##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from            to
 000-51043
 (Commission File Number)
 International Wire Group, Inc.
  Delaware
    
    43-1705942(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 12 Masonic Ave.
 Camden, NY 13316
 (315) 245-3800
    þ o
  o o þ
  o þ
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INTERNATIONAL WIRE GROUP, INC.
 INDEX
 PagePART I.FINANCIAL INFORMATION
    
    
    1ITEM 1. FINANCIAL STATEMENTS
    
    
    1ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    16ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    27ITEM 4. CONTROLS AND PROCEDURES
    
    
    28PART II.OTHER INFORMATION
    
    
    29ITEM 1. LEGAL PROCEEDINGS
    
    
    29ITEM 1A. RISK FACTORS
    
    
    29ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    29ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    29ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30ITEM 5. OTHER INFORMATION
    
    
    30ITEM 6. EXHIBITS
    
    
    30Certification of Principal Executive OfficerCertification of Principal Financial OfficerCertification of Principal Executive OfficerCertification of Principal Financial Officer
  
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 INTERNATIONAL WIRE GROUP, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 June 30,
    
    
    December 31,2006
    
    
    2005(In thousands, except for share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,540
    
    
    $
    5,422Accounts receivable, less allowance of $819 and $3,036
    
    
    121,487
    
    
    
    98,296Inventories
    
    
    74,493
    
    
    
    56,874Prepaid expenses and other
    
    
    8,684
    
    
    
    10,112Assets held for sale
    
    
    37,489
    
    
    
    1,975Deferred income taxes
    
    
    5,345
    
    
    
    8,900Total current assets
    
    
    253,038
    
    
    
    181,579Property, plant and equipment, net
    
    
    99,877
    
    
    
    85,440Goodwill
    
    
    71,193
    
    
    
    71,193Identifiable intangibles, net
    
    
    21,412
    
    
    
    21,358Deferred financing costs, net
    
    
    2,456
    
    
    
    2,457Restricted cash
    
    
    1,764
    
    
    
    1,922Other assets
    
    
    1,848
    
    
    
    2,305Total assets
    
    $
    451,588
    
    
    $
    366,254LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    684
    
    
    $
    228Accounts payable
    
    
    58,362
    
    
    
    33,865Accrued and other liabilities
    
    
    16,990
    
    
    
    17,064Accrued payroll and payroll related items
    
    
    6,765
    
    
    
    4,737Customers deposits
    
    
    13,302
    
    
    
    11,428Accrued income taxes
    
    
    3,563
    
    
    
    197Liabilities held for sale
    
    
    1,479
    
    
    
    Accrued interest
    
    
    1,850
    
    
    
    1,838Total current liabilities
    
    
    102,995
    
    
    
    69,357Long-term debt, less current maturities
    
    
    176,690
    
    
    
    135,188Other long-term liabilities
    
    
    3,883
    
    
    
    3,558Deferred income taxes
    
    
    7,861
    
    
    
    5,705Total liabilities
    
    
    291,429
    
    
    
    213,808Stockholders equity:Common stock, $.01 par value, 20,000,000 shares
authorized, 10,000,002 issued and outstanding
    
    
    100
    
    
    
    100Contributed capital
    
    
    176,144
    
    
    
    175,600Accumulated (deficit)
    
    
    (16,823
    )
    
    
    (21,948
    )Accumulated other comprehensive income/(loss)
    
    
    738
    
    
    
    (1,306
    )Total stockholders equity
    
    
    160,159
    
    
    
    152,446Total liabilities and stockholders equity
    
    $
    451,588
    
    
    $
    366,254
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INTERNATIONAL WIRE GROUP, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands, except
per share amounts)Net sales
    
    $
    214,077
    
    
    $
    102,261
    
    
    $
    358,640
    
    
    $
    198,289Operating expenses:Cost of goods sold, exclusive of depreciation and
amortization expense shown below
    
    
    191,774
    
    
    
    86,727
    
    
    
    318,931
    
    
    
    167,267Selling, general and administrative expenses
    
    
    9,985
    
    
    
    9,285
    
    
    
    17,649
    
    
    
    16,356Depreciation
    
    
    2,587
    
    
    
    2,057
    
    
    
    4,459
    
    
    
    4,115Amortization
    
    
    839
    
    
    
    800
    
    
    
    1,649
    
    
    
    1,599(Gain) on sale of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Operating income
    
    
    8,892
    
    
    
    3,392
    
    
    
    15,952
    
    
    
    8,959Other income/(expense):Interest expense
    
    
    (3,778
    )
    
    
    (3,085
    )
    
    
    (6,634
    )
    
    
    (5,730
    )Amortization of deferred financing costs
    
    
    (177
    )
    
    
    (161
    )
    
    
    (339
    )
    
    
    (322
    )Other, net
    
    
    305
    
    
    
    (8
    )
    
    
    239
    
    
    
    (17
    )Income from continuing operations before income
tax provision/(benefit)
    
    
    5,242
    
    
    
    138
    
    
    
    9,218
    
    
    
    2,890Income tax provision/(benefit) from continuing
operations
    
    
    2,104
    
    
    
    (1,944
    )
    
    
    3,597
    
    
    
    1,498Income from continuing operations
    
    
    3,138
    
    
    
    2,082
    
    
    
    5,621
    
    
    
    1,392Income/(loss) from discontinued operations, net
of income tax provision/(benefit) of $77,
$2,164, ($264) and ($927)
    
    
    126
    
    
    
    (7,770
    )
    
    
    (496
    )
    
    
    (7,541
    )Net income/(loss)
    
    $
    3,264
    
    
    $
    (5,688
    )
    
    $
    5,125
    
    
    $
    (6,149
    )Basic and diluted net income/(loss) per share:Income from continuing operations
    
    $
    0.31
    
    
    $
    0.21
    
    
    $
    0.56
    
    
    $
    0.14Income/(loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.78
    )
    
    
    (0.05
    )
    
    
    (0.75
    )Net income/(loss)
    
    $
    0.32
    
    
    $
    (0.57
    )
    
    $
    0.51
    
    
    $
    (0.61
    )Weighted average basic shares outstanding
    
    
    10,000,002
    
    
    
    10,000,002
    
    
    
    10,000,002
    
    
    
    10,000,002Weighted average diluted shares outstanding
    
    
    10,000,825
    
    
    
    10,000,002
    
    
    
    10,001,090
    
    
    
    10,000,002
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INTERNATIONAL WIRE GROUP, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For the Six Months EndedJune 30, 2006
    
    
    June 30, 2005(In thousands)Cash flows provided by operating activities:Net income/(loss)
    
    $
    5,125
    
    
    $
    (6,149
    )Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:Depreciation
    
    
    5,196
    
    
    
    5,365Amortization
    
    
    1,976
    
    
    
    2,422Amortization of deferred financing costs
    
    
    339
    
    
    
    322Provision for doubtful accounts
    
    
    (81
    )
    
    
    190Stock-based
compensation expense
    
    
    544
    
    
    
    (Gain) on sale of property, plant and equipment
    
    
    (464
    )
    
    
    (7
    )Impairment of identifiable intangibles
    
    
    
    
    
    
    2,548Change in assets and liabilities:Accounts receivable
    
    
    (18,370
    )
    
