BGC- 2012.6.29_10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________ 
FORM 10-Q 
_____________________________________________ 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2012
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: 1-12983
_____________________________________________ 
GENERAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
_____________________________________________ 
Delaware
06-1398235
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
4 Tesseneer Drive
Highland Heights, KY
41076-9753
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code: (859) 572-8000
_____________________________________________  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “ large accelerated filer," “accelerated filer,” "non-accelerated filer," and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer
x
  
Accelerated filer
¨
Non-accelerated filer
¨
  
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Class
Outstanding at July 26, 2012
Common Stock, $0.01 par value
49,770,652

Table of Contents

GENERAL CABLE CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
 
 
 
PAGE
PART I
Financial Statements
 
Item 1.
 
 
Statements of Operations and Comprehensive Income (Loss)
 
 
 
Item 2.
Item 3.
Item 4.
PART II
Other Information
 
Item 1.
Item 1A.
Item 2.
Item 6.


2
Table of Contents

PART I. FINANCIAL STATEMENTS
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GENERAL CABLE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in millions, except per share data)
(unaudited)
 
Three Fiscal Months Ended
 
Six Fiscal Months Ended
 
June 29,
2012
 
July 1,
2011
 
June 29,
2012
 
July 1,
2011
Net sales
$
1,478.1

 
$
1,532.2

 
$
2,910.6

 
$
2,979.8

Cost of sales
1,301.1

 
1,357.6

 
2,586.4

 
2,638.2

Gross profit
177.0

 
174.6

 
324.2

 
341.6

Selling, general and administrative expenses
104.4

 
94.8

 
198.2

 
188.7

Operating income
72.6

 
79.8

 
126.0

 
152.9

Other income (expense)
(13.5
)
 
(3.9
)
 
(6.7
)
 
3.1

Interest income (expense):
 
 
 
 
 
 
 
Interest expense
(25.2
)
 
(23.6
)
 
(49.9
)
 
(47.6
)
Interest income
1.6

 
2.0

 
3.3

 
4.0

 
(23.6
)
 
(21.6
)
 
(46.6
)
 
(43.6
)
Income before income taxes
35.5

 
54.3

 
72.7

 
112.4

Income tax (provision) benefit
(12.0
)
 
(17.2
)
 
(22.9
)
 
(36.6
)
Equity in earnings of affiliated companies
0.5

 
1.0

 
0.5

 
1.4

Net income including non-controlling interest
24.0

 
38.1

 
50.3

 
77.2

Less: preferred stock dividends
0.1

 
0.1

 
0.2

 
0.2

Less: net income attributable to non-controlling interest
2.1

 
0.5

 
3.4

 
1.3

Net income attributable to Company common shareholders
$
21.8

 
$
37.5

 
$
46.7

 
$
75.7

Comprehensive income (loss)
$
(45.7
)
 
$
57.5

 
$
30.7

 
$
125.2

Earnings per share
 
 
 
 
 
 
 
Earnings per common share-basic
$
0.44

 
$
0.72

 
$
0.94

 
$
1.45

Weighted average common shares-basic
49.8

 
52.2

 
49.8

 
52.2

Earnings per common share-assuming dilution
$
0.43

 
$
0.68

 
$
0.92

 
$
1.39

Weighted average common shares-assuming dilution
51.1

 
54.9

 
51.1

 
54.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in millions, except share data)
(unaudited)
 
June 29,
2012
 
December 31,
2011
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
438.8

 
$
434.1

Receivables, net of allowances of $21.3 million at June 29, 2012 and $17.2 million at December 31, 2011
1,213.6

 
1,080.9

Inventories, net
1,259.6

 
1,228.7

Deferred income taxes
39.0

 
43.4

Prepaid expenses and other
105.2

 
100.0

Total current assets
3,056.2

 
2,887.1

Property, plant and equipment, net
1,012.2

 
1,028.6

Deferred income taxes
24.9

 
18.6

Goodwill
165.0

 
164.9

Intangible assets, net
179.5

 
181.6

Unconsolidated affiliated companies
19.0

 
18.6

Other non-current assets
55.7

 
71.0

Total assets
$
4,512.5

 
$
4,370.4

Liabilities and Total Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
969.6

 
$
946.5

Accrued liabilities
390.6

 
420.0

Current portion of long-term debt
228.7

 
156.3

Total current liabilities
1,588.9

 
1,522.8

Long-term debt
918.2

 
892.6

Deferred income taxes
210.7

 
200.0

Other liabilities
247.2

 
243.1

Total liabilities
2,965.0

 
2,858.5

Commitments and contingencies

 

Total equity:
 
 
 
Redeemable convertible preferred stock, at redemption value (liquidation preference of $50.00 per share):
 
 
 
June 29, 2012 – 76,002 shares outstanding
 
 
 
December 31, 2011 – 76,002 shares outstanding
3.8

 
3.8

Common stock, $0.01 par value, issued and outstanding shares:
 
 
 
June 29, 2012– 49,770,887 (net of 8,689,031 treasury shares)
 
 
 
December 31, 2011 – 49,697,763 (net of 8,758,267 treasury shares)
0.6

 
0.6

Additional paid-in capital
672.4

 
666.7

Treasury stock
(135.2
)
 
(136.5
)
Retained earnings
1,005.8

 
959.1

Accumulated other comprehensive income (loss)
(115.0
)
 
(95.1
)
Total Company shareholders’ equity
1,432.4

 
1,398.6

Non-controlling interest
115.1

 
113.3

Total equity
1,547.5

 
1,511.9

Total liabilities and equity
$
4,512.5

 
$
4,370.4

See accompanying Notes to Condensed Consolidated Financial Statements.

4
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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
 
Six Fiscal Months Ended
 
June 29,
2012
 
July 1,
2011
Cash flows of operating activities:
 
 
 
Net income (loss) including non-controlling interest
$
50.3

 
$
77.2

Adjustments to reconcile net income (loss) to net cash flows of operating activities:
 
 
 
Depreciation and amortization
53.7

 
55.8

Amortization on restricted stock awards
1.4

 
1.7

Foreign currency exchange (gain) loss
5.8

 
5.1

Deferred income taxes
8.0

 
(10.8
)
Excess tax (benefits) deficiencies from stock-based compensation
(0.1
)
 
(0.7
)
Convertible debt instruments noncash interest charges
10.9

 
10.2

(Gain) loss on disposal of property
—

 
(1.9
)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
 
 
 
(Increase) decrease in receivables
(146.9
)
 
(164.3
)
(Increase) decrease in inventories
(39.9
)
 
(223.8
)
(Increase) decrease in other assets
2.0

 
(14.4
)
Increase (decrease) in accounts payable, accrued and other liabilities
37.7

 
183.4

Net cash flows of operating activities
(17.1
)
 
(82.5
)
Cash flows of investing activities:
 
 
 
Capital expenditures
(63.9
)
 
(55.5
)
Proceeds from properties sold
4.2

 
2.8

Acquisitions, net of cash acquired
(7.3
)
 
—

Other
(0.1
)
 
0.8

Net cash flows of investing activities
(67.1
)
 
(51.9
)
Cash flows of financing activities:
 
 
 
Preferred stock dividends paid
(0.2
)
 
(0.2
)
Excess tax benefits (deficiencies) from stock-based compensation
0.1

 
0.7

Proceeds from other debt
877.8

 
871.6

Repayments of other debt
(790.8
)
 
(759.3
)
Dividends paid to non-controlling interest
(1.9
)
 
(2.8
)
Proceeds from exercise of stock options
0.1

 
0.7

Net cash flows of financing activities
85.1

 
110.7

Effect of exchange rate changes on cash and cash equivalents
3.8

 
(13.0
)
Increase (decrease) in cash and cash equivalents
4.7

 
(36.7
)
Cash and cash equivalents – beginning of period
434.1

 
458.7

Cash and cash equivalents – end of period
$
438.8

 
$
422.0

Supplemental Information
 
 
 
Cash paid during the period for:
 
 
 
Income tax payments, net of refunds
$
15.2

 
$
18.2

Interest paid
$
33.2

 
$
31.3

Non-cash investing and financing activities:
 
 
 
Capital expenditures included in accounts payable
$
20.2

 
$
27.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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GENERAL CABLE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
1.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of General Cable Corporation and Subsidiaries (“General Cable” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the three and six fiscal months ended June 29, 2012 are not necessarily indicative of results that may be expected for the full year. The December 31, 2011 condensed consolidated balance sheet amounts are derived from the audited financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto in General Cable’s 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2012. The Company’s fiscal quarters consist of 13-week periods ending on the Friday nearest to the end of the calendar months of March, June and September.

