn J. Holler entered into an employment agreement with the Company on November 13, 1999. Pursuant to such employment agreement, as amended, Mr. Holler is required to devote all of his business time and attention to the transaction of the Company's business as is reasonably necessary to discharge his duties under the employment agreement. The employment agreement is extended automatically for one-year periods provided the neither Mr. Holler nor the Company elects to terminate the agreement. The compensation provided to Mr. Holler under his employment agreement includes an annual base salary of not less than $244,000, subject to adjustment at the sole direction of the Chief Executive Officer of Holding, and such benefits as are customarily accorded the executives of the Company for as long as the employment agreement is in force. In addition, Mr. Holler is entitled to an annual bonus in an amount to be determined by the Chief Executive Officer of Holding of up to fifty percent of his base compensation. Mr. Holler's employment agreement also provides that if Mr. Holler's employment is terminated without cause, Mr. Holler will continue to receive his then current salary for one year. In addition, Mr. Holler's employment agreement provides that if Mr. Holler is terminated due to death or disability, Mr. Holler's estate, heirs, or beneficiaries, as applicable, will receive, in addition to any other benefits provided under any benefit plan, his then current salary for a period of six months from the date of termination. 54 James N. Mills Employment Agreement. Mr. James N. Mills entered into an employment agreement with Holding and the Company on June 12, 1995. Pursuant to such employment agreement, as amended, Mr. Mills served as Chief Executive Officer of Holding and the Company through the time of his resignation in July 2001 and Chairman of the Board of Directors of Holding and the Company through his resignation in February 2002. Mr. Mills was required to devote such business time and attention to the transaction of the Company's business as was reasonably necessary to discharge his duties under the employment agreement. Subject to the foregoing limitation on his activities, Mr. Mills was free to participate in other business endeavors. Mr. Mills and his estate, heirs, or beneficiaries, as applicable, in the event of his death, will continue to receive his annual base salary in effect at the time of his resignation of $685,000, as provided in his employment agreement, and such benefits as are customarily accorded the executives of Holding and the Company through December 12, 2002. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Compensation decisions are made by the Board of Directors. Messrs. David M. Sindelar and Rodney D. Kent served as both executive officers and directors during 2001, and are expected to serve in such capacities in 2002. COMPENSATION OF DIRECTORS Directors who are officers, employees or otherwise an affiliate of Holding or the Company receive no compensation for their services as directors. Each director of Holding and the Company who is not also an officer, employee or an affiliate of Holding or the Company (an "Outside Director") will receive an annual retainer of $12,000. Directors of Holding and the Company are entitled to reimbursement of their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the board of directors or committees thereof. BENEFIT PLANS STOCK OPTION PLAN Holding's qualified and non-qualified stock option plan (the "Option Plan") provides for the granting of up to 4,795,322 shares of Holding Common Stock to officers and key employees of Holding and the Company. Under the Option Plan, as of February 28, 2002, Holding has granted options to purchase 3,149,239 shares of Holding common stock, 2,530,000 at $1.00 per share, 170,000 at $1.40 per share, 34,239 at $1.625 per share, 200,000 at $1.81 per share and 215,000 at $2.24 per share, the fair market value of Holding Common Stock at the date of grant as determined by the Board of Directors of Holding. Such options vest ratably over a five-year period commencing on the first anniversary date after the date of grant, subject to acceleration in the discretion of the committee appointed to administer the Option Plan in the event of a Change of Control (as defined in the Option Plan). Generally, an option may be exercised only if the holder is an officer or employee of Holding or the Company at the time of exercise. Options granted under the Option Plan are not transferable, except by will and the laws of descent and distribution. Except as expressly provided otherwise in any optionee's agreement relating to the grant of options under the Option Plan, in the event an optionee's employment with Holding, the Company or a related entity terminates at any time, Holding or its designees shall have the right to repurchase from the optionee (or optionee's representatives) (i) the number of shares of Holding Common Stock acquired upon exercise of an option and (ii) the optionee's right to acquire that number of shares of Holding Common Stock which an optionee can acquire upon exercise immediately prior to such repurchase. The purchase price to be paid is calculated on the basis of the fair market value (as defined in the Option Plan) of Holding Common Stock multiplied by the number of shares of Holding Common Stock to be acquired (less the aggregate exercise price in the event such repurchase option is exercised by Holding with respect to the optionee's right to acquire Holding Common Stock). 