    
    (20,693
    )Inventories
    
    
    (7,093
    )
    
    
    7,858Prepaid expenses and other assets
    
    
    (1,089
    )
    
    
    (939
    )Accounts payable
    
    
    21,318
    
    
    
    19,419Accrued and other liabilities
    
    
    (751
    )
    
    
    (2,201
    )Accrued payroll and payroll related items
    
    
    818
    
    
    
    229Customers deposits
    
    
    1,874
    
    
    
    (503
    )Accrued interest
    
    
    12
    
    
    
    118Accrued income taxes
    
    
    3,309
    
    
    
    Other long-term liabilities
    
    
    (332
    )
    
    
    (855
    )Net cash provided by operating activities before
reorganization activities
    
    
    12,331
    
    
    
    7,124Cash flows used in reorganization activities
    
    
    
    
    
    
    (6,588
    )Net cash provided by operating activities
    
    
    12,331
    
    
    
    536Cash flows used in investing activities:Capital expenditures
    
    
    (4,915
    )
    
    
    (3,874
    )Proceeds from sale of property, plant and equipment
    
    
    644
    
    
    
    11Restricted cash
    
    
    (158
    )
    
    
    1,120Proceeds from sale of assets held for sale
    
    
    1,975
    
    
    
    Acquisition of Phelps Dodge High Performance Conductors of
SC&GA, Inc.
    
    
    (50,012
    )
    
    
    Net cash used in investing activities
    
    
    (52,466
    )
    
    
    (2,743
    )Cash flows provided by/(used in) financing activities:Borrowings of long-term obligations
    
    
    217,510
    
    
    
    Repayment of long-term borrowings
    
    
    (175,552
    )
    
    
    (4,717
    )Financing fees
    
    
    (338
    )
    
    
    (28
    )Net cash provided by/(used in) financing activities
    
    
    41,620
    
    
    
    (4,745
    )Effects of exchange rate changes on cash and cash equivalents
    
    
    (1,367
    )
    
    
    76Net change in cash and cash equivalents
    
    
    118
    
    
    
    (6,876
    )Cash and cash equivalents at beginning of the period
    
    
    5,422
    
    
    
    15,192Cash and cash equivalents at end of the period
    
    $
    5,540
    
    
    $
    8,316Supplemental
disclosure of cash flow information:Interest paid
    
    $
    6,646
    
    
    $
    5,612Net taxes
paid
    
    $
    247
    
    
    $
    248
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INTERNATIONAL WIRE GROUP, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands except per share data)
 (Unaudited)
 1.
    
    Business Organization and Basis of PresentationUnaudited Interim Condensed Consolidated Financial StatementsThe unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting
only of normal recurring adjustments that are, in the opinion of management, necessary for a
fair presentation of the financial position, results of operations and cash flows of
International Wire Group, Inc. (the Company, we or our). The results for the three
and six months ended June 30, 2006 and 2005 are not necessarily indicative of the results
that may be expected for a full fiscal year. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto included in
the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission
for the year ended December 31, 2005.Insulated Wire Business and Discontinued OperationsOver the last several years, the Companys insulated wire business operating results have
been adversely impacted by industry-wide over-capacity and increased material costs, that,
with the exception of copper price increases, could not be passed through to customers under
most of our current customer contracts. In addition, in the second and fourth quarters of
2005, we were notified that significant volume with two large customers, Viasystems
International, Inc. (Viasystems) and Yazaki Corp., and its affiliates, respectively, would
not be renewed upon the expiration of the existing supply contracts. Throughout 2005, the
Company actively evaluated the insulated wire business and considered alternatives affecting
all or part of the insulated wire business. On November 30, 2005, we sold and leased
selected assets of the U.S. insulated wire business to Copperfield, LLC and ceased U.S.
operations.On June 28 and 30, 2006, the Company entered into Stock Purchase Agreements (Cebu and
Durango Purchase Agreements) with Draka Holdings N.V. (Draka) and Draka Holdings Mexico,
S.A. (Draka Mexico). Pursuant to the terms of the Cebu
Purchase Agreement, Draka agreed to
purchase all the stock of the Companys Philippines insulated wire subsidiary,
IWG-Philippines, Incorporated, for a purchase price of $30,000, plus an additional sum,
currently estimated at $651, pursuant to a post closing working capital adjustment.
Additionally, Draka agreed to purchase approximately $6,478 of copper from the Company, which is
being held on consignment, payable in September 2006. Pursuant to the terms of the Durango
Purchase Agreement, Draka and Draka Mexico agreed to purchase all the stock of the Companys
Mexican insulated wire subsidiaries, IWG Services Company, S. de R.L. de C.V., Cables
Durango, S. de R.L. de C.V. and IWG Durango, S. de R.L. de C.V., for a purchase price of
$5,000.On July 3, 2006, the Company completed the disposition of the IWG-Philippines and the
Mexican insulated wire subsidiaries. This sale, together with the sale of certain U.S.
insulated wire assets to Copperfield, LLC in November 2005 and the subsequent collection of
retained accounts receivable, completed the Companys exit from the insulated wire business.
Accordingly, the entire insulated wire business has been presented as a discontinued
operation in the accompanying Condensed Consolidated Statements of Operations, and the related balance
sheet amounts, as of June 30, 2006, are shown as assets held for sale and liabilities held for
sale. The Company expects to record a pre-tax gain of approximately
$1,600 on this sale in
the third quarter of 2006.
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The insulated wire business
operating results of discontinued operations are as follows:
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    22,055
    
    
    $
    56,816
    
    
    $
    53,155
    
    
    $
    114,799Income/(loss)
before income tax provision/(benefit)
    
    
    203
    
    
    
    (5,606
    )
    
    
    (760
    )
    
    
    (8,468
    )
 Assets and liabilities held for sale are comprised of:
 As of
    
    
    As ofJune 30, 2006
    
    

December 31, 2005Assets:Cash
    
    $
    364
    
    
    $
    Accounts receivable
    
    
    11,405
    
    
    
    Inventories
    
    
    8,857
    
    
    
    Prepaid
expenses and other
    
    
    2,379
    
    
    
    Property, plant and equipment, net
    
    
    12,505
    
    
    
    1,975Identifiable intangibles, net
    
    
    1,347
    
    
    
    Other assets
    
    
    632
    
    
    
    $
    37,489
    
    
    $
    1,975Liabilities:Accounts payable, trade
    
    $
    1,192
    
    
    $
    Accrued expenses
    
    
    287
    
    
    
    $
    1,479
    
    
    $
    
 Statement of Cash FlowsThe Company previously separately reported cash flow from discontinued operations. The
Company has conformed the prior year presentation to the current year presentation of total cash flows.
There is no change to operating cash flows for the six months ended
June 30, 2005. The
Condensed Consolidated Statements
of Cash Flows reflects deposits into and changes in restricted cash accounts as an
Investing Activity. The Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2005 previously reflected such deposits into restricted cash accounts as a
Financing Activity. The 2005 period has been conformed to the current year basis and
presentation. This revision had no impact on the Condensed Consolidated Statements of Operations, or
the net increase (decrease) in cash and cash equivalents
included in our Condensed Consolidated
Statements of Cash Flows for the six months ended June 30, 2005.2.
    