The condensed consolidated financial statements include the accounts of General Cable Corporation and its wholly-owned subsidiaries. Investments in 50% or less owned joint ventures in which the Company has the ability to exercise significant influence are accounted for under the equity method of accounting. All intercompany transactions and balances among the consolidated companies have been eliminated.
2.
Accounting Standards
The Company’s significant accounting policies are described in Footnote 2 "Accounting Standards" to the audited annual consolidated financial statements in the 2011 Form 10-K. In the six months ended June 29, 2012, there have been no significant changes to these policies. In the six months ended June 29, 2012, there have been no accounting pronouncements issued that are expected to have a significant effect on the condensed consolidated financial statements. The following accounting pronouncements were adopted and became effective with respect to the Company in 2012 and 2011:

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2011-04 accounting guidance related to fair value measurements ASC 820 - Fair Value Measurement. The new guidance provides clarification to existing standards, and also provides new required disclosures, primarily related to Level 3 fair value measurements. This guidance became effective for the Company on January 1, 2012. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05 accounting guidance related to the presentation requirements for components of comprehensive income ASC 220 - Comprehensive Income. This update was amended in December 2011 by ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05. This update defers only those changes in update ASU No. 2011-05 that relate to the presentation of reclassification adjustments. All other requirements in update ASU No. 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. ASU No. 2011-05 and 2011-12 are effective for fiscal years (including interim periods) beginning after December 15, 2011. This guidance is effective for the Company and the Company has presented other comprehensive income in a single continuous financial statement, which was previously presented within the Consolidated Statements of Changes in Total Equity.

In September 2011, the FASB issued ASU No. 2011-08 accounting guidance related to the testing of goodwill for impairment
ASC 350 - Intangibles-Goodwill and Other. Under this guidance, entities will have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying value. This guidance will become effective for the Company on December 31, 2012. The adoption of this guidance is not expected to have a material impact on the consolidated financial statements.
3.
Acquisitions and Divestitures
General Cable actively seeks to identify key global macroeconomic and geopolitical trends in order to capitalize on expanding markets and new niche markets or exit declining or non-strategic markets in order to achieve better returns. The Company also sets aggressive performance targets for its business and intends to refocus or divest those activities which fail to meet targets or do not fit the Company's long-term strategies. On May18, 2012, General Cable entered into a purchase agreement to acquire

6
Table of Contents

Alcan Cable, the wire and cable business of Rio Tinto plc ("Rio Tinto"). The purchase price is $185 million, subject to adjustments primarily related to working capital levels at closing as provided in the purchase agreement. The closing of the acquisition of the North America business is conditioned upon receipt of necessary regulatory approvals, which have been received. The Company has made the necessary regulatory filings in the People's Republic of China and that review process is ongoing. General Cable expects to use its recently amended revolving credit facility to principally fund the transaction (see Footnote 22 "Subsequent Events"). On July 4, 2012, the Company entered into a purchase agreement to acquire a majority interest (60%) in Procables S.A. for total consideration of $45 million, subject to adjustments primarily related to working capital levels at closing as provided in the purchase agreement. The acquisition is subject to receipt of regulatory approval, which has been received.
4.
Other Income (Expense)
Other income (expense) includes foreign currency transaction gains or losses, which result from changes in exchange rates between the designated functional currency and the currency in which a transaction is denominated as well as gains and losses on derivative instruments that are not designated as cash flow hedges and ineffectiveness on derivatives designated as cash flow hedges. During the three months ended June 29, 2012 and July 1, 2011, the Company recorded other expense of $13.5 million and $3.9 million, respectively. During the six months ended June 29, 2012 and July 1, 2011, the Company recorded other expense of $6.7 million and other income of $3.1 million, respectively. For the three months ended June 29, 2012, other expense was primarily the result of $6.5 million related to losses on derivative instruments that were not designated as cash flow hedges and other expense of $6.5 million related to foreign currency transaction losses. For the six months ended June 29, 2012, other expense was primarily the result of $0.3 million related to losses on derivative instruments that were not designated as cash flow hedges and other expense of $5.1 million related to foreign currency transaction losses. For the three months ended July 1, 2011, other expense of $3.9 million was primarily attributable to foreign currency transaction losses which resulted from changes in exchange rates in the various countries in which the Company operates. For the six months ended July 1, 2011, other income of $3.1 million was primarily the result of unrealized gains on derivative instruments which were not designated as cash flow hedges and foreign currency transaction gains.

The functional currency of the Company’s subsidiary in Venezuela is the U.S. dollar. The Company remeasures the financial statements of the Venezuelan subsidiary at the rate the Company expects to remit dividends, which is 4.30 Venezuelan Bolivar (“BsF”) per U.S. dollar.

Effective January 1, 2011, the Central Bank of Venezuela and the Ministry of Finance published an amendment to Convenio Cambiario No. 14 (the Exchange Law), whereby the official exchange rate was set at 4.30 BsF per U.S. dollar. See Item 2, “Venezuelan Operations” for additional details.
5.
Inventories
Approximately 82% of the Company’s inventories are valued using the average cost method and all remaining inventories are valued using the first-in, first-out (FIFO) method. All inventories are stated at the lower of cost or market value. 
(in millions)
June 29, 2012
 
December 31, 2011
Raw materials
$
323.3

 
$
298.2

Work in process
211.8

 
199.3

Finished goods
724.5

 
731.2

Total
$
1,259.6

 
$
1,228.7

6.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Costs assigned to property, plant and equipment related to acquisitions are based on estimated fair values on the acquisition date. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets: buildings, from 15 to 50 years, and machinery, equipment and office furnishings, from 2 to 15 years. Leasehold improvements are depreciated over the shorter of the lease term or the useful life of the asset, unless acquired in a business combination, in which case the leasehold improvements are amortized over the shorter of the useful life of the asset or a term that includes the reasonably assured life of the lease.


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Property, plant and equipment consisted of the following (in millions): 
 
June 29, 2012
 
December 31, 2011
Land
$
111.3

 
$
110.7

Buildings and leasehold improvements
303.9

 
303.4

Machinery, equipment and office furnishings
1,096.0

 
1,062.9

Construction in progress
83.0

 
95.3

Total – gross book value
1,594.2

 
1,572.3

Less accumulated depreciation
(582.0
)
 
(543.7
)
Total – net book value
$
1,012.2

 
$
1,028.6

Depreciation expense for the three and six fiscal months ended June 29, 2012 was $23.9 million and $47.7 million, respectively. Depreciation expense for the three and six fiscal months ended July 1, 2011 was $24.6 million and $48.6 million, respectively.

The Company periodically evaluates the recoverability of the carrying amount of long-lived assets (including property, plant and equipment and intangible assets with determinable lives) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates events or changes in circumstances based mostly on actual historical operating results, but business plans, forecasts, general and industry trends, and anticipated cash flows are also considered. Impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount. Impairment losses are measured as the amount by which the carrying value of an asset exceeds its fair value and are recognized in earnings. The Company also continually evaluates the estimated useful lives of all long-lived assets and, when warranted, revises such estimates based on current events. No material impairment charges occurred during the six fiscal months ended June 29, 2012 and July 1, 2011.
7.
Goodwill and Other Intangible Assets
Goodwill and intangible assets with indefinite useful lives are not amortized, but are reviewed at least annually for impairment. If the carrying amount of goodwill or an intangible asset with an indefinite life exceeds its fair value, an impairment loss would be recognized in the amount equal to the excess. Intangible assets that are not deemed to have indefinite lives are amortized over their useful lives.

