General Cable Corporation Earnings Call Nuggets: Q1 Volume, SG&A Assumption

On Tuesday, General Cable Corporation (NYSE:BGC) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Q1 Volume

Jeffrey Beach – Stifel Financial: In view of the stronger than expected first quarter volume, up almost 6% sequentially, you’ve given guidance for high single-digit growth in the second quarter. How does this compare historically that step seasonal climb, particularly in view of those strong first quarter volume?

Gregory B. Kenny – President and CEO: It would probably be just a little bit sharper than historically or on the norm. Again, history has been bothered by four years or three plus of a financial crisis, and then of course a booming 2005 to 2007, early 2008 timeframe. So, normal has been a word that we wish we could use more. But I would say, Jeff, it’s roughly in line with what we would expect. There might have been a little bit of pull forward, we don’t think very much in the utility business due to the warm weather in North America. Projects move around and we’re trying to think maybe through a year rather than quarter-to-quarter, because these turnkey projects, including the big transmission projects can bounce around or be delayed a couple of weeks. But roughly we would expect North America to be up in the high single-digits, a little bit less than the Europe and Mediterranean principally because of the stress that we’re seeing in Southern Europe and then in rest of world we would expect double-digit increases in the second quarter versus the first quarter. But I would say pretty typical of what our modeling would tell us if nothing else is going on in the macroeconomy.

Jeffrey Beach – Stifel Financial: Then just as a follow-up, the inventories on a carrying cost went up in the quarter, but on a metal adjusted basis, were they up more than new inventories? You were looking for flat, were they up more than expected, because of the volume?

Brian J. Robinson – EVP, CFO and Treasurer: No, Jeff. I’d say they were flat. I think when you look in the balance sheet there’s some inflation with respect to just, you are right, the average cost and some currency, but on a quasi basis well, pretty flat.

SG&A Assumption

Matthew McCall – BB&T Capital Markets: So, I guess following up on the previous question, you talked about 3% to 7% volume growth last quarter for the full year. You did a little better than you anticipated in Q1; and looks like Q2 still showing some strength, no change to that. I understand it’s a somewhat wide range. But just maybe talk about the assumptions that you’re baking in for the back half that would cause that number not to tick a little bit higher?

Brian J. Robinson – EVP, CFO and Treasurer: Matt, I would say – it’s Brian. I would say a meaningful piece of it is going to be around the seasonality in the business, right. So, we’re expecting typically about second quarter – second, third quarters to be our strongest quarter with maybe little higher bias towards the second quarter. So, we’ve given the annual guidance on the volume – from a volume perspective a quarter ago. This quarter we supplemented with the income, which is really not – which isn’t saying we really have better visibility in the business. It’s really more a way of looking sort of from a full year sort of contextual perspective given some of the volatility we’ve seen on the – and as we get moved around by copper prices, as you’ve seen in the past. So, we’ll see, but I think when we think about ’12, as we’ve said for quite some time, the things that we – as we said, we’re focused on the execution, we’re focused on the working capital management. So, we still feel pretty good in that 3% to 7%.

Gregory B. Kenny – President and CEO: Yeah, (I know.) The U.S. is the early cycle stuff picked up. We see a little bit of wind activity because where there is a question of – there is a – funding continues, so they’re finishing projects and it looks like after the election, the extension the wind tax credits will play. But the U.S., I would say is broadly not accelerating its certainly been over the last couple of years a pleasant surprise and came up faster than other parts of the world and seems to be sort of moving sideways though seasonally, we will be up, but that’s seasonal not a broad breakout. We continue to focus on execution and continuous improvement and that’s so we expect to pull cost out of the business every year. In Europe what’s happening there is France seems to be okay we’re now one company in Europe we’re making some progress in European markets. As you know Europe was built through acquisitions and we’ve been reluctant to get real specific about our turnkey submarine business because we are really in the startup mode, winning contracts, and then needing to execute and the execution is always difficult and complex and timing moves around, because these projects have many actors including governmental, but we do have that, largely of buoying the continued weakness in Spain and frankly all the cost out we have in Spain has been given back to the markets as that demand has even stepped down in the second half of last year. So we’re hoping this continuous cost out in Iberia a stabilizing market, domestically exporting more out of Spain into European and regional markets. Then (row) is still a story of the Americas being the strongest but we’ve seen nice activity in the Philippines and in Thailand as the Thais begin to recover from the natural disasters. But the Americas are probably our strongest market even without U.S. construction anywhere on the board yet. Net, net I think this is a year of sort of that three to seven some of it we are helping ourselves, so I wouldn’t describe the markets as growing necessarily in those levels. We have some new plants coming on, and then we are executing on some of the investment we made over the last couple of years. But that’s sort of a broad travel through what we are seeing.

Matthew McCall – BB&T Capital Markets: The other question I have is really about the assumptions and the guidance maybe this is for you Brian, you’ve seen SG&A kind of bump around a little bit 93, 96, back to 94. So first question is, what’s the SG&A assumption we should be making both in Q2 and for the full-year? Then any commentary about items below the operating line we should keep in mind as we are viewing the quarter or the year?

Brian J. Robinson – EVP, CFO and Treasurer: Matt, I would think it from an assumption perspectives, as you know, these things can be variable, but I’d say on the SG&A, the modeling that I think we described as saying to be helpful of $95 million plus or minus. So I think that continues. We are watching every cost. Obviously in Europe, we are focused really hard on reducing every cost. So, that’s what I would say on the SG&A side. Below the line, Matt, I’d say as you can see on the mark-to-markets on the metals and the currencies for the large contracts which we adjust out for the EPS, adjusted EPS purposes, interestingly the fourth quarter was $8 million loss in this mark-to-markets and most of that came back in the first quarter. So, again, we don’t assume that in our – we assume basically a flat in our guidance. The other last piece would be on the interest expense. I would expect, in second quarter, we see interest expense maybe $2 million to $3 million higher which is partly seasonal to support the working capital investment behind the higher volumes and also in our operations outside of North America. It has more to do with some timing payments – timing of metal payments, and paying for longer terms. But those would be the principal items.

Matthew McCall – BB&T Capital Markets: Would that interest expense number then tick back lower in the back half?

Brian J. Robinson – EVP, CFO and Treasurer: I would say our expectation is it will be in that 23 to 26 kind of range, Matt. I would expect that it would tick lower as we move to the seasonal working capital.