55 PERFORMANCE OPTIONS Mr. Mills was granted options ("Performance Options") to purchase 652,921 shares of Common Stock, Mr. Sindelar has been granted Performance Options to purchase 489,691 shares of Common Stock of Holding and Performance Options to purchase 816,150 shares of Common Stock of Holding have been granted to certain officers of the Company During the year ended December 31, 1998, a member of the Company's management forfeited 163,230 Performance Options. In 1999, the Company reissued these Performance Options with the same terms and conditions to Mr. Mills and Mr. Sindelar. Mr. Mills was granted Performance Options to purchase 81,668 shares of Holding Common Stock and Mr. Sindelar was granted Performance Options to purchase 81,562 shares of Holding Common Stock. On June 12, 1995, the Company granted Performance Options to purchase 1,007,416 shares of Holding Common Stock. Mr. Mills was granted Performance Options to purchase 335,804 shares of Holding Common Stock, Mr. Sindelar was granted Performance Options to purchase 251,856 shares of Holding Common Stock and Performance Options to purchase the remaining 419,756 shares of Holding Common Stock were granted to certain officers of the Company who are also affiliated with Mills & Partners. During the year ended December 31, 1998, a member of the Company's management forfeited Performance Options to purchase 83,951 shares of Holding Common Stock. In 1999, the Company reissued these Performance Options with the same terms and conditions to Mr. Mills and Mr. Sindelar. Mr. Mills was granted Performance Options to purchase 42,003 shares of Holding Common Stock and Mr. Sindelar was granted Performance Options to purchase 41,948 shares of Holding Common Stock. On March 5, 1996, the Company granted Performance Options to purchase 1,236,566 shares of Holding Common Stock. Mr. Mills was granted Performance Options to purchase 412,188 shares of Holding Common Stock, Mr. Sindelar was granted Performance Options to purchase 309,143 shares of Holding Common Stock and Performance Options to purchase the remaining 515,235 shares of Holding Common Stock were granted to certain officers of the Company who are also affiliated with Mills & Partners. During the year ended December 31, 1998, a member of the Company's management forfeited Performance Options to purchase 103,047 shares of Holding Common Stock. In 1999, the Company reissued these Performance Options with the same terms and conditions to Mr. Mills and Mr. Sindelar. Mr. Mills was granted Performance Options to purchase 51,557 shares of Holding Common Stock and Mr. Sindelar was granted Performance Options to purchase 51,490 shares of Holding Common Stock. The Performance Options are exercisable only in the event that Hicks, Muse, Tate and Furst Equity Fund II, L.P. ("HM Fund II") has realized an overall rate of return of at least 35% per annum, compounded annually, on all equity funds invested by it in Holding. Subject to the foregoing, the Performance Options are exercisable (i) immediately prior to a Liquidity Event (as hereinafter defined), (ii) concurrently with the consummation of a Qualified IPO (as hereinafter defined), or (iii) on December 31, 2004 (with respect to the Performance Options granted on March 31, 1995 and June 12, 1995) or on December 31, 2005 (with respect to the Performance Options granted on March 5, 1996). A "Liquidity Event" generally means (i) one or more sales or other dispositions of Holding Common Stock if, thereafter, the amount of Holding Common Stock owned by HM Fund II is reduced by 50%, (ii) any merger, consolidation or other business combination of Holding pursuant to which any person or group acquires a majority of the common stock of the resulting entity, or (iii) any sale of all or substantially all of the assets of Holding. A "Qualified IPO" means a firm commitment underwritten public offering of Holding Common Stock for gross proceeds of at least $25.0 million. The exercise price for the Performance Options is initially equal to $1.00 per share and, effective each anniversary of the grant date, the per share exercise price for the Performance Options is equal to the per share exercise price for the prior year multiplied by 1.09. The exercise price of the Performance Options and the number of shares of Holding Common Stock for which the Performance Options are exercisable is subject to adjustment in the event of certain fundamental changes in the capital structure of Holding. The Performance Options terminate on the tenth anniversary of the date of grant. 56 ITEM 12. SECURITIES OWNERSHIP SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT All of the issued and outstanding shares of common stock of the Company are held by Holding. The following table sets forth as of December 31, 2001 certain information regarding the beneficial ownership of the voting securities of Holding by each person who beneficially owns more than 5% of any class of Holding voting securities and by the directors and certain executive officers of Holding, individually, and by the directors and executive officers of Holding as a group. The Class A Common Stock, par value $0.01 per share, of Holding ("Holding Class A Common Stock") votes together with the Holding Common Stock as a single class and is entitled to one vote for each share.