The amounts of goodwill and indefinite-lived intangible assets were as follows in millions of dollars:
 
Goodwill
 
Indefinite-Lived Assets – Trade Names
 
North
America
 
Europe and
Mediterranean
 
ROW
 
Total
 
North
America
 
Europe and
Mediterranean
 
ROW
 
Total
Balance, December 31, 2011
$
2.3

 
$
2.3

 
$
160.3

 
$
164.9

 
$
2.4

 
$
0.5

 
$
132.3

 
$
135.2

Acquisitions
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Currency translation and other adjustments
—

 
—

 
0.1

 
0.1

 
—

 
—

 
0.3

 
0.3

Balance, June 29, 2012
$
2.3

 
$
2.3

 
$
160.4

 
$
165.0

 
$
2.4

 
$
0.5

 
$
132.6

 
$
135.5

The amounts of other intangible assets for customer relationships were as follows in millions of dollars:
 
June 29, 2012
 
December 31, 2011
Amortized intangible assets:
 
 
 
Customer relationships
$
111.4

 
$
108.3

Accumulated amortization
(67.3
)
 
(61.8
)
Foreign currency translation adjustment
(0.1
)
 
(0.1
)
Amortized intangible assets, net
$
44.0

 
$
46.4

Amortized intangible assets are stated at cost less accumulated amortization as of June 29, 2012 and December 31, 2011. Customer relationships have been determined to have a useful life in the range of 3.5 to 10 years and the Company has accelerated the amortization expense to align with the historical customer attrition rates. The amortization of intangible assets for the first six fiscal months of 2012 and 2011 was $5.5 million and $6.2 million, respectively. The estimated amortization expense during the

8
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twelve month periods beginning June 29, 2012 through June 30, 2017, based on exchange rates as of June 29, 2012, are $10.1 million, $9.2 million, $8.3 million, $7.4 million, $6.1 million and $2.9 million thereafter.
8.     Accrued Liabilities
Included within accrued liabilities were accruals related to warranty expenses as of June 29, 2012 and December 31, 2011.
Warranty Accrual
The warranty accrual balance at June 29, 2012 and December 31, 2011 was $10.7 million and $11.5 million, respectively. The Company accrues liabilities under service and warranty policies based upon specific claims and a review of historical warranty and service claims experience. Adjustments are made to the accruals as claims data and historical experience change. In addition, the Company incurs discretionary costs to service its products in connection with product performance issues.

Changes in the carrying amount of the service and product warranty accrual are below (in millions):
Balance, December 31, 2011
$
11.5

Net provisions for warranties issued
2.3

Net benefits for warranties existing at the beginning of the year
—

Payments related to the warranty accrual
(2.9
)
Foreign currency translation
(0.2
)
Balance, June 29, 2012
$
10.7

9.
Long-Term Debt
(in millions)
June 29, 2012
 
December 31, 2011
North America
 
 
 
Subordinated Convertible Notes due 2029
$
429.5

 
$
429.5

Debt discount on Subordinated Convertible Notes due 2029
(263.7
)
 
(264.4
)
1.00% Senior Convertible Notes due 2012
10.6

 
10.6

Debt discount on 1.00% Senior Convertible Notes due 2012
(0.2
)
 
(0.5
)
0.875% Convertible Notes due 2013
355.0

 
355.0

Debt discount on 0.875% Convertible Notes due 2013
(30.7
)
 
(40.6
)
7.125% Senior Notes due 2017
200.0

 
200.0

Senior Floating Rate Notes
125.0

 
125.0

Revolving Credit Facility
61.3

 
34.9

Other
9.0

 
9.0

Europe and Mediterranean
 
 
 
Spanish Term Loans
22.4

 
31.4

Credit facilities
30.3

 
27.4

Uncommitted accounts receivable facilities
—

 
2.1

Other
11.7

 
11.5

Rest of World (“ROW”)
 
 
 
Credit facilities
186.7

 
118.0

Total debt
1,146.9

 
1,048.9

Less current maturities
228.7

 
156.3

Long-term debt
$
918.2

 
$
892.6

At June 29, 2012, maturities of long-term debt during the twelve month periods beginning June 29, 2012 through June 30, 2017 are $228.7 million, $345.5 million, $5.5 million, $189.2 million and $201.2 million, respectively, and $176.8 million thereafter. As of June 29, 2012 and December 31, 2011, the Company was in compliance with all debt covenants as discussed below.


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The Company’s convertible debt instruments outstanding as of June 29, 2012 and December 31, 2011 are as follows:
 
Subordinated Convertible
Notes
 
1.00% Senior Convertible
Notes
 
0.875% Convertible
Notes
(in millions)
June 29,
2012
 
December 31,
2011
 
June 29,
2012
 
December 31,
2011
 
June 29,
2012
 
December 31,
2011
Face value
$
429.5

 
$
429.5

 
$
10.6

 
$
10.6

 
$
355.0

 
$
355.0

Debt discount
(263.7
)
 
(264.4
)
 
(0.2
)
 
(0.5
)
 
(30.7
)
 
(40.6
)
Book value
165.8

 
165.1

 
10.4

 
10.1

 
324.3

 
314.4

Fair value
422.8

 
412.3

 
10.6

 
9.8

 
339.7

 
329.7

Maturity date
Nov 2029
 
Oct 2012
 
Nov 2013
Stated annual interest rate
4.50% until Nov 2019
2.25% until Nov 2029
 
1.00% until Oct 2012
 
0.875% until Nov 2013
Interest payments
Semi-annually:
May 15 & Nov 15
 
Semi-annually:
Apr 15 & Oct 15
 
Semi-annually:
May 15 & Nov 15
The 1.00% Senior Convertible Notes and the 0.875% Convertible Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by the Company’s wholly-owned U.S. and Canadian subsidiaries. For additional information on the convertible notes, refer to the Company’s 2011 Annual Report on Form 10-K.
Subordinated Convertible Notes
The Company’s Subordinated Convertible Notes were issued on December 15, 2009 in the amount of $429.5 million as part of an exchange offer. The notes and the common stock issuable upon conversion were registered on a Registration Statement on Form S-4, initially filed with the SEC on October 27, 2009, as amended and as declared effective by the SEC on December 15, 2009. At issuance, the Company separately accounted for the liability and equity components of the instrument, based on the Company’s nonconvertible debt borrowing rate on the instrument’s issuance date of 12.5%. At issuance, the liability and equity components were $162.9 million and $266.6 million, respectively. The equity component (debt discount) is being amortized to interest expense based on the effective interest method. There were no proceeds generated from the transaction and the Company incurred issuance fees and expenses of approximately $14.5 million as a result of the exchange offer which have been proportionately allocated to the liability and equity components of the Subordinated Convertible Notes due in 2029.
1.00% Senior Convertible Notes
As a result of the aforementioned exchange offer of Subordinated Convertible Notes due in 2029, approximately 97.8% or $464.4 million of the Company’s 1.00% Senior Convertible Notes were validly tendered. As of December 15, 2009, there were $10.6 million of the 1.00% Senior Convertible Notes outstanding. The Company’s 1.00% Senior Convertible Notes were originally issued in September 2007 in the amount of $475.0 million and sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). Subsequently, on April 16, 2008, the resale of the notes and the common stock issuable upon conversion of the notes was registered on a Registration Statement on Form S-3. The Company separately accounted for the liability and equity components of the instrument based on the Company’s nonconvertible debt borrowing rate on the instrument’s issuance date of 7.5%. At issuance, the liability and equity components were $348.2 million and $126.8 million, respectively. At the exchange date December 15, 2009, the liability and equity components were $389.7 million and $74.7 million, respectively. The equity component (debt discount) is being amortized to interest expense based on the effective interest method.
Proceeds from the 1.00% Senior Convertible Notes were used to partially fund the purchase price of $707.6 million related to the Phelps Dodge International Corporation ("PDIC") acquisition and to pay transaction costs of approximately $12.3 million directly related to the issuance which have been allocated to the liability and equity components in proportion to the allocation of proceeds.
0.875% Convertible Notes
The Company’s 0.875% Convertible Notes were issued in November of 2006 in the amount of $355.0 million. At the time of issuance, the notes and the common stock issuable upon conversion of the notes were registered on a Registration Statement on Form S-3ASR, which was renewed on September 30, 2009 when the Company filed a Renewal Registration Statement for the underlying common stock on Form S-3ASR. The Company separately accounted for the liability and equity components of the instrument based on the Company’s nonconvertible debt borrowing rate on the instrument’s issuance date of 7.35%. At issuance, the liability and equity components were $230.9 million and $124.1 million, respectively. The equity component (debt discount) is being amortized to interest expense based on the effective interest method.
Concurrent with the sale of the 0.875% Convertible Notes, the Company purchased note hedges that are designed to mitigate

