##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 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
(State or other jurisdiction of 
incorporation or organization)
    
    43-1705942
(I.R.S. Employer Identification No.)
 12 Masonic Ave.
Camden, NY 13316
(315) 245-3800
 þ o
 
 Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  þ o




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##### 



INTERNATIONAL WIRE GROUP, INC.
 INDEX
 PART I.  FINANCIAL INFORMATION
    
    
    1ITEM 1. FINANCIAL STATEMENTS
    
    
    1ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    12ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    22ITEM 4. CONTROLS AND PROCEDURES
    
    
    23PART II.  OTHER INFORMATION
    
    
    23ITEM 1. LEGAL PROCEEDINGS
    
    
    23ITEM 1A. RISK FACTORS
    
    
    23ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    23ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    23ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    23ITEM 5. OTHER INFORMATION
    
    
    24ITEM 6. EXHIBITS
    
    
    24Certification of Principal Executive Officer by Rule 13a-14(a)Certification of Principal Financial Officer by Rule 13a-14(a)Certification of Principal Executive Officer by Rule 13a-14(b)Certification of Principal Financial Officer by Rule 13a-14(b)




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,374
    
    
    $
    3,991Accounts receivable, less allowances of $1,263 and $1,282
    
    
    119,186
    
    
    
    93,456Refundable income taxes
    
    
    
    
    
    
    3,283Inventories
    
    
    71,650
    
    
    
    57,346Prepaid expenses and other
    
    
    7,254
    
    
    
    6,446Deferred income taxes
    
    
    11,782
    
    
    
    11,782Total current assets
    
    
    215,246
    
    
    
    176,304Property, plant and equipment, net
    
    
    107,549
    
    
    
    107,354Goodwill
    
    
    62,324
    
    
    
    61,560Identifiable intangibles, net
    
    
    19,967
    
    
    
    16,488Deferred financing costs, net
    
    
    2,003
    
    
    
    2,321Restricted cash
    
    
    1,387
    
    
    
    1,486Other assets
    
    
    4,324
    
    
    
    3,624Total assets
    
    $
    412,800
    
    
    $
    369,137LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    396
    
    
    $
    1,126Accounts payable
    
    
    58,266
    
    
    
    28,705Accrued and other liabilities
    
    
    12,639
    
    
    
    8,757Accrued workers compensation costs
    
    
    6,455
    
    
    
    5,775Accrued payroll and payroll related items
    
    
    8,787
    
    
    
    10,701Customers deposits
    
    
    12,079
    
    
    
    12,445Accrued income taxes
    
    
    530
    
    
    
    Accrued interest
    
    
    1,701
    
    
    
    1,791Total current liabilities
    
    
    100,853
    
    
    
    69,300Long-term debt, less current maturities
    
    
    87,952
    
    
    
    92,022Other long-term liabilities
    
    
    8,228
    
    
    
    8,006Deferred income taxes
    
    
    12,660
    
    
    
    12,957Total liabilities
    
    
    209,693
    
    
    
    182,285Stockholders equity:Common stock, $.01 par value, 20,000,000 shares authorized, 10,115,202 and 10,055,002 issued
    
    
    101
    
    
    
    101Contributed capital
    
    
    186,414
    
    
    
    185,076Retained earnings
    
    
    13,757
    
    
    
    966Treasury stock at cost, 144,000 shares
    
    
    (3,036
    )
    
    
    (3,036
    )Accumulated other comprehensive income
    
    
    5,871
    
    
    
    3,745Total stockholders equity
    
    
    203,107
    
    
    
    186,852Total liabilities and stockholders equity
    
    $
    412,800
    
    
    $
    369,137
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INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except share data)Net sales
    
    $
    199,863
    
    
    $
    200,030
    
    
    $
    406,369
    
    
    $
    374,155Operating expenses:Cost of goods sold, exclusive of depreciation and
amortization expense shown below
    
    
    172,976
    
    
    
    176,180
    
    
    
    350,123
    
    
    
    326,940Selling, general and administrative expenses
    
    
    11,497
    
    
    
    11,561
    
    
    
    23,085
    
    
    
    22,717Depreciation
    
    
    3,773
    
    
    
    3,146
    
    
    
    7,492
    
    
    
    6,279Amortization
    
    
    749
    
    
    
    819
    
    
    
    1,340
    
    
    
    1,620(Gain)/loss on sale of property, plant and equipment
    
    
    (25
    )
    
    
    6
    
    
    
    12
    
    
    
    6Operating income
    
    
    10,893
    
    
    
    8,318
    
    
    
    24,317
    
    
    
    16,593Other income/(expense):Interest expense
    
    
    (2,504
    )
    
    
    (2,540
    )
    
    
    (4,857
    )
    
    
    (4,832
    )Amortization of deferred financing costs
    
    
    (159
    )
    
    
    (159
    )
    
    
    (318
    )
    
    
    (318
    )Other, net
    
    
    (13
    )
    
    
    (12
    )
    
    
    (76
    )
    
    
    8Income from continuing operations before income tax provision
    
    
    8,217
    
    
    
    5,607
    
    
    
    19,066
    
    
    
    11,451Income tax provision from continuing operations
    
    
    2,666
    
    
    
    1,383
    
    
    
