Highland Heights, KY - General Cable Corporation is implementing a restructuring program designed to improve profitability and return on invested capital in each of its three reportable segments. The restructuring program, which builds on the company’s existing productivity and asset optimization plans, is expected to result in ongoing annual savings of approximately $75 million, beginning in 2014 with full realization starting in early 2016. The restructuring program is focused on the closure of certain underperforming assets as well as the consolidation and realignment of other facilities. The company is also implementing reductions in selling, general and administrative (SG&A) expenses globally.
Gregory B. Kenny, President and Chief Executive Officer, said, “While we strongly believe our business is well positioned for the long-term, we are continuing to face ongoing challenges in certain end markets and persistently uneven global demand and pricing. We have therefore decided to expand our productivity and asset optimization plans that were communicated earlier this year by implementing a broad restructuring program focused on improving profitability and return on invested capital in all of our segments. While these are difficult decisions that affect the lives of our employees, we believe these actions are essential to improving both the near-term performance as well as assuring the long-term success of the Company. We appreciate the contributions of all of our employees, and will support those impacted during this time of transition. As we move forward, we remain confident in our strategy, competitiveness and ability to create shareholder value. Over a business cycle, our operating model continues to support substantial incremental earnings as we further strengthen the alignment of our portfolio with the long-term fundamental growth prospects for energy, infrastructure and construction investments in our key end markets around the world.”
Improving Profitability in All Three Reportable Segments
Collectively, the restructuring program is expected to generate $10 million of savings in 2014, increasing to ongoing annual savings of $75 million beginning in 2016.
As a result of the restructuring, the Company expects to record pre-tax charges of approximately $200 million, which includes approximately $80 million of cash costs. The Company anticipates a majority of the total charges will be incurred in 2014.
These actions are anticipated to result in the elimination of approximately 1,000 positions globally, representing nearly 7% of the Company’s workforce.
Progress on the restructuring will be communicated periodically throughout the implementation of the program which is expected to be completed over the next 12 months.
The timing and costs of the restructuring program may vary from the Company’s current estimates based on certain factors, including the finalization of timetables for the transition of production, consultations with employees and other statutory severance requirements of particular legal jurisdictions as well as any other actions that may result from the Company’s ongoing evaluation of its portfolio.
Update on Full Year 2014 Outlook
Aside from typical seasonality, global demand and pricing remains uneven as the tepid pace of the recovery continues to hamper growth in key end markets. As a result, management is tempering its expectations for the second half of the year principally due to the lack of consistent momentum in utility and construction spending in North America and Latin America as well as ongoing headwinds expected in Spain and Thailand. The Company also anticipates that certain assets are unlikely to meet key performance improvement milestones in the second half of the year. Partially offsetting these anticipated trends in the second half of the year are the initial benefits of the Company’s restructuring program and recently rising copper prices. Overall, the Company is expecting adjusted operating income for the full year of 2014 to be in the range of $200 to $230 million, down from its previously communicated estimate of around $230 million. The Company’s expectation for 2014 adjusted operating income excludes any impact from Venezuela. The Company’s outlook assumes copper (COMEX) and aluminum (LME) prices of $3.25 and $0.85, respectively.
Adjusted operating income for the second quarter is expected to be within management’s guidance range principally due to the seasonal improvement experienced across the portfolio including the strong execution of the Company’s submarine turnkey project business. The Company’s share repurchase authorization remains at $75 million under its current program as the Company did not repurchase any shares during the second quarter. The Company may utilize this authorization in the context of economic conditions as well as the then prevailing market price of the common stock of the Company, regulatory requirements, financial covenants and alternative deployments of capital.
Management will provide additional details on its second quarter results and full year 2014 outlook in its earnings release on July 30 and conference call on July 31.