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potential dilution from the conversion of the 0.875% Convertible Notes in the event that the market value per share of the Company’s common stock at the time of exercise is greater than approximately $50.36. Under the note hedges that cover approximately 7,048,880 shares of the Company’s common stock, the counterparties are required to deliver to the Company either shares of the Company’s common stock or cash in the amount that the Company delivers to the holders of the 0.875% Convertible Notes with respect to a conversion, calculated exclusive of shares deliverable by the Company by reason of any additional make whole premium relating to the 0.875% Convertible Notes or the Company's election to unilaterally increase the conversion rate as permitted by the indenture governing the 0.875% Convertible Notes. The note hedges expire at the close of trading on November 15, 2013, which is also the maturity date of the 0.875% Convertible Notes, although the counterparties will have ongoing obligations with respect to 0.875% Convertible Notes properly converted on or prior to that date as to which the counterparties have been timely notified.

The Company issued warrants to counterparties that could require the Company to issue up to approximately 7,048,880 shares of the Company’s common stock in equal installments on each of the fifteen consecutive business days beginning on and including February 13, 2014. The strike price is $76.00 per share, which represents a 92.4% premium over the closing price of the Company’s shares of common stock on November 9, 2006. The warrants are expected to provide the Company with some protection against increases in the common stock price over the conversion price per share.

The note hedges and warrants are separate and legally distinct instruments that bind the Company and the counterparties and have no binding effect on the holders of the 0.875% Convertible Notes. In addition, the note hedges and warrants were recorded as a charge and an increase, respectively, in additional paid-in capital in total equity as separate equity transactions.

Proceeds from the offering were used to decrease outstanding debt by $87.8 million, including accrued interest, under the Company’s Terminated Credit Facility, to pay $124.5 million for the cost of the note hedges, and to pay transaction costs of approximately $9.4 million directly related to the issuance which have been allocated to the liability and equity components in proportion to the allocation of proceeds. Additionally, the Company received $80.4 million in proceeds from the issuance of the warrants. At the conclusion of these transactions, the net effect of the receipt of the funds from the 0.875% Convertible Notes and the payments and proceeds mentioned above was an increase in cash of approximately $213.7 million, which was used by the Company for general corporate purposes including acquisitions.
7.125% Senior Notes and Senior Floating Rate Notes
The Company’s $325.0 million in aggregate principal amount of senior unsecured notes, comprised of $125.0 million of Senior Floating Rate Notes due 2015 (the “Senior Floating Rate Notes”) and $200.0 million of 7.125% Senior Fixed Rate Notes due 2017 (the “7.125% Senior Notes” and together, the “Notes”) were offered and sold in private transactions in accordance with Rule 144A and Regulation S under the Securities Act on March 21, 2007. An exchange offer commenced on June 11, 2007 and was completed on July 26, 2007 to replace the unregistered Notes with registered Notes with like terms pursuant to an effective Registration Statement on Form S-4. 
 
7.125% Senior Notes
 
Senior Floating Rate Notes
(in millions)
June 29, 2012
 
 
 
December 31, 2011
 
June 29, 2012
 
 
 
December 31, 2011
Face value
$
200.0

 
 
 
$
200.0

 
$
125.0

 
 
 
$
125.0

Fair value
204.5

 
 
 
198.5

 
117.2

 
 
 
117.5

Interest rate
7.125
%
 
 
 
7.125
%
 
2.8
%
 
 
 
3.0
%
Interest payment
Semi-annually:
Apr 1 & Oct 1
 
3-month LIBOR rate plus 2.375%
Quarterly: Jan 1, Apr 1, Jul 1 & Oct 1
Maturity date
Apr 2017
 
Jul 2015
Guarantee
Jointly and severally guaranteed by the Company’s wholly-owned U.S. and Canadian  subsidiaries
Call Option(1)
Beginning Date
 
 
 
Percentage
 
Beginning Date
 
 
 
Percentage
April 1, 2012

 
 
 
103.563
%
 
April 1, 2009

 
 
 
102.0
%
April 1, 2013

 
 
 
102.375
%
 
April 1, 2010

 
 
 
101.0
%
April 1, 2014

 
 
 
101.188
%
 
April 1, 2011

 
 
 
100.0
%
April 1, 2015

 
 
 
100.000
%
 
 
 
 
 
 
(1)
The Company may, at its option, redeem the Notes on or after the stated beginning dates at percentages noted above (plus interest due)

The Notes’ indenture contains covenants that limit the ability of the Company and certain of its subsidiaries to (i) pay dividends on, redeem or repurchase the Company’s capital stock; (ii) incur additional indebtedness; (iii) make investments; (iv) create liens; (v) sell assets; (vi) engage in certain transactions with affiliates; (vii) create or designate unrestricted subsidiaries; and

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(viii) consolidate, merge or transfer all or substantially all assets. However, these covenants are subject to important exceptions and qualifications, one of which permits the Company to declare and pay dividends or distributions on the Series A preferred stock provided there are no default on the Notes and certain financial conditions are met.

Proceeds from the Notes of $325.0 million, less approximately $7.9 million of cash payments for fees and expenses that are being amortized over the life of the Notes, were used to pay approximately $285.0 million for 9.5% Senior Notes, $9.3 million for accrued interest on the 9.5% Senior Notes and $20.5 million for tender fees and the inducement premium on the 9.5% Senior Notes, leaving net cash proceeds of approximately $2.3 million which were used for general corporate purposes.
Asset-Based Revolving Credit Facility (“Revolving Credit Facility”)
On July 22, 2011, the Company entered into a new $400 million asset-based revolving credit facility. The Revolving Credit Facility replaced the Company’s prior $400 million Senior Secured Revolving Credit Facility (“Terminated Credit Facility”), which was set to mature in July 2012. The Revolving Credit Facility contains restrictions in areas consistent with the Terminated Credit Facility, including limitations on, among other things, distributions and dividends, acquisitions and investments, indebtedness, liens and affiliate transactions. In the aggregate, however, the restrictions in the Revolving Credit Facility provide the Company greater flexibility than those under the Terminated Credit Facility, and generally only apply in the event that the Company’s availability under the Revolving Credit Facility falls below certain specific thresholds.

The Revolving Credit Facility has a term of five years and provides for a committed revolving credit line of up to $400 million, of which $40 million is available in a Canadian multi-currency tranche. The Revolving Credit Facility includes a springing maturity concept which is generally applicable only if the Company's 0.875% Convertible Notes due 2013 or its $125 million Senior Floating Rate Notes due 2015 are not repaid or refinanced within 90 days of their maturity. The commitment amount under the Revolving Credit Facility may be increased by an additional $100 million, subject to certain conditions and approvals as set forth in the credit agreement. The Company capitalized $4.8 million in deferred financing costs in connection with the Revolving Credit Facility in the third quarter of 2011. Also in the third quarter of 2011, the Company expensed $1.3 million in unamortized fees and expenses related to the Terminated Credit Facility. The Revolving Credit Facility requires maintenance of a minimum fixed charge coverage ratio of one to one if availability under the Revolving Credit Facility is less than $40 million or 10% of the then existing aggregate lender commitment under the facility. At June 29, 2012 and December 31, 2011, the Company was in compliance with all covenants under these facilities.

The Revolving Credit Facility may be used for refinancing certain existing indebtedness and will continue to be used for working capital and general corporate purposes and is guaranteed by substantially all of the U.S. and Canadian assets (excluding certain intellectual property and Canadian real estate) of the Company and certain of its U.S. and Canadian subsidiaries and by a pledge of 65% of the equity interests of certain of the Company’s foreign subsidiaries.

Borrowings under the Revolving Credit Facility bear interest based on the daily balance outstanding at an applicable rate per annum calculated quarterly and varied based on the Company’s average availability as set forth in the credit agreement. The Revolving Credit Facility also carries a commitment fee equal to the available but unused borrowings multiplied by an applicable margin (varying from 0.375% to 0.50%).