    AcquisitionOn March 4, 2006, the Company entered into a Stock Purchase Agreement (HPC Purchase
Agreement) to acquire Phelps Dodge High Performance Conductors of SC & GA, Inc. (HPC)
from Phelps Dodge Corporation (PD). HPC is a manufacturer of specialty high performance
conductors which are plated copper and copper alloy conductors offering both high and low
temperature standard and customized conductors as well as specialty film insulated
conductors and miniature tubing products. The conductors manufactured are tin, nickel and
silver plated, including some proprietary products. High temperature products are generally
used where high thermal stability and good solderability are required for certain military
and commercial aerospace applications. The medical products include ultra fine alloys,
which are used in medical electronics such as ultrasound equipment and portable
defibrillators. The tubing products are used in a variety of medical devices in medicine
delivery and coronary procedures. These products are sold to harness assembly
manufacturers, distributors and original equipment
manufacturers (OEMs) in the United
States, Europe and Asia primarily serving the aerospace, medical, automotive, computer,
telecommunications, mass transportation, geophysical and electronics markets. HPC has
manufacturing operations in Inman, South Carolina and Trenton,
Georgia and a sales and distribution site in Purrs, Belguim.On March 31, 2006, the Company completed the acquisition of all of the outstanding common
stock of HPC for $42,000 plus an estimated working capital adjustment payment at closing of
$1,676. The acquisition was funded with borrowings under the Companys Revolver Credit
Facility (Note 9). Additionally, on March 31, 2006, the Company purchased the copper inventory held
on consignment by HPC from PD for $5,057, with $2,528 paid on May 15, 2006 and $2,529 paid
on June 14, 2006. Also, the Company expects to pay PD an
additional post-closing working capital adjustment in the range of $2,421 to $2,944. In addition, pursuant to the HPC Purchase Agreement, the Company has
agreed to pay a contingency payment to PD in an amount equal to 4.88 multiplied by the amount that
HPCs 2006 Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) (as defined in the HPC Purchase
Agreement) exceeds
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Purchase of common stock and estimated working capital
adjustment at closing
    
    $
    43,676Estimated additional working capital adjustment
    
    
    2,131Purchase of consigned inventory
    
    
    5,057Fees and costs
    
    
    1,279$
    52,143
  Current assets
    
    $
    34,690Property, plant and equipment
    
    
    26,734Identifiable intangibles
    
    
    2,500Current liabilities
    
    
    (6,406
    )Deferred credit
    
    
    (2,665
    )Deferred income taxes
    
    
    (2,361
    )Other liabilities
    
    
    (349
    )$
    52,143
   
    
    Any excess of the fair value of the contingent consideration issued or issuable
over the amount of the deferred credit will be recognized as additional cost of the
acquired entity.
    
    Any excess of the deferred credit over the fair value of the consideration
issued or issuable will first be recognized as a pro rata reduction of the amounts
that were initially assigned to eligible acquired assets, after which any remaining
difference would be recognized as an extraordinary gain.
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The following table shows summary unaudited pro forma results of operations as if the
Company and HPC had been combined as of the beginning of the periods presented. The
unaudited pro forma results of operations are based on estimates and assumptions, which are
preliminary and have been made solely for purposes of developing such pro forma information.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would have
occurred if the acquisition had been consummated as of the beginning of the periods
presented:
 Pro FormaFor the Three
    
    For the SixMonths Ended
    
    Months EndedJune 30,
    
    June 30,
    
    June 30,2005
    
    2006
    
    2005Net sales
    
    $
    123,551
    
    
    $
    385,534
    
    
    $
    240,860Income from continuing operations
    
    
    2,017
    
    
    
    6,652
    
    
    
    2,626Net income/(loss)
    
    
    (5,753
    )
    
    
    6,156
    
    
    
    (4,915
    )Basic and diluted net income/(loss) per share
    
    
    (0.58
    )
    
    
    0.62
    
    
    
    (0.49
    )
 3.
    
    Recently Issued Accounting StandardsIn November 2004 (revised in December 2004), the Financial Accounting Standards Board
(FASB) issued SFAS No. 151, Inventory Costs  an amendment of ARB No. 43,Chapter 4 to be
effective for inventory costs incurred during fiscal years beginning after June 15, 2005,
with early adoption permitted. SFAS No. 151 amends the guidance in Accounting Research
Bulleting (ARB) No. 43, Chapter 4, Inventory Pricing,to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB No. 43, Chapter 4, previously stated that . . . under some
circumstances, items such as idle facility expense, excessive spoilage, double freight, and
rehandling costs may be so abnormal as to require treatment as
current period charges. . . . SFAS No. 151 requires those items be recognized as current period charges regardless of
whether they meet the criterion of so abnormal. In addition, SFAS No. 151 requires the
allocation of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The adoption of SFAS No. 151 did not have a material
impact on the Companys financial statements.In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment.SFAS No. 123(R)
establishes standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. This Statement focuses primarily on accounting
for transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be
recognized as an expense in the historical financial statements as services are performed.
Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were required.
The Company adopted the provisions of SFAS No. 123(R) effective the first quarter of fiscal
year 2006, which began on January 1, 2006. See Note 6.In November 2005, the FASB issued FSP No. FAS 123(R)-3,
Transition Election Related to Accounting for the Tax Effects
of Share-Based Payment Awards. This FSP provides an elective
alternative simplified method for calculating the pool of excess tax
benefits available to absorb tax deficiencies recognized subsequent
to the adoption of SFAS No. 123R and reported in the Condensed
Consolidated Statements of Cash Flows. Companies may take up to one
year from the effective date of the FSP to evaluate the available
transition alternatives and make a one-time election as to which
method to adopt. We are currently in the process of evaluating the
alternative methods.In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes,to be effective for fiscal years beginning after December 31, 2006. This
Interpretation adopts a two-step approach for recognizing and measuring tax benefits and
requires certain disclosures about uncertainties in income tax positions. It also adopts the
recognition threshold of more likely than not. The
Company is currently evaluating the impact, if any, that
Interpretation No. 48 will have on its financial statements.
 7




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4.
    
    InventoriesThe composition of inventories is as follows:


June 30,
    
    
    December 31,2006
    
    
    2005Raw materials
    
    $
    19,080
    
    
    $
    18,274Work-in process
    
    
    16,796
    
    
    
    14,400Finished goods
    
    
    38,617
    
    
    
    24,200Total inventories
    
    $
    74,493
    
    
    $
    56,874


Inventories are valued at the lower of cost or market. Cost is determined using the
last-in, first-out (LIFO) method. Had inventories been valued at the first-in, first-out
(FIFO) cost method, inventories would have been $42,861 and $20,641 higher as of June 30,
2006 and December 31, 2005, respectively. 5.
    