SHARES BENEFICIALLY OWNED(1) --------------------------------------------------------------- HOLDING CLASS A HOLDING COMMON STOCK COMMON STOCK ------------------------ ----------------------- NUMBER OF PERCENT OF NUMBER OF PERCENT OF PERCENT OF SHARES CLASS SHARES CLASS TOTAL ----------- ---------- ---------- ---------- ---------- 5% STOCKHOLDERS: HM Parties(2)................................ 119,319,690 100.0% 13,000,000 100.0% 100.0% c/o Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court, Suite 1600 Dallas, Texas 75201 Rodney D. Kent(3).............................. 6,100,000 5.1% -- -- 4.6% c/o International Wire Group, Inc. 101 S. Hanley St. Louis, Missouri 63101 James N. Mills(4).............................. 1,702,034 OFFICERS AND DIRECTORS: Charles W. Tate(5)............................. 967,856 * -- -- * David M. Sindelar(6)........................... -- -- 3,648,482 28.1% 2.8% Jack D. Furst(7)............................... 858,857 * -- -- * John A. Gavin(8)............................... 235,957 * -- -- * Thomas P. Danis(9)............................. 200,000 * -- -- * Richard W. Vieser(10).......................... 235,957 * -- -- * Joseph M. Fiamingo(11)......................... 1,000,000 * -- -- * Rodney D. Kent(3).............................. 6,100,000 5.1% -- -- 4.6% Glenn J. Holler(12)............................ 250,000 * -- -- * Donald F. DeKay(13)............................ 720,000 * -- -- * Chrysant E. Makarushka(14)..................... 75,000 * -- -- * All executive officers and directors as a group (10 persons)(15)............................. 119,319,690 100.0% 13,000,000 100.0% 100.0%
--------------- * Less than one percent. (1) Holding Class A Common Stock is convertible into Holding Common Stock (i) at the option of any holder thereof at any time, (ii) at the option of Holding upon the occurrence of a Triggering Event (as defined below), and (iii) mandatorily at March 31, 2005. A "Triggering Event" means any sale of substantially all of the assets of Holding or any merger, consolidation or other business combination of Holding in which Hicks Muse and its affiliates cease to own at least 50% of the resulting entity. Each share of Holding Class A Common Stock is convertible into a fraction of a share of Holding Common Stock equal to the quotient of (i) the fair market value of a share of Holding Common Stock at the time of conversion less the sum of $0.99 plus imputed interest thereon at a rate of 9% per annum, compounded annually, at the time of conversion, divided by (ii) the fair market value of a share of Holding Common Stock at the time of conversion. Because the fraction of a share of Holding Common Stock into which Holding Class A Common Stock is convertible is determinable only at the time of a 57 conversion, shares of Class A Holding Common Stock are not included in the shares of Holding Common Stock beneficially owned in the foregoing table. (2) Includes (i) shares owned of record by HM Fund II, a limited partnership of which the sole general partner is HM2/GP Partners, L.P., a limited partnership of which the sole general partner is Hicks, Muse GP Partners, L.P., a limited partnership of which the sole general partner is Hicks, Muse, Tate & Furst Fund II Incorporated, a corporation affiliated with Hicks Muse; (ii) shares owned of record by HM2/Wire/Hunt Partners, L.P., HM2/Wire/Sunwestern Partners, L.P. and HM2/Wire/Hubbard Partners, L.P., limited partnerships of which the sole general partner is HM2/GP Partners, L.P.; (iii) shares owned of record by Hicks, Muse, Tate & Furst Fund I Incorporated, a corporation affiliated with Hicks Muse; (iv) shares owned of record by certain individuals that Hicks Muse has the power to direct the voting of with respect to the election of directors; (v) warrants to purchase 340,201 shares of Holding Common Stock owned by HM Fund II and its affiliates and (vi) shares of Holding Common Stock and Holding Class A Common Stock owned of record by certain individuals subject to an irrevocable proxy in favor of Hicks Muse. Thomas O. Hicks is a controlling stockholder of Hicks Muse and serves as Chairman of the Board, Chief Executive Officer and Partner of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial owner of Holding Common Stock held by HM Fund II. Mr. Hicks disclaims beneficial ownership of Holding Common Stock not owned of record by him. (3) Includes 400,000 shares of Holding Common Stock issuable to Mr. Kent upon exercise of options granted under the Option Plan that are currently exercisable. See "Executive Compensation -- Benefit Plans -- Stock Option Plan." (4) Does not include 1,576,027 shares of Holding Common Stock issuable to Mr. Mills upon exercise of Performance Options that are not currently exercisable. See "Executive Compensation