The Company’s Revolving Credit Facility is summarized in the table below:
 
Revolving Credit Facility
(in millions)
June 29, 2012
 
December 31, 2011
Outstanding borrowings
$
61.3

 
$
34.9

Undrawn availability
301.3

 
336.0

Interest rate
1.8
%
 
2.9
%
Outstanding letters of credit
$
18.9

 
$
20.2

Original issuance
Jul 2011
Maturity date
Jul 2016
Spanish Term Loans
The table below provides a summary of the Company’s term loans and corresponding fixed interest rate swaps. The proceeds from the Spanish Term Loans were used to partially fund the acquisition of Enica Biskra and for general working capital purposes. There is no remaining availability under these Spanish Term Loans. 

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Spanish Term Loans (1)
(in millions)
June 29, 2012
 
December 31, 2011
Outstanding borrowings
$
22.4

 
$
31.4

Fair value
22.6

 
32.0

Interest rate – weighted average (2)
3.7
%
 
3.7
%
(1)
 The terms of the Spanish Term Loans are as follows:
(in millions)
Original
Amount
Issuance Date
Maturity Date
Interest Rate
Loan and Interest Payable
Interest
Rate Swap (2)
Term Loan 1
€
20.0

Feb 2008
Feb 2013
Euribor +0.5%
Semi-annual: Aug & Feb
4.2
%
Term Loan 2
€
10.0

Apr 2008
Apr 2013
Euribor +0.75%
Semi-annual: Apr & Oct
4.58
%
Term Loan 3
€
21.0

Jun 2008
Jun 2013
Euribor +0.75%
Quarterly: Mar, Jun, Sept & Dec
4.48
%
Term Loan 4
€
15.0

Sep 2009
Aug 2014
Euribor +2.0%
Quarterly: Mar, Jun, Sept & Dec
Principal payments: Feb & Aug
1.54
%
(2)
The Company entered into fixed interest rate swaps to coincide with the terms and conditions of the term loans that will effectively hedge the variable interest rate with a fixed interest rate.
At June 29, 2012 and December 31, 2011, the Company was in compliance with all covenants under these facilities.
Europe and Mediterranean Credit Facilities
The Company’s Europe and Mediterranean credit facilities are summarized in the table below: 
 
Europe and Mediterranean Credit Facilities
(in millions)
June 29, 2012
 
December 31, 2011
Outstanding borrowings
$
30.3

 
$
27.4

Undrawn availability
95.7

 
108.8

Interest rate – weighted average
5.3
%
 
5.2
%
Maturity date
Various
Europe and Mediterranean Uncommitted Accounts Receivable Facilities
The Company’s Europe and Mediterranean uncommitted accounts receivable facilities are summarized in the table below:
 
Uncommitted Accounts
Receivable Facilities
(in millions)
June 29, 2012
 
December 31, 2011
Outstanding borrowings
$
—

 
$
2.1

Undrawn availability
76.6

 
69.2

Interest rate – weighted average
—

 
2.0
%
Maturity date
Various
The Spanish Term Loans and certain credit facilities held by one of the Company’s Spanish subsidiaries are subject to certain financial ratios, which include minimum net equity and net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratios. At June 29, 2012 and December 31, 2011, the Company was in compliance with all covenants under these facilities.

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ROW Credit Facilities
The Company’s ROW credit facilities are summarized in the table below: 
 
ROW Credit Facilities
(in millions)
June 29, 2012
 
December 31, 2011
Outstanding borrowings
$
186.7

 
$
118.0

Undrawn availability
270.5

 
270.1

Interest rate – weighted average
4.1
%
 
3.8
%
Maturity date
Various
The Company’s ROW credit facilities are short term loans utilized for working capital purposes. Certain credit facilities are subject to financial covenants. The Company was in compliance with all covenants under these facilities as of June 29, 2012 and December 31, 2011. 
10.
Financial Instruments
The Company is exposed to various market risks, including changes in interest rates, foreign currency and raw material (commodity) prices. To manage risks associated with the volatility of these natural business exposures, the Company enters into interest rate, commodity and foreign currency derivative agreements, as well as copper and aluminum forward pricing agreements. The Company does not purchase or sell derivative instruments for trading purposes. The Company does not engage in trading activities involving derivative contracts for which a lack of marketplace quotations would necessitate the use of fair value estimation techniques.

General Cable utilizes interest rate swaps to manage its interest expense exposure by fixing its interest rate on a portion of the Company’s floating rate debt. The Company does not provide or receive any collateral specifically for these contracts. The fair value of interest rate derivatives, which are designated as and qualify as cash flow hedges, are based on quoted market prices, which reflect the present values of the difference between estimated future variable-rate receipts and future fixed-rate payments.

The Company enters into commodity instruments to hedge the purchase of copper, aluminum and lead in future periods and foreign currency exchange contracts principally to hedge the currency fluctuations in certain transactions denominated in foreign currencies, thereby limiting the Company’s risk that would otherwise result from changes in exchange rates. Principal transactions hedged during the year were firm sales and purchase commitments. The fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices.

We account for these commodity instruments and foreign currency exchange contracts as cash flow or economic hedges. Changes in the fair value of derivatives that are designated as cash flow hedges are recorded in other comprehensive income and reclassified to the income statement when the effects of the items being hedged are realized. Changes in the fair value of economic hedges are recognized in current period earnings.
Fair Value of Derivatives Instruments
The notional amounts and fair values of derivatives designated as cash flow hedges and derivatives not designated as cash flow hedges at June 29, 2012 and December 31, 2011 are shown below (in millions).


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June 29, 2012
 
December 31, 2011
 
Notional
Amount
 
Fair Value
 
Notional
Amount
 
Fair Value
 
Asset (1)
 
Liability (2)
 
Asset (1)
 
Liability (2)
Derivatives designated as cash flow
hedges:
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
23.0

 
$
0.1

 
$
0.3

 
$
32.1

 
$
—

 
$
0.6

Commodity futures
126.2

 
1.4

 
9.1

 
216.1

 
3.8

 
14.0

Foreign currency exchange
48.4

 
0.3

 
0.3

 
55.4

 
0.4

 
1.1

 
 
 
$
1.8

 
$
9.7

 
 
 
$
4.2

 
$
15.7

Derivatives not designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Commodity futures
$
152.0

 
$
3.2

 
$
4.1

 
$
133.0

 
$
2.4

 
$
12.6

Foreign currency exchange
266.3

 
2.5

 
8.9

 
321.7

 
4.1

 
7.9

 
 
 
$
5.7

 
$
13.0

 
 
 
$
6.5

 
$
20.5

 
(1)
Balance recorded in “Prepaid expenses and other” and “Other non-current assets”
(2)
Balance recorded in “Accrued liabilities” and “Other liabilities”

Depending on the extent of an unrealized loss position on a derivative contract held by the Company, certain counterparties may require collateral to secure the Company’s derivative contract position. As of June 29, 2012, there were no contracts held by the Company that required collateral to secure the Company’s derivative liability positions. At December 31, 2011, there were contracts held by the Company that required $0.7 million in collateral to secure the Company’s derivative liability positions.