    Goodwill and Intangible Assets, NetThe changes in the carrying amount of goodwill are as follows:
 June 30,
    
    
    December 31,2006
    
    

2005Balance, beginning of period
    
    $
    71,193
    
    
    $
    71,359Reversal of deferred income tax valuation allowance
    
    
    
    
    
    
    (166
    )Balance, end of period
    
    $
    71,193
    
    
    $
    71,193
 All goodwill is included in the bare wire segment. The
Company completed its annual impairment test at December 31, 2005 and concluded that goodwill was not impaired.
 The components of identifiable intangibles, net are as
follows:
 June
30, 2006
    
    

December
31, 2005Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    

Amortization
    
    

Cost
    
    

AmortizationCustomer contracts and relationships
    
    $
    11,634
    
    
    $
    1,107
    
    
    $
    11,292
    
    
    $
    1,125Trade names and trademarks
    
    
    10,500
    
    
    
    871
    
    
    
    10,248
    
    
    
    660Leases
    
    
    2,671
    
    
    
    1,514
    
    
    
    2,671
    
    
    
    1,068Alloys
    
    
    100
    
    
    
    1
    
    
    
    
    
    
    
    Total intangible assets
    
    $
    24,905
    
    
    $
    3,493
    
    
    $
    24,211
    
    
    $
    2,853
 Amortization expense for continuing operations for the six months ended June 30, 2006 was $1,049 and $1,018 for the same period in 2005.
The estimated amortization expense for identifiable intangible assets
held as of June 30, 2006 is as follows:
 Amount2006
    
    $
    1,0802007
    
    
    1,9832008
    
    
    1,2712009
    
    
    1,2712010
    
    
    1,271Thereafter
    
    
    14,536
 6.
    
    Stock Option Plans and Compensation ExpenseOn May 11, 2006, the Companys stockholders approved the 2006 Management Stock Option Plan
and the 2006 Stock Option Plan for Non-Employee Directors. Under the 2006 Management Stock
Option Plan, options for up to 1,300,000 shares of common stock are available for grant to
the eligible members of management. The options will be granted at no less than 100% of
fair market value of the Companys stock on the date of the grant and have a term of no
longer than 10 years. All other material terms of the stock options, including without
limitation, vesting and exercisability, will be determined by the Compensation Committee of
the Board of Directors. On May 12, 2006, the Compensation Committee and the Board of Directors
approved the issuance of
972,000 options to management members at an exercise of $15 per share, a term of 10 years,
and a vesting schedule of one-third of the award to each employee
on each of the first, second and third anniversaries of the date of grant. The estimated grant date fair value per option
using the Black-Scholes option model
was $7.01 for the 972,000
awards issued in May 2006.Under the 2006 Stock Option for Non-Employee Directors, options for up to 300,000 shares of
common stock are available for grant to non-employee directors. These stock options will
have an exercise price equal to 100% of fair market value of the underlying stock on the
date of grant and have a term of 10 years. On May 19, 2006, stock option awards of 69,300 were
granted to current non-employee directors at an exercise price of $15 per share with a
10-year term and a vesting schedule of one-third on the date of grant, one-third on October 20,
 2006 and the remaining one-third on October 20, 2007. The estimated grant date fair value of
these awards as calculated using the Black-Scholes option model was $7.01 per option.Effective January 1, 2006, the Company adopted SFAS No. 123(R) which requires companies to
measure and recognize compensation expense for all stock-based payments at fair value. SFAS
No. 123(R) is being applied on the modified prospective basis. Prior to the adoption of
SFAS No. 123(R), the Company accounted for stock-based compensation plans under the
recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.Under the modified prospective approach, SFAS No. 123(R) applies to new awards and to awards
that were outstanding on January 1, 2006 that are subsequently modified, repurchased or
cancelled. Under the modified prospective approach, compensation cost recognized for the
six months ended June 30, 2006 includes compensation cost for all share-based payments
granted in May 2006 and issued prior to, but not yet vested on, January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of
SFAS No. 123(R). Prior periods were not restated to reflect the impact of adopting the new standard.
 As a result of adopting SFAS No. 123(R) on January 1, 2006, the net income for the six
months ended June 30, 2006, includes compensation expense of $337 related to stock options
(net of tax benefit of $207). The stock-based compensation expense
is included in selling, general and administrative expenses in the
accompanying Condensed Consolidated Statement of Operations. Using the Black-Scholes option model to estimate
fair value of share-based awards, the Company used the following weighted average assumptions:
 8




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##### Table of Contents



Six Months Ended June 30, 2006Stock Options and Awards:Expected life
    
    6 yearsExpected volatility
    
    
    40
    %Dividend yield
    
    
    0
    %Risk-free interest rate
    
    
    4.9
    %
 The Company calculates expected volatility for stock options
using historical volatility of a group of companies in the wire and
cable industry. The risk-free interest rate is estimated based on the
Federal Reserves historical data for the maturity of nominal
treasury investments that corresponds to the expected term of the
option. The expected life was determined using the simplified method.Stock option activity for the six months ended June 30, 2006 is summarized as follows (in
thousands except per share amounts):
 WeightedWeighted
    
    Average
    
    AggregateAverage
    
    Remaining
    
    IntrinsicOptions
    
    Exercise Price
    
    Term in Years
    
    Value (in $000s)Outstanding at
January 1, 2006
    
    
    25,000
    
    
    $
    11.00Granted
    
    
    1,041,300
    
    
    $
    15.00Outstanding at June
30, 2006
    
    
    1,066,300
    
    
    $
    14.91
    
    
    
    9.8
    
    
    $
    580Exercisable at
June 30, 2006
    
    
    31,433
    
    
    $
    13.94
    
    
    
    9.7
    
    
    $
    142
 As of June 30, 2006, the Company had total unrecognized compensation costs of $6,760 which will be recognized as compensation expense
over a weighted average period of three years. The Company estimates a 5%
forfeiture rate in recording stock option compensation expense. As of June 30, 2006, no awards have been
exercised under the 2006 Management Stock Option Plan and the 2006 Stock Option Plan for
Non-Employee Directors.7.
    
    Comprehensive Income/(Loss)Comprehensive income/(loss) is comprised of:
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income/(loss)
    
    $
    3,264
    
    
    $
    (5,688
    )
    
    $
    5,125
    
    
    $
    (6,149
    )Foreign currency translation
adjustment
    
    
    1,038
    
    
    
    (1,896
    )
    
    
    2,044
    
    
    
    (2,070
    )Total comprehensive income/(loss)
    
    $
    4,302
    
    
    $
    (7,584
    )
    
    $
    7,169
    
    
    $
    (8,219
    )
 8.
    
    Net Income Per ShareNet income/(loss) per share is calculated using the weighted average number of common shares
outstanding during the period. For purposes of computing weighted average dilutive shares
outstanding the Company uses the treasury stock method as required by Statement of Financial
Accounting Standards No. 128 Earnings Per Share (as amended). The number of shares used in
the calculation of earnings per share for the three and six months ended June 30, 2006 and
2005 is as follows:
 9




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##### Table of Contents



For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Weighted average shares outstanding-basic
    
    
    10,000,002
    
    
    
    10,000,002
    
    
    
    10,000,002
    
    
    
    10,000,002Dilutive stock options
    
    
    823
    
    
    
    
    
    
    
    1,088
    
    
    
    Weighted average shares outstanding-dilutive
    
    
    10,000,825
    
    
    
    10,000,002
    
    
    
    10,001,090
    
    
    
    10,000,002Weighted average shares outstanding for the three and six month
periods ended June 30, 2006 exclude 1,041,300 options, because they are antidilutive.
 9.
    
