Superior Essex�Inc. (NASDAQ: SPSX) today reported its first quarter
2008 financial results. For the quarter, Superior Essex reported
revenues of $757 million and earnings of $0.37 per diluted share.
These results compare to revenues of $696 million and earnings of
$0.45 per diluted share in the first quarter of 2007. Included in
first quarter 2008 diluted earnings per share was $9.6 million in
pre-tax facility restructuring charges related primarily to the
previously announced North American Magnet Wire factory
consolidation project. Excluding these charges and other special
items, adjusted earnings per diluted share a totaled $0.69 for the
first quarter of 2008, an increase of 50% over the prior year first
quarter adjusted earnings per diluted share of $0.46. In the first
quarter of 2008, Core Business revenues at constant copper a
increased 12% vs. the prior year quarter. The revenue increase in
the first quarter of 2008 included the benefit of the three magnet
wire acquisitions completed in 2007, along with the positive impact
of currency exchange rates in the European operations. Excluding
acquisitions and currency impact, Core Business revenues at
constant copper declined approximately 9%, as compared to the first
quarter of 2007. �We are extremely pleased with our first quarter
performance, including the benefits from the successful execution
of our 2007 acquisitions, which contributed to our 12% constant
copper Core Business revenue increase and 50% adjusted EPS growth,�
said Stephen M. Carter, chief executive officer of Superior Essex.
�The positive contribution from these acquisitions, combined with
sustained benefits from our cost reduction activities, more than
offset the impact of weak demand in certain of our end markets and
allowed us to exceed our previous earnings guidance.� Consolidated
First Quarter 2008 Financial Results The following are highlights
of operating results for the three months ended March 31 (dollars
in millions, except earnings per share): � 3 months ended 3/31 2008
� 2007 Total revenues $757.2 $695.6 Core Business revenues $743.0
$623.2 Core Business revenue change (at constant copper) 12%
Adjusted EBITDA a,1 $39.1 $33.7 Net income $7.4 $9.2 Earnings per
diluted share $0.37 $0.45 Adjusted earnings per diluted share 1
$0.69 $0.46 � 1 Adjusted EBITDA and adjusted EPS for the three
months ended March 31, 2008, exclude $10.1 million in special
items. The major components of the special items include cash
charges of $2.1 million and non-cash charges for accelerated
depreciation of $7.5 million related primarily to the closure of
the Company�s Magnet Wire manufacturing facility in Vincennes,
Indiana. The non-cash charge for accelerated depreciation is
reflected as a component of costs of goods sold in the March 31,
2008, quarterly income statement. Business Segment Operating
Results The following are financial highlights for the three months
ended March 31 (dollars in millions) for: (1) the Communications
Cable business segment; (2) the combined global Magnet Wire and
Distribution operations, which include our Magnet Wire and
Distribution North America, Magnet Wire and Distribution Europe,
and Magnet Wire Asia Pacific business segments; and (3) the Copper
Rod business segment (see Supplemental Financial Information in the
financial tables for further revenue and adjusted EBITDA details on
a business segment basis). Communications Cable � � 3 months ended
3/31 2008 � 2007 Revenues $196.5 $216.0 Revenue change (at constant
copper) (11%) Adjusted EBITDA $22.9 $21.9 Revenues in the
Communications Cable segment declined 11% on a constant copper
basis, as compared to the first quarter of 2007. This decline was
principally the result of reduced demand from the major
telecommunications customers due to the contraction in residential
construction and housing starts. Despite lower revenues, adjusted
EBITDA in the first quarter of 2008 increased 4% year-over-year,
due to continued margin expansion from cost efficiencies and
product mix improvements. Global Magnet Wire and Distribution � � 3
months ended 3/31 2008 � 2007 Revenues $546.5 $407.2 Revenue change
(at constant copper) 23% Adjusted EBITDA $22.8 $16.8 First quarter
2008 Global Magnet Wire and Distribution revenues of $546 million
increased 23% on a constant copper basis over the first quarter of
2007. This revenue growth included the benefit of the 2007 magnet
wire acquisitions and the impact of favorable currency exchange
rates. On an organic basis (excluding the acquisition and currency
benefits), revenues at constant copper declined 8%, reflecting
continued weakness in the North American commercial/residential and
European industrial end markets, partially offset by increased
demand across all regions in the power/energy product lines. The
Global Magnet Wire and Distribution operations reported adjusted
EBITDA of $22.8 million, an increase of 36% over the first quarter
of 2007. The increase included the benefit of the 2007 magnet wire