For the above derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the unrealized gain and loss on the derivative is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings, which generally occurs over periods of less than one year. Gain and loss on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
 
Three Fiscal Months Ended June 29, 2012
(in millions)
Effective Portion
Recognized in Accumulated OCI
Gain /(Loss)
 
Reclassified from
Accumulated  OCI
Gain / (Loss)
 
Ineffective Portion and
Amount Excluded
from
Effectiveness Testing
Gain / (Loss) (1)
 
Location
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
Interest rate swaps
$
0.1

 
$
—

 
$
—

 
Interest expense
Commodity futures
(8.5
)
 
(0.6
)
 
(0.2
)
 
Cost of sales
Foreign currency exchange
—

 
(0.3
)
 
—

 
Other income (expense)
Total
$
(8.4
)
 
$
(0.9
)
 
$
(0.2
)
 
 
 
Six Fiscal Months Ended June 29, 2012
(in millions)
Effective Portion
Recognized in Accumulated OCI
Gain /(Loss)
 
Reclassified from
Accumulated  OCI
Gain / (Loss)
 
Ineffective Portion and
Amount Excluded
from
Effectiveness Testing
Gain / (Loss) (1)
 
Location
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
Interest rate swaps
$
0.3

 
$
—

 
$
—

 
Interest expense
Commodity futures
(0.1
)
 
0.1

 
(0.4
)
 
Cost of sales
Foreign currency exchange
(0.1
)
 
(0.9
)
 
—

 
Other income (expense)
Total
$
0.1

 
$
(0.8
)
 
$
(0.4
)
 
 



15
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Three Fiscal Months Ended July 1, 2011
(in millions)
Effective Portion
Recognized  in
Accumulated OCI
Gain / (Loss)
 
Reclassified from
Accumulated  OCI
Gain / (Loss)
 
Ineffective Portion and
Amount Excluded
from
Effectiveness Testing
Gain / (Loss) (1)
 
Location
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
Interest rate swaps
$
0.1

 
$
—

 
$
(0.1
)
 
Interest expense
Commodity futures
(4.4
)
 
3.6

 
(0.1
)
 
Cost of sales
Foreign currency exchange
(1.1
)
 
0.7

 
0.2

 
Other income (expense)
Total
$
(5.4
)
 
$
4.3

 
$
—

 
 
 
Six Fiscal Months Ended July 1, 2011
(in millions)
Effective Portion
Recognized  in
Accumulated OCI
Gain / (Loss)
 
Reclassified from
Accumulated  OCI
Gain / (Loss)
 
Ineffective Portion and
Amount Excluded
from
Effectiveness Testing
Gain / (Loss) (1)
 
Location
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
Interest rate swaps
$
(0.3
)
 
$
—

 
$
(0.2
)
 
Interest expense
Commodity futures
(4.1
)
 
20.9

 
—

 
Cost of sales
Foreign currency exchange
1.5

 
0.3

 
0.1

 
Other income (expense)
Total
$
(2.9
)
 
$
21.2

 
$
(0.1
)
 
 
(1)
The ineffective portion and the amount excluded from effectiveness testing for all derivatives designated as cash flow hedges is recognized in other income and expense.

For derivative instruments that are not designated as cash flow hedges, the unrealized gain or loss on the derivatives is reported in current earnings. For the three fiscal months ended June 29, 2012 and July 1, 2011, the Company recorded a loss of $6.5 million and a gain of $0.4 million and for the six fiscal months ended June 29, 2012 and July 1, 2011, the Company recorded a loss of $0.3 million and a gain of $6.4 million, respectively, for derivative instruments not designated as cash flow hedges in other income and expense on the condensed consolidated statements of operations and comprehensive income (loss).
Other Forward Pricing Agreements
In the normal course of business, General Cable enters into forward pricing agreements for the purchase of copper and aluminum for delivery in a future month to match certain sales transactions. The Company accounts for these forward pricing arrangements under the “normal purchases and normal sales” scope exception because these arrangements are for purchases of copper and aluminum that will be delivered in quantities expected to be used by the Company over a reasonable period of time in the normal course of business. For these arrangements, it is probable at the inception and throughout the life of the arrangements that the arrangements will not settle net and will result in physical delivery of the inventory. At June 29, 2012 and December 31, 2011, the Company had $35.8 million and $36.3 million, respectively, of future copper and aluminum purchases that were under forward pricing agreements. At June 29, 2012 and December 31, 2011, the fair value of these arrangements was $35.4 million and $35.3 million, respectively, and the Company had unrealized losses of $0.4 million and $1.0 million, respectively, related to these transactions. The Company believes the unrealized gains (losses) under these agreements will be largely offset as a result of firm sales price commitments with customers. Depending on the extent of the unrealized loss position on certain forward pricing agreements, certain counterparties may require collateral to secure the Company’s forward purchase agreements. There were no funds posted as collateral as of June 29, 2012 or December 31, 2011.
11.
Income Taxes
During the second quarter of 2012, the Company accrued approximately $3.0 million of income tax expense for uncertain tax positions likely to be taken in the current year and for interest and penalties on tax positions taken in prior periods, all of which would have a favorable impact on the effective tax rate, if recognized. The Company recognized a tax benefit of $2.2 million (including penalties and interest) in the second quarter of 2012 due primarily to the expiration of statute of limitations for certain tax exposures.

The Company files income tax returns in numerous tax jurisdictions around the world. Due to uncertainties regarding the timing and outcome of various tax audits, appeals and settlements, it is difficult to reliably estimate the amount of unrecognized tax

16
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benefits that could change within the next twelve months. The Company believes it is reasonably possible that approximately $10 million of unrecognized tax benefits could change within the next twelve months due to the resolution of tax audits and statute of limitations expiration.

Tax years that are open for examination and assessment by the Internal Revenue Service ("IRS") are 2007 through 2011. The IRS is currently in the process of examining the Company's 2007 through 2010 consolidated income tax returns. With limited exceptions, tax years prior to 2007 are no longer open in major foreign, state, or local tax jurisdictions.
12.    Employee Benefit Plans
General Cable provides retirement benefits through contributory and noncontributory qualified and non-qualified defined benefit pension plans covering eligible domestic and international employees as well as through defined contribution plans and other postretirement benefits.
Defined Benefit Pension Plans
Benefits under General Cable’s qualified U.S. defined benefit pension plan generally are based on years of service multiplied by a specific fixed dollar amount, and benefits under the Company’s qualified non-U.S. defined benefit pension plans generally are based on years of service and a variety of other factors that can include a specific fixed dollar amount or a percentage of either current salary or average salary over a specific period of time. The amounts funded for any plan year for the qualified U.S. defined benefit pension plan are neither less than the minimum required under federal law nor more than the maximum amount deductible for federal income tax purposes. The Company’s non-qualified unfunded U.S. defined benefit pension plans include a plan that provides defined benefits to select senior management employees beyond those benefits provided by other programs. The Company’s non-qualified unfunded non-U.S. defined benefit pension plans include plans that provide retirement indemnities to employees within the Company’s European and ROW segments. Pension obligations for the majority of non-qualified unfunded defined benefit pension plans are provided for by book reserves and are based on local practices and regulations of the respective countries. The Company makes cash contributions for the costs of the non-qualified unfunded defined benefit pension plans as the benefits are paid.

The components of net periodic benefit cost for pension benefits were as follows (in millions): 
 
Three Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
Service cost
$
0.4

 
$
0.8

 
$
0.4

 
$
0.8

Interest cost
1.9

 
1.3

 
2.1

 
1.5

Expected return on plan assets
(2.3
)
 
(0.4
)
 
(2.4
)
 
(0.6
)
Amortization of prior service cost
—

 
0.2

 
—

 
0.1

Amortization of net loss
2.1

 
0.3

 
1.1

 
0.3

Amortization of translation obligation
—

 
—

 
—

 
0.1

Settlement (gain) loss
—

 
6.1

 
—

 
—

Net pension expense
$
2.1

 
$
8.3

 
$
1.2

 
$
2.2

 
Six Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
Service cost
$
0.8

 
$
1.6

 
$
0.8

 
$
1.6

Interest cost
3.8

 
2.8

 
4.2

 
3.0

Expected return on plan assets
(4.6
)
 
(1.0
)
 
(4.8
)
 
(1.2
)
Amortization of prior service cost
—

 
0.4

 
0.1

 
0.2

Amortization of net loss
4.2

 
0.6

 
2.2

 
0.6

Amortization of translation obligation
—

 
—

 
—

 
0.2

Settlement (gain) loss
—

 
6.1

 
—

 
—

Net pension expense
$
4.2

 
$
10.5

 
$
2.5

 
$
4.4


17
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Defined benefit pension plan cash contributions for the three and six fiscal months ended June 29, 2012 were $1.7 million and $3.5 million, respectively. Defined benefit pension plan cash contributions for the three and six fiscal months ended July 1, 2011 were $3.0 million and $6.0 million, respectively.

In the second quarter of 2012, the Company recorded a pre-tax non-cash settlement loss of $6.1 million for the termination of a legacy pension plan in the United Kingdom stemming from the 1999 acquisition of BICC.
Postretirement Benefits Other Than Pensions
General Cable has postretirement benefit plans that provide medical and life insurance for certain retirees and eligible dependents. The Company funds the plans as claims or insurance premiums are incurred.