    Long-Term DebtThe composition of long-term debt is as follows:
 June 30,
    
    
    December 31,2006
    
    
    2005Senior Revolving Credit Facility
    
    $
    71,690
    
    
    $
    30,188Senior Term Loan
    
    
    30,000
    
    
    
    30,00010% Secured Senior Subordinated Notes
    
    
    75,000
    
    
    
    75,000Other
    
    
    684
    
    
    
    228177,374
    
    
    
    135,416Less current maturities
    
    
    684
    
    
    
    228Long-term portion of long-term debt
    
    $
    176,690
    
    
    $
    135,188
 Senior Revolving Credit Facility and Term LoanOn October 20, 2004, and as amended on March 31,
2006, in connection with the acquisition of HPC and as amended on June
28, 2006, the Company and its domestic
subsidiaries entered into (collectively, the Credit
Facility) (1) an amended credit agreement among
Congress Financial Corporation (Central), now known as Wachovia Capital Financial
Corporation (Central), as administrative agent, and the several banks and financial
institutions parties thereto, which provides for a five-year senior
revolver credit
facility in an amount of up to $155,000 subject to borrowing availability (including, as a
sub-facility of the revolver credit facility, a $25,000 letter of credit facility) (the
Revolver Credit Facility), and (2) an amended credit agreement among Silver Point Finance, LLC, as
administrative agent, and the several banks and financial institutions parties thereto,
which provides for a $30,000 five-year senior term loan facility (the Term Credit
Facility).Borrowings under the Revolver Credit Facility are tied to a borrowing base, which is
calculated by reference to, among other things, eligible accounts receivable, eligible
inventory and eligible real property
 10




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##### Table of Contents



and equipment. As of June 30, 2006,
letters of credit in the amount of $13,472 were outstanding and $71,690 was drawn under the
Revolver Credit Facility. Availability under the Revolver Credit Facility was $69,367 as of
June 30, 2006.On July 3, 2006, funds were transferred in connection with the sale of the IWG-Philippines
and the Mexican insulated wire subsidiaries (Note 1). Proceeds from the sale were used to repay
borrowings under the Revolver Credit Facility. As of August 11, 2006, letters of credit in
the amount of $13,472 were outstanding and $27,609 was drawn under the Revolver Credit
Facility. Availability under the Revolver Credit Facility was $113,448 as of August 11,
2006.The Companys domestic subsidiaries are the primary parties to the Credit Facility. The
Company has guaranteed their obligations under the Credit Facility. The collateral for the
Credit Facility includes all or substantially all of the Companys and its domestic
subsidiaries assets, including 65 percent of the capital stock of, or other equity
interests in, the Companys foreign subsidiaries. The Term Credit Facility, and the liens
and guarantees in respect thereof, are junior to the Revolver Credit Facility, and the liens
and guarantees in respect thereof.The Companys Credit Facility requires the Company to observe conditions, affirmative
covenants and negative covenants (including financial covenants), including compliance with
a fixed charge coverage ratio when either (1) minimum availability under the credit
facility falls below $20,000 or (2) there is a default or event of default. At June 30,
2006, the Company is in compliance with the terms of the Credit Facility.The Companys Revolver Credit Facility commitment expires on October 20, 2009. The Term
Credit Facility is required to be repaid in full at maturity on October 20, 2009.Secured Senior Subordinated NotesThe 10% Secured Senior Subordinated Notes due 2011 (Notes) are: senior
subordinated obligations of the Company; senior in right of payment to any future
subordinated obligations; guaranteed by the Companys domestic subsidiaries; and secured by
a third-priority lien on all or substantially all of the Companys and its domestic
subsidiaries assets, including 65 percent of the capital stock of, or other equity
interests in, the Companys foreign subsidiaries. The Company issued the Notes on October
20, 2004 in aggregate principal amount of $75,000. The Notes will mature on October 15,
2011.Interest on the Notes accrues at the rate of 10 percent per annum and is payable
semiannually in arrears on April 15 and October 15. Interest on overdue principal accrues
at 2 percent per annum in excess of the above rate.The indenture governing the Notes contains restrictive covenants which, among other things,
limit the ability of the Company and its subsidiaries to (subject to exceptions): incur
additional debt; pay dividends or distributions on, or redeem or repurchase capital stock;
restrict dividends or other payments; transfer or sell assets; engage in transactions with
affiliates; create certain liens; engage in sale/leaseback transactions; impair the
collateral for the Notes; make investments; guarantee debt; consolidate, merge or transfer
all or substantially all of its assets and the assets of the Companys subsidiaries; and
engage in unrelated businesses.10.
    
    Business Segment and Geographic InformationPrior to March 31, 2006, the Company had three reportable
segments: bare wire, engineered products-Europe and insulated wire. As a result of the HPC acquisition on March 31, 2006 (Note 2) and the discontinued operations
of the insulated wire business (Note 1), the Companys three reportable segments are: bare wire, engineered products-Europe and high performance conductors. Segment data for the three and six months ended
June 30, 2005 below has been recast to conform to the current year presentation based on the current segments. These segments are strategic business units
organized around three product categories that follow managements internal organization
structure. The Company evaluates segment performance based on segment operating income.
 11




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##### Table of Contents



The bare wire segment manufactures bare and tin-plated copper wire products (or conductors)
used to transmit digital, video and audio signals or conduct electricity and sells to
insulated wire manufacturers and various industrial OEMs for use in computer and data
communications products, general industrial, energy, appliances, automobiles, and other
applications. The bare wire segment is in the primary business of copper fabrication.
While the Company bills its customers for copper it provides, it does not distinguish in its
records these customer types and it is therefore not practical to provide such disclosure.The engineered products-Europe segment manufactures and engineers connections and bare copper wire products (or
conductors) to conduct electricity either for power or for grounding purposes and are sold
to a diverse customer base of various OEMs for use in electrical appliances, power supply,
aircraft and railway, and automotive.The high performance conductors segment, which resulted from the Companys acquisition
described in Note 2, manufactures specialty high performance conductors which include tin,
nickel and silver plated copper and copper alloy conductors including high and low
temperature standard and customized conductors as well as specialty film insulated
conductors and miniature tubing products.Summarized financial information for the Companys reportable segments is as follows:
 Engineered
    
    HighProducts-
    
    PerformanceBare Wire
    
    Europe
    
    Conductors
    
    Corporate
    
    Eliminations
    
    TotalNet salesThree months ended June 30, 2006
    
    $
    170,863
    
    
    $
    14,272
    
    
    $
    29,028
    
    
    $
    
    
    
    $
    (86
    )
    
    $
    214,077Three months ended June 30, 2005
    
    
    93,333
    
    
    
    10,068
    
    
    
    
    
    
    
    
    
    
    
    (1,140
    )
    
    
    102,261Six months ended June 30, 2006
    
    
    302,919
    
    
    
    26,938
    
    
    
    29,028
    
    
    
    
    
    
    
    (245
    )
    
    
    358,640Six months ended June 30, 2005
    
    
    180,181
    
    
    
    20,520
    
    
    
    
    
    
    
    
    
    
    
    (2,412
    )
    
    
    198,289Operating income/(loss)Three months ended June 30, 2006
    
    
    5,312
    
    
    