acquisitions, partially offset by start-up losses in the Company�s
Suzhou, China, operations and the impact of organic volume
declines. Adjusted EBITDA for the first quarter of 2008 excluded
$8.0 million in cash and non-cash charges for the North American
factory consolidation announced earlier this year. This project is
expected to be completed by the end of 2008 with estimated annual
cost savings of $7 to $9 million. Copper Rod In 2007, and
continuing into 2008, the Company implemented a planned
rationalization of its total copper rod production output, which
has resulted in a significant reduction of third-party sales of
copper rod and an increase in the percentage of production used
internally. As a result, Copper Rod business segment revenues for
the first quarter of 2008 were reduced to $14 million as compared
to $72 million in the first quarter of 2007. Revenues from the sale
of Copper Rod generally allow for fixed cost recovery at margins
that approximate break-even. In the first quarter of 2008, the
Copper Rod business segment incurred charges associated with
facility restructuring of $1.4 million (including $1.3 million of
non-cash charges for accelerated depreciation recorded as a
component of cost of goods sold). Debt and Cash Flow The Company
reported total debt at March 31, 2008, of $356 million and net debt
(debt net of cash and cash equivalents) of approximately $290
million. For the first quarter of 2008, net debt increased by
approximately $40 million. The increase in net debt was due to
higher net working capital resulting from normal seasonal
increases, along with the impact of higher copper values. Stephen
Carter's CEO Comments �Successful execution and integration of our
2007 acquisitions allowed us to continue to produce revenue and
adjusted EPS growth in the first quarter of 2008, despite the
persistent slump in key North American commercial/residential and
European industrial end markets. We also benefited from strong
demand for our expanded energy/power product lines, which now
exceed $600 million in annualized revenues." �In the first quarter,
we announced plans, and began to take the steps necessary, to
consolidate our global Magnet Wire manufacturing base. This should
produce substantial cost efficiencies and provide an opportunity to
leverage improved product mix. The benefits from these actions are
expected to be significant and should begin to be realized in late
2008." �These cost reduction initiatives, coupled with sustained
margin improvements in our Communications Cable business segment, a
growing base of Magnet Wire revenues related to the energy end
market, and prospects for an ultimate recovery in the North
American residential sector make us extremely optimistic regarding
margin and earnings growth on a long term basis." �For the second
quarter of 2008, we expect economic conditions in Europe and North
America to remain generally unchanged. Nonetheless, we should
continue to benefit from the 2007 magnet wire acquisitions on a
year-over-year basis. However, this benefit will be to a lesser
degree than the first quarter of 2008, due to the timing of the
Canadian acquisition, which occurred early in the second quarter of
2007. All in all, for the second quarter of 2008 we expect to
generate increases in both Core Business revenues on a constant
copper basis and adjusted EPS, although at a rate below the 12%
constant copper revenue growth and 50% adjusted EPS growth achieved
in the first quarter of 2008.� Analyst Call Information Superior
Essex will host an analyst call at 10:00 a.m. (ET), May 2, 2008.
During the call, the Company will discuss earnings results and will
provide a general business update. The dial-in number for domestic
financial analysts is 800-374-2356. International financial
analysts should dial in to 706-634-6384. To participate, please
dial in a few minutes before the scheduled time. The media and the
public are invited to listen to the call at superioressex.com. A
replay of the call will be available through May 9, 2008, by
dialing 800-642-1687 or 706-645-9291 and using the following
conference ID: 44244609. A webcast replay will also be archived for
a limited period on the Company's Web site at superioressex.com. a
Adjusted earnings per diluted share, adjusted EBITDA and Core
Business revenues at constant copper are non-GAAP financial
measures. Please see Financial Measures and Key Operating Metrics
for detailed explanations of these terms and the attached tables
for reconciliations to the appropriate GAAP measures. About
Superior Essex Superior Essex�Inc., a FORTUNE 1000 company, is one
of the largest wire and cable manufacturers in the world. The
Company manufactures and supplies a broad portfolio of wire and
cable products for the Communications, Energy, Automotive,
Industrial, and Commercial & Residential end-markets.�It is a
leading manufacturer of magnet wire, fabricated insulation
products, and copper and fiber optic communications wire and cable.