Benefit Plans -- Performance Options." (5) Includes warrants to purchase 275 shares of Holding Common Stock owned by Mr. Tate. (6) Does not include 1,225,804 shares of Holding Common Stock issuable to Mr. Sindelar upon exercise of Performance Options that are not currently exercisable. See "Executive Compensation -- Benefit Plans -- Performance Options." (7) Includes warrants to purchase 231 shares of Holding Common Stock owned by Mr. Furst. (8) Includes 100,000 shares of Holding Common Stock issuable to Mr. Gavin upon exercise of options granted in 1995 that are currently exercisable. (9) Includes 100,000 shares of Holding Common Stock issuable to Mr. Danis upon exercise of options granted in 1995 that are currently exercisable. (10) Includes 100,000 shares of Holding Common Stock issuable to Mr. Vieser upon exercise of options granted in 1995 that are currently exercisable. (11) Consists of 1,000,000 shares of Holding Common Stock issuable to Mr. Fiamingo upon exercise of options granted under the Option Plan that are currently exercisable. See "Executive Compensation -- Benefit Plans -- Stock Option Plan." (12) Consists of 250,000 shares of Holding Common Stock issuable to Mr. Holler upon exercise of options granted under the Option Plan that are currently exercisable. See "Executive Compensation -- Benefit Plans -- Stock Option Plan." (13) Includes 150,000 shares of Holding Common Stock issuable to Mr. DeKay upon exercise of options granted under the Option Plan that are currently exercisable. See "Executive Compensation -- Benefit Plans -- Stock Option Plan." (14) Includes 75,000 shares of Holding Common Stock issuable to Mr. Makarushka upon exercise of options granted under the Option Plan that are currently exercisable. See "Executive Compensation -- Benefit Plans -- Stock Option Plan." (15) Includes (i) shares of Holding Class A Common Stock held by executive officers and directors and shares of Holding Class A Common Stock as to which Hicks Muse has the power to vote by proxy and (ii) 3,279,513 shares of Holding Common Stock issuable upon exercise of options that are currently 58 exercisable. Does not include 4,202,744 shares of Holding Common Stock issuable to executive officers of Holding upon the exercise of Performance Options and 905,000 options under the Option Plan that are not currently exercisable. See "Executive Compensation -- Benefit Plans -- Stock Option Plan" and "-- Performance Options." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIPS WITH VIASYSTEMS GROUP, INC. On March 29, 2000, the Company sold its Wire Harness Segment to Viasystems for $210.8 million in cash. The Company and Viasystems are commonly controlled by affiliates of Hicks Muse. As such, the Company accounted for the gain on the transaction through stockholder's equity. The purchase price was determined by senior management of both companies. In addition, each of the boards of directors have received opinions from nationally recognized financial advisors that the purchase price is fair, from a financial point of view, to each of the respective parties. In connection with the Wire Harness Sale, the Company entered into an agreement to supply Viasystems' wire harness business with substantially all of their insulated wire requirements through 2003, which is a continuation of existing practice. In connection with such sale, the Company agreed to indemnify Viasystems for certain product liability claims, as described in the purchase agreement (See Note 6 to the Company's Consolidated Financial Statements). During the year ended December 31, 2001 the Company had sales to Viasystems of $34.5 million. RELATIONSHIPS WITH JAMES N. MILLS PURCHASE OF CORPORATE ASSETS In July 2001, James N. Mills resigned as Chief Executive Officer of Holding and the Company but remained on the board of directors through February 2002. In August 2001, the Company sold certain corporate assets to Mr. Mills for $1,150. Prior to the sale of the assets, the Company obtained an independent appraisal of the assets, which supported the sales price. The assets had a carrying value of $1,001 and the Company recorded a gain on sale of property, plant and equipment in the amount of $149 related to the transaction. RELATIONSHIPS WITH HICKS MUSE MONITORING AND OVERSIGHT AGREEMENT On June 12, 1995, Holding and the Company entered into a ten-year agreement (the "Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"), a limited partnership of which the sole general partner is HM Partners Inc., a corporation affiliated with Hicks Muse, pursuant to which they pay an annual fee of $0.5 million for oversight and monitoring services to Holding and the Company. The annual fee is adjustable at the end of each fiscal year to an amount equal to 0.1% of the consolidated net sales of