Net postretirement benefit expense included the following components (in millions): 
 
Three Fiscal Months Ended
 
Six Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
 
June 29, 2012
 
July 1, 2011
Service cost
$
—

 
$
—

 
$
—

 
$
0.1

Interest cost
0.1

 
0.1

 
0.2

 
0.2

Net amortization and deferral
—

 
—

 
—

 
—

Net postretirement benefit expense
$
0.1

 
$
0.1

 
$
0.2

 
$
0.3

Defined Contribution Plans
Expense under both U.S. and non-U.S. defined contribution plans generally equals up to six percent of each eligible employee’s covered compensation based on the location and status of the employee. The net defined contribution plan expense recognized for the three and six fiscal months ended June 29, 2012 was $2.4 million and $5.1 million, respectively. The net defined contribution plan expense recognized for the three and six fiscal months ended July 1, 2011 was $2.2 million and $4.8 million, respectively.
13.     Total Equity
General Cable is authorized to issue 200 million shares of common stock and 25 million shares of preferred stock.
Condensed consolidated statements of changes in total equity are presented below for the six months ended June 29, 2012 and July 1, 2011 (in millions):
 
 
 
General Cable Total Equity
 
Total Equity
 
Preferred
Stock
Amount
 
Common
Stock
Amount
 
Add’l
Paid in
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Non-Controlling
Interest
Balance, December 31, 2011
$
1,511.9

 
$
3.8

 
$
0.6

 
$
666.7

 
$
(136.5
)
 
$
959.1

 
$
(95.1
)
 
$
113.3

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) including non-controlling interest
50.3

 

 

 

 

 
46.9

 

 
3.4

Foreign currency translation adj.
(20.1
)
 

 

 

 

 

 
(20.3
)
 
0.2

Gain (loss) defined benefit plan
(2.1
)
 

 

 

 

 

 
(2.1
)
 


Unrealized gain (loss) on financial instruments
2.6

 

 

 

 

 

 
2.5

 
0.1

Comprehensive income (loss)
30.7

 

 

 

 

 

 

 

Preferred stock dividend
(0.2
)
 

 

 

 

 
(0.2
)
 

 

Excess tax benefit from stock compensation
0.1

 

 

 
0.1

 

 

 

 

Dividends paid to non-controlling interest
(1.9
)
 

 

 

 

 

 

 
(1.9
)
Other – issuance pursuant to restricted stock, stock options and other
6.9

 

 

 
5.6

 
1.3

 

 

 


Balance, June 29, 2012
$
1,547.5

 
$
3.8

 
$
0.6

 
$
672.4

 
$
(135.2
)
 
$
1,005.8

 
$
(115.0
)
 
$
115.1


18
Tables of Contents


 
 
 
General Cable Total Equity
 
Total Equity
 
Preferred
Stock
Amount
 
Common
Stock
Amount
 
Add’l
Paid in
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Non-Controlling
Interest
Balance, December 31, 2010
$
1,605.3

 
$
3.8

 
$
0.6

 
$
652.8

 
$
(74.0
)
 
$
875.3

 
$
23.5

 
$
123.3

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income including noncontrolling interest
77.2

 
 
 
 
 
 
 
 
 
75.9

 
 
 
1.3

Foreign currency translation adj.
68.0

 
 
 
 
 
 
 
 
 
 
 
66.7

 
1.3

Gain (loss) defined benefit plan
—

 
 
 
 
 
 
 
 
 
 
 
0.7

 
(0.7
)
Unrealized gain (loss) on financial instruments
(20.0
)
 
 
 
 
 
 
 
 
 
 
 
(20.0
)
 
—

Comprehensive income (loss)
125.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock dividend
(0.2
)
 
 
 
 
 
 
 
 
 
(0.2
)
 
 
 
 
Excess tax benefit from stock compensation
0.7

 
 
 
 
 
0.7

 
 
 
 
 
 
 
 
Dividends paid to non-controlling interest
(2.8
)
 
 
 
 
 


 
 
 
 
 
 
 
(2.8
)
Other – issuance pursuant to restricted stock, stock options and other
4.0

 
 
 
 
 
6.0

 
(0.7
)
 
 
 
 
 
(1.3
)
Balance, July 1, 2011
$
1,732.2

 
$
3.8

 
$
0.6

 
$
659.5

 
$
(74.7
)
 
$
951.0

 
$
70.9

 
$
121.1

The components of accumulated other comprehensive income (loss) as of June 29, 2012 and December 31, 2011, respectively, consisted of the following (in millions):
 
June 29, 2012
 
December 31, 2011
 
Company
Common
Shareholders
 
Non-Controlling
Interest
 
Company
Common
Shareholders
 
Non-Controlling
Interest
Foreign currency translation adjustment
$
(32.3
)
 
$
(18.1
)
 
$
(12.0
)
 
$
(18.3
)
Change in fair value of pension benefit obligation, net of tax
(65.1
)
 
(3.2
)
 
(63.0
)
 
(3.2
)
Change in fair value of derivatives, net of tax
(25.2
)
 
(0.5
)
 
(27.7
)
 
(0.6
)
Company deferred stock held in rabbi trust, net of tax
7.3

 
—

 
7.3

 
—

Other
0.3

 
—

 
0.3

 
—

Accumulated other comprehensive income (loss)
$
(115.0
)
 
$
(21.8
)
 
$
(95.1
)
 
$
(22.1
)
Comprehensive income consists of the following (in millions):
 
Three Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
 
Company
Common
Shareholders
 
Non-Controlling
Interest
 
Company
Common
Shareholders
 
Non-Controlling
Interest
Net income (1)
$
21.9

 
$
2.1

 
$
37.6

 
$
0.5

Currency translation gain (loss)
(61.3
)
 
(2.9
)
 
23.4

 
1.5

Change in fair value of pension benefit obligation, net of tax
(2.2
)
 
0.1

 
0.3

 
(0.3
)
Change in fair value of derivatives, net of tax
(3.4
)
 
—

 
(5.5
)
 
—

Comprehensive income (loss)
$
(45.0
)
 
$
(0.7
)
 
$
55.8

 
$
1.7

 
(1)
Net income before preferred stock dividend payments.

19
Tables of Contents


 
Six Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
 
Company
Common
Shareholders
 
Non-Controlling
Interest
 
Company
Common
Shareholders
 
Non-Controlling
Interest
Net income (1)
$
46.9

 
$
3.4

 
$
75.9

 
$
1.3

Currency translation gain (loss)
(20.3
)
 
0.2

 
66.7

 
1.3

Change in fair value of pension benefit obligation, net of tax
(2.1
)
 
—

 
0.7

 
(0.7
)
Change in fair value of derivatives, net of tax
2.5

 
0.1

 
(20.0
)
 
—

Comprehensive income (loss)
$
27.0

 
$
3.7

 
$
123.3

 
$
1.9

(1)
Net income before preferred stock dividend payments.
The Company maintains a deferred compensation plan (“Deferred Compensation Plan”) under the terms and conditions disclosed in the Company’s 2011 Annual Report on Form 10-K. The Company accounts for the Deferred Compensation Plan in accordance with ASC 710 - Compensation–General as it relates to arrangements where amounts earned are held in a rabbi trust. The market value of mutual fund investments, nonvested and subsequently vested stock and restricted stock in the rabbi trust was $33.8 million and $31.9 million as of June 29, 2012 and December 31, 2011, respectively. The market value of the assets held by the rabbi trust, exclusive of the market value of the shares of the Company’s nonvested and subsequently vested restricted stock, restricted stock units held in the deferred compensation plan and Company stock investments by participants’ elections, at June 29, 2012 and December 31, 2011 was $16.5 million and $15.2 million, respectively, and is classified as “other non-current assets” in the condensed consolidated balance sheets. Amounts payable to the plan participants at June 29, 2012 and December 31, 2011, excluding the market value of the shares of the Company’s nonvested and subsequently vested restricted stock and restricted stock units held, were $18.3 million and $16.9 million, respectively, and are classified as “other liabilities” in the condensed consolidated balance sheets.
14.
Share-Based Compensation
General Cable has various plans that provide for granting options, restricted stock units and restricted stock to certain employees and independent directors of the Company and its subsidiaries. The Company recognizes compensation expense for share-based payments based on the fair value of the awards at the grant date. The table below summarizes compensation expense for the Company’s non-qualified stock options based on the fair value method estimated using the Black-Scholes valuation model, and non-vested stock awards, including restricted stock units, and performance-based non-vested stock awards based on the fair value method for the three and six fiscal months ended June 29, 2012 and July 1, 2011 (in millions).
 