It is also a leading distributor of magnet wire, insulation and
related products. Additional information on the Company can be
found on its Web site at superioressex.com. Forward-Looking
Statements and Risk Factors The matters discussed in this news
release, including expected results, contain forward-looking
statements that involve a number of risks and uncertainties. Actual
results may vary significantly based on a number of factors,
including, but not limited to, general economic, business and
industry trends and conditions; fluctuations in the availability
and cost of copper and other principal raw materials (including the
working capital impact of such fluctuations and our ability to
recover such costs) as well as natural gas and freight; changes in
spending patterns by the telephone industry; changes in the rate of
decline in access lines to homes and businesses; the migration of
magnet wire demand to China; intense competition from other
manufacturers and from alternative technologies such as fiber
optics, wireless and VoIP; losses or gains in sales as customer
contracts expire or are renewed or rebid; volume and timing of
customer orders; rapid product and technology development; market
acceptance of new products and continuing product demand for
existing products; significant changes in the amount of our
indebtedness; our ability to operate within the framework of our
revolving credit facility and senior notes; our ability to achieve
anticipated benefits of manufacturing network restructurings,
integrate acquired acquisition operations and achieve anticipated
benefits; our ability to identify, finance and integrate other
acquisitions; our ability to successfully operate and expand our
magnet wire business in China; changes in short-term interest rates
and foreign exchange rates; any deterioration in our labor
relations; and other risk factors detailed in Superior Essex's
filings with the Securities and Exchange Commission, including the
Annual Report on Form 10-K for the year ended December 31, 2007,
and Quarterly Reports on Form 10-Q, all of which we incorporate by
reference herein. Forward-looking statements are only as of the
date they are made, and we do not undertake to update these
statements to reflect subsequent changes except as required by
federal securities law. Financial Measures and Key Operating
Metrics General We use certain operating and financial measures
that are not calculated in accordance with accounting principles
generally accepted in the United States of America, or GAAP. A
non-GAAP financial measure is defined as a numerical measure of a
company's financial performance, financial position or cash flows
that (i) excludes amounts, or is subject to adjustments that have
the effect of excluding amounts, that are included in the most
directly comparable measure calculated and presented in accordance
with GAAP in the statement of income, balance sheet or statement of
cash flows; or (ii) includes amounts, or is subject to adjustments
that have the effect of including amounts, that are excluded from
the comparable measure so calculated and presented. These non-GAAP
operating and financial measures are described below. Revenues at
Constant Copper Due to the impact of differing copper values on
revenues in the reported periods, the Company is providing
supplemental, non-GAAP sales comparisons at a constant value of
copper to aid in analyzing period-to-period net sales. Presentation
of net sales herein for both 2008 and 2007 are adjusted to a
$3.00/lb COMEX value for our North American operations (or the
equivalent SHME per kilogram value for our Chinese operations) and
�4.900 per kilogram for our European operations. Sales adjusted for
a constant value of copper as used by us may not be comparable to
similarly titled measures of other companies. Core Business
Revenues Core Businesses consist of the Company�s Communications
Cable business segment, its Magnet Wire and Distribution North
America business segment, its Magnet Wire and Distribution Europe
business segment, and its Magnet Wire Asia Pacific business
segment. EBITDA Earnings before interest, taxes, depreciation and
amortization, or "EBITDA," is a performance metric which we use and
which is used by other companies. "EBITDA" as used by the Company
(defined as earnings before interest, taxes, depreciation,
amortization, minority interest and other expense, net) may not be
comparable to a similarly titled measure of another company.
Adjusted EBITDA and Adjusted EPS The Company uses the terms
�Adjusted EBITDA� and �Adjusted earnings per diluted share� (or
�Adjusted EPS�). Adjusted EBITDA is defined as EBITDA including
other expense, net and excluding the impact of special items.