    1,158
    
    
    
    2,962
    
    
    
    (540
    )
    
    
    
    
    
    
    8,892Three months ended June 30, 2005
    
    
    5,209
    
    
    
    341
    
    
    
    
    
    
    
    (2,158
    )
    
    
    
    
    
    
    3,392Six months ended June 30, 2006
    
    
    11,320
    
    
    
    2,219
    
    
    
    2,962
    
    
    
    (549
    )
    
    
    
    
    
    
    15,952Six months ended June 30, 2005
    
    
    10,352
    
    
    
    1,127
    
    
    
    
    
    
    
    (2,520
    )
    
    
    
    
    
    
    8,959GoodwillJune 30, 2006
    
    
    71,193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,193December 31, 2005
    
    
    71,193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,193Total assetsJune 30, 2006
    
    
    290,827
    
    
    
    36,957
    
    
    
    64,895
    
    
    
    59,195
    (a)
    
    
    (286
    )
    
    
    451,588December 31, 2005
    
    
    254,351
    
    
    
    28,230
    
    
    
    
    
    
    
    84,689
    (a)
    
    
    (1,016
    )
    
    
    366,254
 
 (a)
    
    Includes assets held for sale as of June 30, 2006 and assets of the insulated wire segment as of December 31, 2005. 12




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##### Table of Contents



The following table presents sales by period and by geographic region based on the
country in which the legal subsidiary is domiciled.
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005United States
    
    $
    199,805
    
    
    $
    92,193
    
    
    $
    331,702
    
    
    $
    177,769Europe
    
    
    14,272
    
    
    
    10,068
    
    
    
    26,938
    
    
    
    20,520Total
    
    $
    214,077
    
    
    $
    102,261
    
    
    $
    358,640
    
    
    $
    198,289
 The following table presents property, plant and equipment, net by geographic region based
on the location of the asset (excludes amounts included in assets
held for sale):
 June 30,
    
    
    December 31,2006
    
    
    2005United States
    
    $
    90,880
    
    
    $
    64,693Europe
    
    
    8,997
    
    
    
    7,916Mexico
    
    
    
    
    
    
    5,118Philippines
    
    
    
    
    
    
    7,713Total
    
    $
    99,877
    
    
    $
    85,440
 11.
    
    Related Party TransactionsIn September 2002, the Company began selling a portion of its production scrap to Prime
Materials Recovery, Inc. (Prime). Prime is a closely held company and its major
shareholder, chairman and director is the Chief Executive Officer of the Company. In
addition, the Vice President of Finance of the Company holds a minority ownership interest
and is a director. The Company had sales to Prime of $7,572 and $2,514 for the three months
ended June 30, 2006 and 2005, respectively, and $11,278 and $5,314 for the six months ended
June 30, 2006 and 2005, respectively. The outstanding trade receivables were $2,418 and
$823 at June 30, 2006 and December 31, 2005, respectively. Sales to Prime were made at
terms comparable to those of other companies in the industry.12.
    
    LitigationIn February 2002, the Company initiated an action in the Circuit Court of Cook County,
Chancery Division (Case No. 02CH2470) located in Chicago, Illinois, titled International
Wire Group, Inc. v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania, AIG
Technical Services, Inc., Aon Corporation and Aon Risk Services of Missouri, Ltd.(the AIG
Litigation). The Company alleges in the complaint in such action, among other things, that
National Union is obligated to defend and indemnify and otherwise provide insurance coverage
to the Company and the various OEMs for certain claims and damages related to certain water
inlet hoses supplied by and through the Companys former wire harness business pursuant to two (2) $25,000 excess insurance
policies issued to the Company by National Union. In July 2003, a ruling was rendered in
this matter. The trial court ruled in favor of the Company and ruled that National
Union/AIG is obligated to defend and indemnify and otherwise provide insurance coverage to
the Company and various OEMs for certain claims and damages related to certain water inlet
hoses supplied by and through the Company pursuant to the two (2) $25,000 excess insurance
policies issued to the Company by National Union. National Union/AIG filed for an appeal of
the decision.In December 2003, the Company and its former parent company reached an agreement with
National Union, AIG Technical Services, Aon Corporation and Aon Risk Services of Missouri to
settle pending matters in the AIG Litigation. Under the settlement agreement, National
Union agreed to provide full
 13




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##### Table of Contents



Value ofNo. of
    
    
    AllegedClaims
    
    
    DamagesAs of December 31, 2004
    
    
    388
    
    
    $
    3,956For the year ended December 31, 2005:New uninsured claims
    
    
    1,526
    
    
    
    15,158Resolved uninsured claims
    
    
    (1,604
    )
    
    
    (15,503
    )As December 31, 2005
    
    
    310
    
    
    
    3,611For the six months ended June 30, 2006:New uninsured claims
    
    
    409
    
    
    
    4,177Resolved uninsured claims
    
    
    (334
    )
    
    
    (2,927
    )As of June 30, 2006
    
    
    385
    
    
    $
    4,861
   For the Six Months
    
    For the YearEnded
    
    EndedJune 30, 2006
    
    December 31, 2005Aggregate settlement costs
    
    $
    208
    
    
    $
    340Cost of administering and litigating
    
    $
    82
    
    
    $
    360Average cost per resolved claim
    
    $
    1
    
    
    $
    
  14




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##### Table of Contents



global settlements, the future costs of final settlement of
these claims may differ from the liability currently accrued.
However, in the Companys opinion, the impact of final
settlement of these claims on future operations, financial position
and cash flows should not be material.The
Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental
to the operations of the Company. The Company does not believe that
such proceedings and actions would materially affect the Company.13.
    
    Subsequent EventOn August 10, 2006, the Company and the domestic
subsidiaries entered into a Commitment Letter with Wachovia Capital
Finance Corporation (Central) to amend the Companys existing
Credit Facility. Under the proposed amendment, the existing Revolver
Credit Facility would be increased to $200,000 subject to borrowing
availability (including a $25,000 letter of credit facility), the
existing Term Facility would be terminated, the maturity would be
extended until 2011 and the interest rate margin would be reduced.
The amendment is expected to be completed by the end of August 2006.
The Commitment Letter is subject to certain customary terms and
conditions precedent.
 15




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  believes, expects, may, will, should, seeks, pro forma, anticipates, intends, plans, estimates,
   Overview
 OEMs
 
    
    Bare Wire Products.Our bare and tin-plated copper wire products (or
conductors) are used to transmit digital, video and audio signals or conduct
electricity and are sold to a diverse customer base of over 1,000 insulated wire
manufacturers and various industrial OEMs for use in computer and data
communications products, general industrial, energy, appliances, automobiles and
other applications.
    
    Engineered Products  Europe.Our connections and bare copper wire products are engineered
and used to conduct electricity either for power or for grounding purposes and are
sold to a diverse customer base of various OEMs for use in electrical appliances,
power supply, aircraft and railway and automotive.
 16




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##### Table of Contents




    
    High Performance Conductors.Our high performance conductors segment
manufacturers specialty high performance conductors which include tin, nickel and
silver plated copper and copper alloy conductors including high and low temperature
standard and customized conductors as well as specialty film insulated conductors
and miniature tubing products. This segment resulted from our acquisition of Phelps
Dodge High Performance Conductors of SC & GA, Inc. (HPC) on March 31, 2006.
  
