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General Cable Corporation (BGC - Snapshot Report) reported second-quarter 2012 adjusted non-GAAP earnings per share of 74 cents, 4.2% above the Zacks Consensus Estimate of 71 cents. The earnings per share were up 54% compared to the prior-year quarter.

GAAP earnings for the quarter was 43 cents a share, which includes the impact of 10 cents per share of non-cash convertible debt interest expense, 13 cents per share of mark-to-market gains on financial derivatives and a one-time non-cash pension termination charge.

Total Revenue and Volume

Total revenue, on a metal-adjusted basis in the quarter increased 5% year over year to $1,478.1 million.

Volume based on metal pounds sold increased 5% year over year, driven by shipment of aerial transmission products globally. Demand improvement in France and the Mediterranean increased volume by 2% sequentially.

Geographical Volume Growth

In North America, volume in metal pounds sold for the second quarter increased 2% year over year and was up 1% sequentially. Excluding telephone and electric utility cables, volume increased 4% year over year and was up 1% sequentially as demand for industrial and networking products improved marginally as compared to the first quarter.

In the rest of the world (ROW), volume in metal pounds sold increased 7% year over year and grew 1% sequentially. Excluding metal pounds attributable to aerial transmission project shipments in Brazil, volume was flat year over year and decreased sequentially 2% compared to the first quarter of 2012.

Sequentially, stronger electrical infrastructure investment and construction activity in Latin America and the ongoing recovery of demand patterns in Thailand following the severe flooding were more than offset by rod mill customers and distributors postponing orders due to declining metal prices.

In Europe and Mediterranean, volume in metal pounds sold increased 6% year over year and was grew 4% sequentially. On a sequential basis, the second quarter reflects strong demand for medium voltage cables in France, where reliability work on the grid continues and demand for aluminum based electric utility products in the Mediterranean as investments in the grid advanced during the quarter.

Income and Expenses

Operating income in the quarter was $78.7 million in the quarter, reflecting a 47% sequential increase over $53.4 million in the first quarter of 2012. The sequential improvement in operating income is attributable to improved performance in the North American telephone and electric utility businesses, strong global aerial transmission project activity, improving domestic conditions in Thailand following the severe flooding in the fourth quarter of 2011, strong mining activity in Chile and ongoing grid investment in France.

On a metal adjusted basis, operating margin for the quarter was up 140 basis points (bps) sequentially to 5.3% but was almost flat year over year. Prior-year operating margin benefited from a rising metal price environment and operating results in Spain.

Balance Sheet

Cash and cash equivalents were $438.8 million at the end of the quarter. Net debt for the reported quarter was $708.1 million as of June 29 2012, reflecting 30% increase from $687.5 million at the end of the first quarter of 2012. The increase was attributable to the impact of funding of $41.0 million of copper purchases made during the quarter in Venezuela, as the company received authorization to import copper that will be used in production over the second half of the year.

Exiting the quarter, the company had a long term debt of $918.2 million with a debt-to-capital ratio of 37.2%.

Outlook

Concurrent with the earnings release, management provided guidance for the third quarter and fiscal 2012. Revenue for the third quarter are expected to be in the range of $1.43 billion to $1.48 billion, assuming average metal prices for the 30-day period ending July 30 on flat to slightly lower volume sequentially.

Adjusted operating income is expected to be in the range of $65 million to $75 million, while adjusted earnings per share are expected to be in the range of 60 cents to 70 cents before the impact of non-cash convertible debt interest expense and mark to market gains or losses on derivative instruments.

However, given the current economic uncertainty and metal cost volatility, the company has lowered its guidance for full fiscal 2012.  Adjusted operating income is now expected to be in the range of $260 million to $280 million compared to its previous guidance range of $270 million to $300 million.

The company has also narrowed its unit volume guidance for 2012 lowering the range to an increase of 2-4% compared to 3% to 7% guidance earlier.

Headquartered in Highland Heights, Kentucky, General Cable is engaged in the development, design, manufacture, marketing and distribution of copper, aluminum and fiber optic wire and cable products for the energy, industrial, specialty and communications markets. The company offers competitive strengths in areas, such as breadth of product line, brand recognition, distribution and logistics, sales and service, and operating efficiency.

General Cable Corporation holds a Zacks #3 Rank (short-term Hold recommendation).

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