Adjusted EPS is defined as earnings per diluted share excluding the
after-tax, after minority interest impact of special items. These
items may not be comparable to a similarly titled measure of
another company. Special items are detailed in the financial tables
accompanying this release. Net Debt The Company uses the term �Net
Debt,� which is a non-GAAP financial measure. Net debt is defined
as total debt outstanding less cash and cash equivalents. Net debt
as used by the Company may not be comparable to a similarly titled
measure of another company. Comparisons to GAAP Management believes
that EBITDA, Adjusted EBITDA, Adjusted EPS and Revenues at Constant
Copper are useful adjuncts to net income (loss), earnings per
share, revenues and other measurements under GAAP. The Company
believes these measures are useful in analyzing the underlying
operating performance of the Company�s business without regard to
financing methods, capital structure, cost basis of assets or other
non-routine events which we do not expect to occur regularly in the
future. These measures are also used in our internal budgeting
process, managing, comparing and reporting on operating performance
internally and to evaluate performance for certain executive
compensation programs. The following non-GAAP financial
measurements are reconciled to the most directly comparable GAAP
financial measures � EBITDA to net income; Adjusted EBITDA to net
income; Adjusted EPS (or Adjusted earnings per diluted share) to
earnings per diluted share; and Revenues at Constant Copper to
revenues. EBITDA, Adjusted EBITDA and Adjusted EPS are supplements
to GAAP financial information and should not be considered an
alternative to, or more meaningful than, net income or operating
income as determined in accordance with GAAP. EBITDA and Adjusted
EBITDA have distinct limitations as compared to GAAP information
such as net income or operating income. These measures do not
reflect all costs and benefits associated with the operation of our
business that impact net income or earnings per share calculated on
a GAAP basis. Management compensates for these limitations by
reconciling the non-GAAP financial measurements to the most
directly comparable GAAP measure and by presenting the GAAP results
in conjunction with these other measures. Revenues at Constant
Copper has distinct limitations as compared to GAAP revenues. With
Revenues at Constant Copper, in a declining copper cost
environment, it may not be apparent that net sales may be declining
on an actual basis. Management compensates for these limitations by
reconciling the non-GAAP financial measurements to the most
directly comparable GAAP measure and by presenting the GAAP results
in conjunction with Revenues at Constant Copper. Core Business
revenues has distinct limitations as compared to GAAP revenues. By
limiting net sales to �Core Businesses,� the revenues of the
omitted segment, copper rod, may not be apparent. Management
compensates for these limitations by reconciling the non-GAAP
financial measurements to the most directly comparable GAAP measure
and by presenting the GAAP results in conjunction with Core
Business revenues. Superior Essex Inc. Condensed Consolidated
Income Statements Three Months Ended March 31 ($ in millions,
except share and per share data) Unaudited � � Three Months Ended
Three Months Ended March 31, 2008 March 31, 2007 � Revenues $ 757.2
$ 695.6 Cost of goods sold (includes $7.5 million in accelerated
depreciation in 2008 related to assets to be retired) 691.2 � 634.4
� Gross profit 66.0 61.2 Selling, general and administrative 43.6
35.6 Restructuring and other charges 2.1 � 0.9 � Operating income
20.3 24.7 Interest expense (8.3 ) (7.6 ) Interest income 0.6 0.7
Other expense, net (1.2 ) (0.7 ) Income before income taxes and
minority interest 11.4 17.1 Income tax expense (3.7 ) (6.9 )
Minority interest in earnings of subsidiary (0.3 ) (1.0 ) Net
income $ 7.4 � $ 9.2 � � Earnings per common share Basic $ 0.38 $