    
    Demand for the end products in which our products are incorporated.
    
    Our abilities to compete with other suppliers in the industry served.
  
    
    Electronics/data communications and industrial/energy  while the end user
applications are very diverse, some of the contributing factors of demand in the
markets include technology spending and major industrial and/or infrastructure
projects, including build-out of computer networks, mining development, oil
exploration and production projects, mass transit and general commercial and
industrial real estate development.
    
    Automobiles  North American industry production statistics, which are
influenced by labor relations issues, regulatory requirements and trade agreements.
For the first six months of 2006, automotive industry production volumes increased
2.2% compared to the same period for 2005.
    
    With the HPC acquisition, additional factors include commercial aircraft
shipments, military aircraft deliveries and electro-medical equipment demand rates.
Orders and deliveries of large civil aircraft in the first six months of 2006
increased approximately 20% over the same period in 2005. Demand for medical
devices was also strong in the first six months of 2006 due to the broadening
acceptance of products available for minimally invasive procedures and increased
product development.
  tolled owned copper
 COMEX
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##### Table of Contents



U.S. Insulated Wire, Philippines and Mexico Business Sale
  
    
    Sold the inventory, equipment, spare parts and certain other assets located at
our Avilla, Indiana facility and three facilities located in El Paso, Texas;
    
    Sold our Avilla, Indiana facility, transferred leases for two of our El Paso,
Texas facilities and leased a third El Paso, Texas facility to Copperfield (the
third facility was subsequently sold to Copperfield on February 21, 2006 for $2
million); and
    
    Transferred certain contracts related to these facilities.
    18




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##### Table of Contents



Acquisition
 Purchase Agreement HPC PD
   19




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##### Table of Contents



Results of Operations
  For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    214.1
    
    
    
    100.0
    %
    
    $
    102.3
    
    
    
    100.0
    %
    
    $
    358.6
    
    
    
    100.0
    %
    
    $
    198.3
    
    
    
    100.0
    %Operating expenses:Cost of goods sold, exclusive of depreciation
and amortization expense shown below
    
    
    191.8
    
    
    
    89.6
    
    
    
    86.7
    
    
    
    84.8
    
    
    
    318.9
    
    
    
    88.9
    
    
    
    167.3
    
    
    
    84.4Selling, general and administrative expenses
    
    
    10.0
    
    
    
    4.7
    
    
    
    9.3
    
    
    
    9.1
    
    
    
    17.6
    
    
    
    4.9
    
    
    
    16.4
    
    
    
    8.2Depreciation and amortization
    
    
    3.4
    
    
    
    1.6
    
    
    
    2.9
    
    
    
    2.8
    
    
    
    6.1
    
    
    
    1.7
    
    
    
    5.7
    
    
    
    2.9Operating income
    
    
    8.9
    
    
    
    4.1
    
    
    
    3.4
    
    
    
    3.3
    
    
    
    16.0
    
    
    
    4.5
    
    
    
    8.9
    
    
    
    4.5Other income/(expense):Interest expense
    
    
    (3.8
    )
    
    
    (1.7
    )
    
    
    (3.1
    )
    
    
    (3.0
    )
    
    
    (6.6
    )
    
    
    (1.8
    )
    
    
    (5.7
    )
    
    
    (2.9
    )Amortization of deferred financing costs
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.4
    )
    
    
    (0.1
    )
    
    
    (0.3
    )
    
    
    (0.1
    )Other, net
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.2
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Income before income tax provision
    
    
    5.2
    
    
    
    2.4
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    9.2
    
    
    
    2.6
    
    
    
    2.9
    
    
    
    1.5Income tax provision/(benefit)
    
    
    2.1
    
    
    
    1.0
    
    
    
    (2.0
    )
    
    
    (1.9
    )
    
    
    3.6
    
    
    
    1.0
    
    
    
    1.5
    
    
    
    0.8Income from continuing operations
    
    
    3.1
    
    
    
    1.4
    
    
    
    2.1
    
    
    
    2.0
    
    
    
    5.6
    
    
    
    1.6
    
    
    
    1.4
    
    
    
    0.7Income/(loss) from discontinued operations
    
    
    0.2
    
    
    
    0.1
    
    
    
    (7.8
    )
    
    
    (7.6
    )
    
    
    (0.5
    )
    
    
    (0.2
    )
    
    
    (7.5
    )
    
    
    (3.8
    )Net income/(loss)
    
    $
    3.3
    
    
    
    1.5
    %
    
    $
    (5.7
    )
    
    
    (5.6
    )%
    
    $
    5.1
    
    
    
    1.4
    %
    
    $
    (6.1
    )
    
    
    (3.1
    )%
  For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales:Bare Wire
    
    $
    170.9
    
    
    
    80
    %
    
    $
    93.3
    
    
    
    91
    %
    
    $
    302.9
    
    
    
    84
    %
    
    $
    180.2
    
    
    
    91
    %Engineered
Products  Europe
    
    
    14.3
    
    
    
    7
    
    
    
    10.1
    
    
    
    10
    
    
    
    26.9
    
    
    
    8
    
    
    
    20.5
    
    
    
    10High Performance Conductors
    
    
    29.0
    
    
    
    13
    
    
    
    0.0
    
    
    
    
    
    
    
    29.0
    
    
    
    8
    
    
    
    0.0
    
    
    
    Elimination
    
    
    (0.1
    )
    
    
    
    
    
    
    (1.1
    )
    
    
    (1
    )%
    
    
    (0.2
    )
    
    
    0
    
    
    
    (2.4
    )
    
    
    (1
    )Total
    
    $
    214.1
    
    
    
    100
    %
    
    $
    102.3
    
    
    
    100
    %
    
    $
    358.6
    
    
    
    100
    %
    
    $
    198.3
    
    
    
    100
    %Operating income:Bare Wire
    
    $
    5.3
    
    
    
    56
    %
    
    $
    5.2
    
    
    
    93
    %
    
    $
    11.3
    
    
    
    69
    %
    
    $
    10.3
    
    
    
    90
    %Engineered
Products  Europe
    
    
    1.1
    
    
    
    12
    
    
    
    0.4
    
    
    
    7
    
    
    
    2.2
    
    
    
    13
    
    
    
    1.1
    
    
    
    10High Performance Conductors
    
    
    3.0
    
    
    
    32
    
    
    
    0.0
    
    
    
    
    
    
    
    3.0
    
    
    
    18
    
    
    
    
    
    
    
    Subtotal
    
    
    9.4
    
    
    
    100
    %
    
    
    5.6
    
    
    
    100
    %
    
    
    16.5
    
    
    
    100
    %
    
    
    11.4
    
    
    
    100
    %Corporate and eliminations
    
    
    (0.5
    )
    
    
    
    
    
    
    (2.2
    )
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    (2.5
    )Total
    
    $
    8.9
    
    
    
    
    
    
    $
    3.4
    
    
    
    
    
    
    $
    16.0
    
    
    
    
    
    
    $
    8.9
 20




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##### Table of Contents



Three Months Ended June 30, 2006 versus Three Months Ended June 30, 2005
         21