the Company, but in no event less than $0.5 million. Hicks Muse Partners also will be entitled to receive a fee equal to 1.5% of the transaction value (as defined) for each add-on transaction (as defined) in which the Company is involved. The term "transaction value" means the total value of any add-on transaction, including, without limitation, the aggregate amount of the funds required to complete the add-on transaction (excluding any fees payable pursuant to the Monitoring and Oversight Agreement and any fees, if any, paid to any other person or entity for financial advisory, investment banking, brokerage, or any other similar services rendered in connection with such add-on transaction) including the amount of any indebtedness, preferred stock or similar items assumed (or remaining outstanding). The term "add-on transaction" means any future proposal for a tender offer, acquisition, sale, merger, exchange offer, recapitalization, restructuring, or other similar transaction directly or indirectly involving Holding, the Company, or any of their respective subsidiaries and any other person or entity. Messrs. Tate and Furst, directors of Holding and the Company, are each principals of Hicks Muse Partners. In addition, Holding and the Company have agreed to indemnify Hicks Muse Partners, its affiliates 59 and shareholders, and their respective directors, officers, agents, employees and affiliates from and against all claims, actions, proceedings, demands, liabilities, damages, judgments, assessments, losses and costs, including fees and expenses, arising out of or in connection with the services rendered by Hicks Muse Partners in connection with the Monitoring and Oversight Agreement. The Monitoring and Oversight Agreement makes available the resources of Hicks Muse Partners concerning a variety of financial and operational matters. The services that have been and will continue to be provided by Hicks Muse Partners could not otherwise be obtained by Holding and the Company without the addition of personnel or the engagement of outside professional advisors. In management's opinion, the fees provided for under this agreement reasonably reflect the benefits received and to be received by Holding and the Company. STOCKHOLDERS AGREEMENT Each investor in any class of common stock of Holding has entered into a stockholders agreement (the "Stockholders Agreement"). The Stockholders Agreement, among other things, grants preemptive rights and certain registration rights to the parties thereto and contains provisions requiring the parties thereto to sell their shares of common stock in connection with certain sales of Holding's common stock by Hicks Muse ("drag-along right") and granting the parties thereto the right to include a portion of their shares of common stock in certain sales in which Hicks Muse does not exercise its drag-along rights ("tag-along rights"). In addition, the Stockholders agreement contains an irrevocable proxy pursuant to which all parties to the Stockholders Agreement grant to Hicks Muse the power to vote all shares of Holding Common Stock held by such parties. The Stockholders Agreement terminates on its tenth anniversary date, although the preemptive rights, drag-along rights and tag- along rights contained therein terminate earlier upon the consummation of a firm commitment underwritten public offering of Holding Common Stock. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K. See Index to Financial Statements and Financial Schedules on page 23 of this report. Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 -- Restated Certificate of Incorporation of International >Wire Group, Inc.(4) 3.2 -- By-Laws of International Wire Group, Inc.(1) 4.1 -- Indenture, dated as of June 12, 1995, among International Wire Group, Inc., as Issuer, the Subsidiary Guarantors (as therein defined) and IBJ Schroder Bank & Trust Company, as Trustee.(1) 4.2 -- Form of the 11 3/4% Note (included in Exhibit 4.1, Exhibit A) 4.3 -- Exchange and Registration Rights Agreement, dated as of June 12, 1995, among International Wire Group, Inc., the Subsidiary Guarantors (as therein defined), Chemical Securities Inc. and BT Securities Corporation.(1) 4.4 -- First Supplemental Indenture, dated as of March 5, 1996, by and among International Wire Group, Inc., Wire Technologies, Inc., the subsidiary guarantors party thereto, and IBJ Schroder Bank & Trust Company, as Trustee.(2) 4.5 -- Certificate of Designation of Series A Senior Cumulative Exchangeable Redeemable Preferred Stock of International Wire Group, Inc.(2) 4.6 -- Second Supplemental Indenture, dated as of December 20, 1996, by International Wire Group, Inc. the subsidiary guarantors party thereto, and IBJ Schroder Bank and Trust Company, as Trustee.(4)
60
EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.7 -- Indenture, dated as of February 12, 1997, among International Wire Group, Inc., as Issuer, the Subsidiary Guarantors (as therein defined) and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.8 -- Form of 14% Note (included in Exhibit 4.7, Exhibit A). 4.9 -- Preferred Stock and Warrant Purchase Agreement dated as of March 5, 1996, by and among International Wire Holding Company, International Wire Group, Inc., Chemical Equity Associates and Hicks, Muse, Tate & Furst Equity Fund II, L.P.(5) 4.10 -- Third Supplemental Indenture, dated as of February 12, 1997, by and among International Wire Group, Inc., the subsidiary guarantors party thereto, and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.11 -- First Supplemental Indenture, dated as of June 10, 1997, by and among International Wire Group, Inc., the subsidiary guarantors party thereto, and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.12 -- Indenture, dated as of June 17, 1997, among International Wire Group, Inc., as Issuer, the Subsidiary Guarantors (as therein defined) and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.13 -- Form of 11 3/4% Series B Note (included in Exhibit 4.12, Exhibit (A)) 4.14 -- Second Amended and Restated Credit Agreement, dated December 20, 2001, among International Wire Holding Company, the several lenders from Time to Time Parties thereto, and JP Morgan Chase Bank as Administrative Agent.* 10.3 -- Agreement of Sublease, dated as of December 31, 1991, between Oneida County Industrial Development Agency and OWI Corporation.(1) 10.4 -- Agreement of Sublease, dated as of December 31, 1991, between Onondaga County Industrial Development Agency and OWI Corporation.(1) 10.8+ -- Employment Agreement, dated as of June 12, 1995, among International Wire Holding Company, International Wire Group Inc. and certain of its subsidiaries and James N. Mills.(3) 10.9+ -- Employment Agreement, dated as of June 12, 1995, among International Wire Holding Company, International Wire Group Inc. and certain of its subsidiaries and David M. Sindelar.(3) 10.10+ -- Employment Agreement, dated as of March 14, 1995, between Omega Wire, Inc. and Rodney D. Kent.(1) 10.11+ -- Option Agreement, dated as of March 31, 1995, between Omega Wire Corp. and James N. Mills.(1) 10.12+ -- Option Agreement, dated as of March 31, 1995, between Omega Wire Corp. and David M. Sindelar.(1) 10.13+ -- Option Agreement dated as of June 12, 1995, between Omega Wire Corp. and David M. Sindelar.(1) 10.14+ -- Option Agreement dated as of June 12, 1995, between International Wire Group, Inc. and David M. Sindelar.(1) 10.15 -- Stockholders Agreement dated as of June 12, 1995, among International Wire Holding Company and the Stockholders signatories thereto.(1) 10.16 -- Monitoring and Oversight Agreement dated as of June 12, 1995, among International Wire Holding Company, International Wire Group, Inc. and Hicks, Muse & Co. Partners, L.P.(1) 10.17+ -- 1995 Stock Option Plan of International Wire Holding Company.(3) 10.18+ -- Form of Option Agreement of International Wire Holding Company under 1995 Stock Option Plan.(3) 10.21+ -- Employment Agreement, dated as of September 25, 1996, among International Wire Holding Company and International Wire Group, Inc. and Joseph M. Fiamingo.(4) 10.22+ -- Option Agreement, dated as of November 5, 1995, between International Wire Holding Company and Joseph M. Fiamingo.(4)
61
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.23+ -- Option Agreement, dated as of November 6, 1996, between International Wire Holding Company and Joseph M. Fiamingo.(4) 10.24 -- First Amendment to Amended and Restated Credit Agreement, dated as of June 17, 1997, among International Wire Group, Inc., International Wire Holding Company, the Several Lenders from time to time parties thereto, the Chase Manhattan Bank, as Administrative Agent, and Bankers Trust Company, as Documentation Agent.(5) 10.26+ -- Option Agreement, dated as of August 6, 1996, between International Wire Holding Company and Glenn J. Holler.(6) 10.28+ -- Employment Agreement, dated as of November 13, 1999, among International Wire Holding Company and International Wire Group, Inc. and Glenn J. Holler.(7) 10.29+ -- Employment Agreement, dated as of November 13, 1999, among International Wire Holding Company and International Wire Group, Inc. and Joseph M. Fiamingo.(7) 21.1 -- Subsidiaries of International Wire Group, Inc.*