0.45 Diluted $ 0.37 $ 0.45 � Shares used for computation (000s)
Basic 19,757 20,152 Diluted 19,929 20,455 Superior Essex Inc. � �
Condensed Consolidated Balance Sheets ($ in millions) Unaudited �
March 31, 2008 December 31, 2007 ASSETS Current assets: Cash and
cash equivalents $ 64.9 $ 102.7 Accounts receivable, net 467.5
403.1 Inventories, net 334.7 310.0 Other current assets 26.1 32.1
Total current assets 893.2 847.9 Property, plant and equipment (net
of accumulated depreciation) 327.9 323.3 Intangible and other
long-term assets, net 45.7 44.2 TOTAL ASSETS $ 1,266.8 $ 1,215.4 �
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Short-term borrowings and current portion of long-term debt $ 67.9
$ 67.0 Accounts payable 278.7 245.0 Accrued expenses 105.6 100.0
Total current liabilities 452.2 412.0 Long-term debt 287.7 286.2
Other long-term liabilities 85.1 83.9 Total liabilities 825.0 782.1
Minority interest in subsidiary 3.1 2.7 Stockholders' equity 438.7
430.6 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,266.8 $
1,215.4 Superior Essex Inc. � � Supplemental Financial Information
Three Months Ended March 31 ($ in millions) Unaudited � Three
Months Ended Three Months Ended March 31, 2008 March 31, 2007
Revenues Magnet Wire and Distribution North America $ 295.8 $ 246.7
Magnet Wire and Distribution Europe 234.0 160.4 Magnet Wire Asia
Pacific 16.7 � 0.1 � Global Magnet Wire $ 546.5 $ 407.2
Communications Cable 196.5 � 216.0 � Core Business revenues $ 743.0
$ 623.2 Copper Rod 14.2 � 72.4 � $ 757.2 � $ 695.6 � � Revenues,
copper price adjusted 1 Magnet Wire and Distribution North America
$ 273.8 $ 260.6 Magnet Wire and Distribution Europe 229.1 160.4
Magnet Wire Asia Pacific 16.4 � 0.1 � Global Magnet Wire $ 519.3 $
421.1 Communications Cable 187.6 � 211.9 � Core Business Revenues $
706.9 $ 633.0 Copper Rod 12.4 � 80.4 � Revenues, copper price
adjusted $ 719.3 $ 713.4 Constant cost of copper adjustment 37.9 �
(17.8 ) Net sales (GAAP) $ 757.2 � $ 695.6 � � Reconciliation of
Adjusted EBITDA to net income Net income $ 7.4 $ 9.2 Income tax
expense 3.7 6.9 Interest expense 8.3 7.6 Interest income (0.6 )
(0.7 ) Minority interest in earnings of subsidiary 0.3 1.0 Other
expense, net 1.2 � 0.7 � Operating income $ 20.3 $ 24.7
Depreciation/amortization (includes $7.7 million in accelerated
depreciation in 2008 related to assets to be retired) 16.7 � 7.5 �
EBITDA $ 37.0 $ 32.2 Restructuring and other charges 2.1 0.9
Non-cash equity compensation 0.9 2.0 Special litigation costs 0.3 -
Special bad debt recoveries - (0.7 ) Other expense, net (1.2 ) (0.7
) Adjusted EBITDA $ 39.1 � $ 33.7 � � Adjusted EBITDA by segment
Magnet Wire and Distribution North America $ 14.0 $ 11.5 Magnet
Wire and Distribution Europe 7.8 6.0 Magnet Wire Asia Pacific 1.0 �
(0.7 ) Global Magnet Wire $ 22.8 $ 16.8 Communications Cable 22.9
21.9 Copper Rod 0.2 0.2 Corporate (6.4 ) (4.9 ) Other (0.4 ) (0.3 )
Adjusted EBITDA $ 39.1 � $ 33.7 � � 1 Adjusted in both periods to a
constant $3.00 COMEX copper cost per pound for our North American
operations (or the equivalent SHME per kilogram value for our
Chinese operations) and �4.900 per kilogram for our European
operations Superior Essex Inc. Detail of Special Items Impacting
Net Income Three Months Ended March 31 ($ in millions, except per
share data) Unaudited � � Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007 Special bad debt recoveries -
customer insolvencies $ - $ 0.7 Facility restructuring costs (9.6 )
(0.4 ) Special litigation costs (0.3 ) - Other (0.2 ) (0.5 )
Subtotal $ (10.1 ) $ (0.2 ) Tax and minority interest impact of
above items 3.8 � - � Total impact increase/(decrease) on net
income $ (6.3 ) $ (0.2 ) Total impact to earnings per diluted share
related to special items $ (0.32 ) $ (0.01 ) � Reconciliation of
earnings per diluted share to adjusted earnings per diluted share
Earnings per diluted share $ 0.37 $ 0.45 Impact of special items
0.32 � 0.01 � Adjusted earnings per diluted share $ 0.69 � $ 0.46 �
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