General Cable (BGC) Q1 2012 Earnings Call May 01, 2012 8:30 am ET Executives Len Texter - Brian J. Robinson - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer Gregory B. Kenny - Chief Executive Officer, President and Director Analysts Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division Matthew S. McCall - BB&T Capital Markets, Research Division Shawn M. Harrison - Longbow Research LLC Richard Wesolowski - Sidoti & Company, LLC Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division Presentation Operator
The format of today's call will first be an overview by Brian Robinson of our first quarter. Secondly, Greg Kenny will provide comments on the company's second quarter 2012 outlook and full-year business trends followed by a question-and-answer period.Before we get started, I wanted to call your attention to our Safe Harbor provision regarding forward-looking statements and company-defined non-GAAP financial measures as defined on Slide #2, as we may refer to adjusted operating income and adjusted EBITDA in today's call. To begin, please turn to Slide 5, where we have included a reconciliation of our previously communicated outlook provided on February 9. With that, I will turn the call over to Brian Robinson. Brian J. Robinson Thank you, Len. Good morning. Overall, our first quarter operating results were above our expectations as metal cost headwinds subsided during the quarter and volumes improved in most North American and European businesses. Market metal prices increased during the quarter and were closer to inventory book values by the latter portion of the quarter, helping to mitigate the burden of selling higher average cost inventory into a lower metal price environment, which was so strongly evident in the [indiscernible]. Otherwise, as you can see on Slide 5, net sales inventory climbed [ph] movements and the effective tax rate were generally consistent with our expectation for the first quarter. On Slide #6, we've provided a commentary explaining our first quarter results compared to the fourth quarter of 2011 with Q4 net sales presented on a metals adjusted basis. The top line was flat despite the sequential increase in unit volume of 6% experienced during the quarter. Metal pounds sold in the first quarter included improved volume in Spain, which was captured at very low pricing levels. Gross profit and operating income in the first quarter reflects the impact of rising metal prices that helped to mitigate the burden of selling higher average cost inventory as we move through the quarter.
Also our first quarter results reflect the benefit of increased demand in many North American and European businesses as well as improving conditions in Thailand. Other income for the first quarter of $6.8 million reflects a net impact of $8.2 million of accounting gains on economic hedges, which are used to manage currency and commodity risk on our project businesses globally, partially offset by $1.4 million of transactional currency losses. This level of transactional currency losses is consistent with historical norms given the numerous currencies, in which we transact business around the world. Our adjusted EPS increased 60% sequentially from the fourth quarter. On the next 3 slides, 7, 8, and 9, we have provided segment information for your reference.First in North America, sequentially, demand improved across most business units including our utility businesses, which benefited from a relatively mild winter and demand for cables used in wind farm applications. Specialty cables, particularly those used in natural resource extraction and transportation applications, continued to be a source of strength. Sequentially, first quarter operating income of $30.4 million was above our expectation as metal cost headwind subsided and demand improved sequentially 10%. In ROW, sequentially, demand driven by construction-related activity in Venezuela and the Philippines and normalizing conditions in Thailand was more than offset by a typical and seasonally slower start to the year in many Latin American countries. Also the fourth quarter of 2011 included elevated copper rod shipments in sub-Saharan Africa following the rapid decline of copper prices at the end of the third quarter as well as strong demand for electric utility products in Mexico. Sequentially, first quarter operating income of $18.5 million was above our expectation as metal cost headwind subsided and conditions in Thailand improved. In Europe and Mediterranean, sequentially, demand improved for medium and high-voltage cables in France along with the supply of offshore specialty cables in Germany. Also, metal pounds shipped out of our Spanish facilities increased in the first quarter as compared to the significant decline experienced in the fourth quarter. Sequentially, first quarter operating income of $4.5 million was above our expectation as metal cost headwind subsided and the benefit of higher volume in most European countries helped to partially offset the ongoing weak pricing environment in Spain and a seasonally slower submarine and land turnkey project business. Read the rest of this transcript for free on seekingalpha.com