--------------- (1) Incorporated by reference to the Registration Statement on Form S-1 (33-93970) of International Wire Group, Inc. as declared effective by the Securities and Exchange Commission on September 29, 1995. (2) Incorporated by reference to the Current Report on Form 8-K of International Wire Group, Inc. as filed with the Securities Exchange Commission on March 20, 1996. (3) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1995. (4) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1996. (5) Incorporated by reference to the Registration Statement on Form S-1 (333-26925) of International Wire Group, Inc. as declared effective by the Securities and Exchange Commission on November 12, 1997. (6) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1997. (7) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1999. * Filed herewith. + Indicates compensatory plan or arrangement. (b) Reports on Form 8-K The Company did not file a report on Form 8-K with the Securities and Exchange Commission during the quarter ended December 31, 2001. 62 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. INTERNATIONAL WIRE GROUP, INC. By: /s/ GLENN J. HOLLER ------------------------------------ Glenn J. Holler, Senior Vice President and Chief Financial Officer Date: March 19, 2002 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 and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ CHARLES W. TATE Chairman of the Board of Holding March 19, 2002 ------------------------------------------------ and the Company (Charles W. Tate) /s/ DAVID M. SINDELAR Chief Executive Officer, President March 19, 2002 ------------------------------------------------ and Director of Holding and Chief (David M. Sindelar) Executive Officer and Director of the Company (Principal Executive Officer) /s/ GLENN J. HOLLER Senior Vice President and Chief March 19, 2002 ------------------------------------------------ Financial Officer of Holding and (Glenn J. Holler) the Company (Principal Financial and Accounting Officer) /s/ THOMAS P. DANIS Director of Holding and the March 19, 2002 ------------------------------------------------ Company (Thomas P. Danis) /s/ JACK D. FURST Director of Holding and the March 19, 2002 ------------------------------------------------ Company (Jack D. Furst) /s/ JOHN A. GAVIN Director of Holding and the March 19, 2002 ------------------------------------------------ Company (John A. Gavin) /s/ RICHARD W. VIESER Director of Holding and the March 19, 2002 ------------------------------------------------ Company (Richard W. Vieser) /s/ RODNEY D. KENT Director of Holding and Director, March 19, 2002 ------------------------------------------------ President and Chief Operating (Rodney D. Kent) Officer of the Company /s/ JOSEPH M. FIAMINGO Chairman and Director of Holding March 19, 2002 ------------------------------------------------ and the Company (Joseph M. Fiamingo)
63 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT The registrant has not sent to its security holders any annual report to security holders covering the registrant's last fiscal year or sent any proxy statement, form of proxy or other proxy soliciting material with respect to any annual or special meeting of security holders to more than ten of the registrant's security holders. 64 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 -- Restated Certificate of Incorporation of International >Wire Group, Inc.(4) 3.2 -- By-Laws of International Wire Group, Inc.(1) 4.1 -- Indenture, dated as of June 12, 1995, among International Wire Group, Inc., as Issuer, the Subsidiary Guarantors (as therein defined) and IBJ Schroder Bank & Trust Company, as Trustee.(1) 4.2 -- Form of the 11 3/4% Note (included in Exhibit 4.1, Exhibit A) 4.3 -- Exchange and Registration Rights Agreement, dated as of June 12, 1995, among International Wire Group, Inc., the Subsidiary Guarantors (as therein defined), Chemical Securities Inc. and BT Securities Corporation.(1) 4.4 -- First Supplemental Indenture, dated as of March 5, 1996, by and among International Wire Group, Inc., Wire Technologies, Inc., the subsidiary guarantors party thereto, and IBJ Schroder Bank & Trust Company, as Trustee.(2) 4.5 -- Certificate of Designation of Series A Senior Cumulative Exchangeable Redeemable Preferred Stock of International Wire Group, Inc.(2) 4.6 -- Second Supplemental Indenture, dated as of December 20, 1996, by International Wire Group, Inc. the subsidiary guarantors party thereto, and IBJ Schroder Bank and Trust Company, as Trustee.(4) 4.7 -- Indenture, dated as of February 12, 1997, among International Wire Group, Inc., as Issuer, the Subsidiary Guarantors (as therein defined) and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.8 -- Form of 14% Note (included in Exhibit 4.7, Exhibit A). 4.9 -- Preferred Stock and Warrant Purchase Agreement dated as of March 5, 1996, by and among International Wire Holding Company, International Wire Group, Inc., Chemical Equity Associates and Hicks, Muse, Tate & Furst Equity Fund II, L.P.