---



##### Table of Contents



Six Months Ended June 30, 2006 versus Six Months Ended June 30, 2005
     22




---



##### Table of Contents



23




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##### Table of Contents



Financial Condition
     Recently Issued Accounting Standards
  24




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##### Table of Contents



Inventory Costs  and amendment of ARB No. 43, Chapter 4 ARB Inventory Pricing, ...
 Accounting for Uncertainty in Income
Taxes
 Liquidity and Capital Resources
 Working Capital and Cash Flows
    25




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##### Table of Contents



Financing Arrangements
  Liquidity
     Off-Balance Sheet Arrangements
  26




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Risk
  Foreign Currency Risk
     Commodity Price Risk
   27




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Remediation Plan
   Changes in Internal Control over Financial Reporting
  28




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Item 3 Legal
Proceedings
 
 ITEM 1A. RISK FACTORS.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  29




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Rodney D. Kent
    
    For: 9,669,540
    
    Withheld: 25,300Mark K. Holdsworth
    
    For: 9,694,840
    
    Withheld: 0William Lane Pennington
    
    For: 9,669,540
    
    Withheld: 25,300Peter Blum
    
    For: 9,694,840
    
    Withheld: 0David M. Gilchrist, Jr.
    
    For: 9,694,840
    
    Withheld: 0Robert A. Hamwee
    
    For: 9,694,840
    
    Withheld: 0Lowell W. Robinson
    
    For: 9,694,840
    
    Withheld: 0John T. Walsh
    
    For: 9,694,840
    
    Withheld: 0
       
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 Exhibit Number
    
    Description2.1
    
    Stock Purchase Agreement, dated as of June 28, 2006, by and among Draka Holding N.V.,
International Wire Group, Inc., and Wire Technologies, Inc. (incorporated by reference to Exhibit
2.1 to Form 8-K filed July 5, 2006).2.2
    
    Purchase Agreement, dated as of June 30, 2006, by and among Draka Holding N.V., Draka
Mexico Holding, S.A. de C.V., International Wire Group, Inc. and Wire Technologies, Inc. (incorporated by reference to Exhibit 2.2 to Form 8-K filed July 5, 2006).10.1
    
    International Wire Group, Inc. 2006 Management Stock Option Plan (incorporated by reference
to Exhibit 10.1 to Form 8-K filed May 17, 2006).10.2
    
    International Wire Group, Inc. 2006 Stock Option Plan for Nonemployee Directors (incorporated
by reference to Exhibit 10.2 to Form 8-K filed May 17, 2006).10.3
    
    Amendment Number 1 to International Wire Group, Inc. 2006 Stock Option Plan for Nonemployee
Directors (incorporated by reference to Exhibit 10.3 to Form 8-K filed May 17, 2006).10.4
    
    Letter agreement regarding Amended and Restated Registration Rights Agreement, dated June
14, 2006, among International Wire Group, Inc., GSCP (NJ), Inc., Special Value Absolute Return
Fund, LLC and Special Value Opportunities Fund, LLC (incorporated by reference to Exhibit 10.1 to
Form 8-K filed June 19, 2006).10.5
    
    Amendment No. 2 Loan and Security Agreement, dated as of June 28, 2006, by and among
International Wire Group, Inc., its domestic subsidiaries, the parties to the Loan Agreement as
lenders and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial
Corporation (Central) (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 5, 2006).10.6
    
    Amendment No. 2 Loan and Security Agreement, dated as of June 28, 2006, by and among
International Wire Group, Inc., its domestic subsidiaries, the parties to the Loan Agreement as
lenders and Silver Point Finance LLC (incorporated by reference to Exhibit 10.2 to Form 8-K filed
July 5, 2006).10.7
    
    Amendment No. 2 to Intercreditor Agreement, dated as of June 28, 2006, by and between
Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation
(Central), in its capacity as agent for the lenders who are party from time to time and Silver
Point Finance LLC, in its capacity as collateral agent for the lenders who are party from time to
time (incorporated by reference to Exhibit 10.3 to Form 8-K filed July 5, 2006).31.1
    
    Certification of Principal Executive Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.31.2
    
    Certification of Principal Financial Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.32.1
    
    Certification of Principal Executive Officer Required by
Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Principal Financial Officer Required by
Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 30




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##### Table of Contents



SIGNATURES
  INTERNATIONAL WIRE GROUP, INC.Dated: August 14, 2006
    
    By:
    
    /s/ GLENN J. HOLLERName:
    
    Glenn J. HollerTitle:
    
    Senior Vice President, Chief Financial Officer(Principal Financial and Accounting Officer) and
Secretary
 31




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Stock Purchase Agreement, dated as of June 28, 2006, by and among Draka Holding N.V.,
International Wire Group, Inc., and Wire Technologies, Inc. (incorporated by reference to Exhibit
2.1 to Form 8-K filed July 5, 2006).2.2
    
    Purchase Agreement, dated as of June 30, 2006, by and among Draka Holding N.V., Draka
Mexico Holding, S.A. de C.V., International Wire Group, Inc. and Wire
Technologies, Inc. (incorporated by reference to Exhibit 2.2 to Form 8-K filed July 5, 2006).10.1
    
    International Wire Group, Inc. 2006 Management Stock Option Plan (incorporated by reference
to Exhibit 10.1 to Form 8-K filed May 17, 2006).10.2
    
    International Wire Group, Inc. 2006 Stock Option Plan for Nonemployee Directors (incorporated
by reference to Exhibit 10.2 to Form 8-K filed May 17, 2006).10.3
    
    Amendment Number 1 to International Wire Group, Inc. 2006 Stock Option Plan for Nonemployee
Directors (incorporated by reference to Exhibit 10.3 to Form 8-K filed May 17, 2006).10.4
    
    Letter agreement regarding Amended and Restated Registration Rights Agreement, dated June
14, 2006, among International Wire Group, Inc., GSCP (NJ), Inc., Special Value Absolute Return
Fund, LLC and Special Value Opportunities Fund, LLC (incorporated by reference to Exhibit 10.1 to
Form 8-K filed June 19, 2006).10.5
    
    Amendment No. 2 Loan and Security Agreement, dated as of June 28, 2006, by and among
International Wire Group, Inc., its domestic subsidiaries, the parties to the Loan Agreement as
lenders and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial
Corporation (Central) (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 5, 2006).10.6
    
    Amendment No. 2 Loan and Security Agreement, dated as of June 28, 2006, by and among
International Wire Group, Inc., its domestic subsidiaries, the parties to the Loan Agreement as
lenders and Silver Point Finance LLC (incorporated by reference to Exhibit 10.2 to Form 8-K filed
July 5, 2006).10.7
    
    Amendment No. 2 to Intercreditor Agreement, dated as of June 28, 2006, by and between
Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation
(Central), in its capacity as agent for the lenders who are party from time to time and Silver
Point Finance LLC, in its capacity as collateral agent for the lenders who are party from time to
time (incorporated by reference to Exhibit 10.3 to Form 8-K filed July 5, 2006).31.1
    
    Certification of Principal Executive Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.31.2
    
    Certification of Principal Financial Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.32.1
    
    Certification of Principal Executive Officer Required by
Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Principal Financial Officer Required by
Rule 13a-14(b) of the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
 32