Three Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
Non-qualified stock option expense
$
1.5

 
$
1.2

Non-vested stock awards expense
2.2

 
1.8

Total pre-tax share-based compensation expense
$
3.7

 
$
3.0

Excess tax benefit on share-based compensation (1)
$
—

 
$
—

 
Six Fiscal Months Ended
 
June 29, 2012
 
July 1, 2011
Non-qualified stock option expense
$
2.9

 
$
2.3

Non-vested stock awards expense
4.3

 
3.4

Total pre-tax share-based compensation expense
$
7.2

 
$
5.7

Excess tax benefit on share-based compensation (1)
$
0.1

 
$
0.7

(1)
Cash inflows (outflows) recognized as financing activities in the condensed consolidated statements of cash flows.
The Company records compensation expense related to non-vested stock awards as a component of selling, general and administrative expense. There have been no material changes in financial condition or operations that would affect the method or the nature of the share-based compensation recorded in the current period or the prior comparative periods.
15.
Shipping and Handling Costs
All shipping and handling amounts billed to a customer in a sales transaction are classified as revenue. Shipping and handling

20
Table of Contents

costs associated with storage and handling of finished goods and shipments to customers are included in cost of sales and totaled $35.5 million and $35.7 million, respectively, for the three fiscal months ended June 29, 2012 and July 1, 2011 and $68.8 million and $69.7 million, respectively, for the six fiscal months ended June 29, 2012 and July 1, 2011.
16.
Earnings (Loss) Per Common Share
The Company applied the two-class method of computing basic and diluted earnings (loss) per share for the three and six fiscal months ended June 29, 2012 and July 1, 2011. Historically and for the three and six fiscal months ended June 29, 2012 and July 1, 2011, the Company did not declare, pay or otherwise accrue a dividend payable to the holders of the Company’s common stock or holders of unvested share-based payment awards (restricted stock). A reconciliation of the numerator and denominator of earnings (loss) per common share – basic to earnings (loss) per common share – assuming dilution is as follows (in millions, except per share data):
 
Three Fiscal Months Ended
 
Six Fiscal Months Ended
(in millions, except per share data)
June 29, 2012
 
July 1, 2011
 
June 29, 2012
 
July 1, 2011
Earnings per common share – basic:
 
 
 
 
 
 
 
Net income for basic EPS computation (1)
$
21.8

 
$
37.5

 
$
46.7

 
$
75.7

Weighted average shares outstanding for basic EPS computation (2)
49.8

 
52.2

 
49.8

 
52.2

Earnings per common share – basic (3)
$
0.44

 
$
0.72

 
$
0.94

 
$
1.45

Earnings per common share – assuming dilution:
 
 
 
 
 
 
 
Net income attributable to Company common shareholders
$
21.8

 
$
37.5

 
$
46.7

 
$
75.7

Add: preferred stock dividends, if applicable
0.1

 
0.1

 
0.2

 
0.2

Net income for diluted EPS computation (1)
$
21.9

 
$
37.6

 
$
46.9

 
$
75.9

Weighted average shares outstanding including nonvested shares
49.8

 
52.2

 
49.8

 
52.2

Dilutive effect of convertible notes
—

 
1.4

 
—

 
1.2

Dilutive effect of stock options and restricted stock units
0.9

 
0.9

 
0.9

 
0.9

Dilutive effect of assumed conversion of preferred stock
0.4

 
0.4

 
0.4

 
0.4

Weighted average shares outstanding for diluted EPS computation (2)
51.1

 
54.9

 
51.1

 
54.7

Earnings per common share – assuming dilution
$
0.43

 
$
0.68

 
$
0.92

 
$
1.39

(1)
Numerator
(2)
Denominator
(3)
Under the two-class method, earnings per share – basic reflects undistributed earnings per share for both common stock and unvested share-based payment awards (restricted stock).

Under ASC 260 - Earnings per Share and ASC 470 - Debt and because of the Company’s obligation to settle the par value of the 0.875% Convertible Notes, 1.00% Senior Convertible Notes, and the Subordinated Convertible Notes in cash, the Company is not required to include any shares underlying the 0.875% Convertible Notes, 1.00% Senior Convertible Notes and Subordinated Convertible Notes in its weighted average shares outstanding – assuming dilution until the average stock price per share for the quarter exceeds the $50.36, $83.93, and $36.75 conversion price of the 0.875% Convertible Notes, 1.00% Senior Convertible Notes and the Subordinated Convertible Notes, respectively, and only to the extent of the additional shares that the Company may be required to issue in the event that the Company’s conversion obligation exceeds the principal amount of the 0.875% Convertible Notes, the 1.00% Senior Convertible Notes and the Subordinated Convertible Notes.

Regarding the 0.875% Convertible Notes, the average stock price threshold conditions had not been met as of June 29, 2012. At any such time in the future that threshold conditions are met, only the number of shares issuable under the “treasury” method of accounting for the share dilution would be included in the Company’s earnings per share – assuming dilution calculation, which is based upon the amount by which the average stock price exceeds the conversion price. In addition, shares underlying the warrants will be included in the weighted average shares outstanding – assuming dilution when the average stock price per share for a quarter exceeds the $76.00 strike price of the warrants, and shares underlying the note hedges, will not be included in the weighted average shares outstanding – assuming dilution because the impact of the shares will always be anti-dilutive.

The following table provides examples of how changes in the Company’s stock price would require the inclusion of additional shares in the denominator of the weighted average shares outstanding – assuming dilution calculation for the 0.875% Convertible Notes. The table also reflects the impact on the number of shares that the Company would expect to issue upon concurrent settlement of the 0.875% Convertible Notes and the note hedges and warrants.

21
Tables of Contents


Share Price
Shares
Underlying
0.875%
Convertible
Notes
 
Warrant
Shares
 
Total Treasury
Method
Incremental
Shares (1)
 
Shares Due
to the
Company
under
Note Hedges
 
Incremental
Shares
Issued by the
Company upon
Conversion (2)
$50.36
—

 
—

 
—

 
—

 
—

$60.36
1,167,502

 
—

 
1,167,502

 
(1,167,502
)
 
—

$70.36
2,003,400

 
—

 
2,003,400

 
(2,003,400
)
 
—

$80.36
2,631,259

 
382,618

 
3,013,877

 
(2,631,259
)
 
382,618

$90.36
3,120,150

 
1,120,363

 
4,240,513

 
(3,120,150
)
 
1,120,363

$100.36
3,511,614

 
1,711,088

 
5,222,702

 
(3,511,614
)
 
1,711,088

(1)
Represents the number of incremental shares that must be included in the calculation of fully diluted shares under GAAP.
(2)
Represents the number of incremental shares to be issued by the Company upon conversion of the 0.875% Convertible Notes, assuming concurrent settlement of the note hedges and warrants.

Regarding the 1.00% Senior Convertible Notes, the average stock price threshold conditions had not been met as of June 29, 2012. At any such time in the future that threshold conditions are met, only the number of shares issuable under the “treasury” method of accounting for the share dilution would be included in the Company’s earnings per share – assuming dilution calculation, which is based upon the amount by which the average stock price exceeds the conversion price.

The following table provides examples of how changes in the Company’s stock price would require the inclusion of additional shares in the denominator of the weighted average shares outstanding – assuming dilution calculation for the 1.00% Senior Convertible Notes.
Share Price
Shares Underlying 1.00% Senior Convertible Notes
 
Total Treasury Method Incremental Shares (1)
$83.93
—

 
—

$93.93
13,425

 
13,425

$103.93
24,271

 
24,271

$113.93
33,213

 
33,213

$123.93
40,712

 
40,712

$133.93