(5) 4.10 -- Third Supplemental Indenture, dated as of February 12, 1997, by and among International Wire Group, Inc., the subsidiary guarantors party thereto, and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.11 -- First Supplemental Indenture, dated as of June 10, 1997, by and among International Wire Group, Inc., the subsidiary guarantors party thereto, and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.12 -- Indenture, dated as of June 17, 1997, among International Wire Group, Inc., as Issuer, the Subsidiary Guarantors (as therein defined) and IBJ Schroder Bank and Trust Company, as Trustee.(5) 4.13 -- Form of 11 3/4% Series B Note (included in Exhibit 4.12, Exhibit (A)) 4.14 -- Second Amended and Restated Credit Agreement, dated December 20, 2001, among International Wire Holding Company, the several lenders from Time to Time Parties thereto, and JP Morgan Chase Bank as Administrative Agent. * 10.3 -- Agreement of Sublease, dated as of December 31, 1991, between Oneida County Industrial Development Agency and OWI Corporation.(1) 10.4 -- Agreement of Sublease, dated as of December 31, 1991, between Onondaga County Industrial Development Agency and OWI Corporation.(1) 10.8+ -- Employment Agreement, dated as of June 12, 1995, among International Wire Holding Company, International Wire Group Inc. and certain of its subsidiaries and James N. Mills.(3) 10.9+ -- Employment Agreement, dated as of June 12, 1995, among International Wire Holding Company, International Wire Group Inc. and certain of its subsidiaries and David M. Sindelar.(3) 10.10+ -- Employment Agreement, dated as of March 14, 1995, between Omega Wire, Inc. and Rodney D. Kent.(1) 10.11+ -- Option Agreement, dated as of March 31, 1995, between Omega Wire Corp. and James N. Mills.(1)
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.12+ -- Option Agreement, dated as of March 31, 1995, between Omega Wire Corp. and David M. Sindelar.(1) 10.13+ -- Option Agreement dated as of June 12, 1995, between Omega Wire Corp. and David M. Sindelar.(1) 10.14+ -- Option Agreement dated as of June 12, 1995, between International Wire Group, Inc. and David M. Sindelar.(1) 10.15 -- Stockholders Agreement dated as of June 12, 1995, among International Wire Holding Company and the Stockholders signatories thereto.(1) 10.16 -- Monitoring and Oversight Agreement dated as of June 12, 1995, among International Wire Holding Company, International Wire Group, Inc. and Hicks, Muse & Co. Partners, L.P.(1) 10.17+ -- 1995 Stock Option Plan of International Wire Holding Company.(3) 10.18+ -- Form of Option Agreement of International Wire Holding Company under 1995 Stock Option Plan.(3) 10.21+ -- Employment Agreement, dated as of September 25, 1996, among International Wire Holding Company and International Wire Group, Inc. and Joseph M. Fiamingo.(4) 10.22+ -- Option Agreement, dated as of November 5, 1995, between International Wire Holding Company and Joseph M. Fiamingo.(4) 10.23+ -- Option Agreement, dated as of November 6, 1996, between International Wire Holding Company and Joseph M. Fiamingo.(4) 10.24 -- First Amendment to Amended and Restated Credit Agreement, dated as of June 17, 1997, among International Wire Group, Inc., International Wire Holding Company, the Several Lenders from time to time parties thereto, the Chase Manhattan Bank, as Administrative Agent, and Bankers Trust Company, as Documentation Agent.(5) 10.26+ -- Option Agreement, dated as of August 6, 1996, between International Wire Holding Company and Glenn J. Holler.(6) 10.28+ -- Employment Agreement, dated as of November 13, 1999, among International Wire Holding Company and International Wire Group, Inc. and Glenn J. Holler. (7) 10.29+ -- Employment Agreement, dated as of November 13, 1999, among International Wire Holding Company and International Wire Group, Inc. and Joseph M. Fiamingo. (7) 21.1 -- Subsidiaries of International Wire Group, Inc.*
--------------- (1) Incorporated by reference to the Registration Statement on Form S-1 (33-93970) of International Wire Group, Inc. as declared effective by the Securities and Exchange Commission on September 29, 1995. (2) Incorporated by reference to the Current Report on Form 8-K of International Wire Group, Inc. as filed with the Securities Exchange Commission on March 20, 1996. (3) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1995. (4) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1996. (5) Incorporated by reference to the Registration Statement on Form S-1 (333-26925) of International Wire Group, Inc. as declared effective by the Securities and Exchange Commission on November 12, 1997. (6) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1997. (7) Incorporated by reference to the Annual Report on Form 10-K of International Wire Group, Inc. for the fiscal year ended December 31, 1999. * Filed herewith. + Indicates compensatory plan or arrangement.