    6,400
    
    
    
    3,317Income from continuing operations
    
    
    5,551
    
    
    
    4,224
    
    
    
    12,666
    
    
    
    8,134Income from discontinued operations, net of income tax
provision of $0, $33, $63 and $65
    
    
    6
    
    
    
    73
    
    
    
    125
    
    
    
    140Net income
    
    $
    5,557
    
    
    $
    4,297
    
    
    $
    12,791
    
    
    $
    8,274Basic net income per share:Income from continuing operations
    
    $
    0.56
    
    
    $
    0.42
    
    
    $
    1.28
    
    
    $
    0.82Income from discontinued operations
    
    
    0.00
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Net income
    
    $
    0.56
    
    
    $
    0.43
    
    
    $
    1.29
    
    
    $
    0.83Diluted net income per share:Income from continuing operations
    
    $
    0.54
    
    
    $
    0.41
    
    
    $
    1.24
    
    
    $
    0.80Income from discontinued operations
    
    
    0.00
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Net income
    
    $
    0.54
    
    
    $
    0.42
    
    
    $
    1.25
    
    
    $
    0.81Weighted  average basic shares outstanding
    
    
    9,937,972
    
    
    
    10,001,431
    
    
    
    9,929,620
    
    
    
    10,000,720Weighted  average diluted shares outstanding
    
    
    10,238,162
    
    
    
    10,255,935
    
    
    
    10,227,846
    
    
    
    10,162,594
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INTERNATIONAL WIRE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 For the Six Months EndedJune 30, 2008
    
    
    June 30, 2007(In thousands)Cash flows provided by operating activities:Net income
    
    $
    12,791
    
    
    $
    8,274Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    7,492
    
    
    
    6,279Amortization
    
    
    1,340
    
    
    
    1,620Amortization of deferred financing costs
    
    
    318
    
    
    
    318Stock-based compensation expense
    
    
    436
    
    
    
    1,565Loss/(gain) on sale of property, plant and equipment
    
    
    12
    
    
    
    (243
    )Deferred income taxes
    
    
    35
    
    
    
    1,347Change in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (22,809
    )
    
    
    (19,702
    )Inventories
    
    
    (12,236
    )
    
    
    (4,320
    )Prepaid expenses and other assets
    
    
    (2,054
    )
    
    
    (1,066
    )Accounts payable
    
    
    28,783
    
    
    
    30,435Accrued and other liabilities and workers compensation costs
    
    
    4,322
    
    
    
    908Accrued payroll and payroll related items
    
    
    (2,116
    )
    
    
    (2,906
    )Customers deposits
    
    
    (366
    )
    
    
    960Accrued interest
    
    
    (90
    )
    
    
    (14
    )Accrued/refundable income taxes
    
    
    3,777
    
    
    
    431Other long-term liabilities
    
    
    171
    
    
    
    (235
    )Net cash provided by operating activities
    
    
    19,806
    
    
    
    23,651Cash flows used in investing activities:Capital expenditures
    
    
    (5,647
    )
    
    
    (9,383
    )Proceeds from sale of property, plant and equipment
    
    
    58
    
    
    
    497Restricted cash
    
    
    99
    
    
    
    28Acquisition of Hamilton Products, net of $293 cash received
    
    
    (9,117
    )
    
    
    Acquisition of Phelps Dodge High Performance Conductors of SC&GA, Inc.
    
    
    
    
    
    
    (3,000
    )Net cash used in investing activities
    
    
    (14,607
    )
    
    
    (11,858
    )Cash flows used in financing activities:Borrowings of long-term obligations
    
    
    139,079
    
    
    
    176,132Repayment of long-term obligations
    
    
    (144,029
    )
    
    
    (189,428
    )Proceeds from the issuance of common stock
    
    
    902
    
    
    
    55Financing fees
    
    
    
    
    
    
    (2
    )Net cash used in financing activities
    
    
    (4,048
    )
    
    
    (13,243
    )Effects of exchange rate changes on cash and cash equivalents
    
    
    232
    
    
    
    56Net change in cash and cash equivalents
    
    
    1,383
    
    
    
    (1,394
    )Cash and cash equivalents at beginning of the period
    
    
    3,991
    
    
    
    3,315Cash and cash equivalents at end of the period
    
    $
    5,374
    
    
    $
    1,921Supplemental disclosure of cash flow information:Interest paid, net of capitalized interest of $0 and $237
    
    $
    4,947
    
    
    $
    4,846Taxes paid, net of refunds of $1,418 and $0
    
    $
    2,520
    
    
    $
    1,438Amount included in accounts payable for capital expenditures
    
    $
    415
    
    
    $
    652
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INTERNATIONAL WIRE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
 1.
    
    Business Organization and Basis of PresentationUnaudited Interim Consolidated Financial StatementsThe unaudited interim 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, 2008 and 2007 are not necessarily indicative of the results that may be expected for
the 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,
2007.2.
    
    AcquisitionOn January 2, 2008, the Company acquired the assets and operations of Hamilton Products, Inc.
and the related real estate owned by JPS Holdings, LLC (collectively Hamilton Products).
Hamilton Products was formed in 1994 and is a manufacturer and marketer of copper braided wire
products serving the aerospace and industrial markets. Under the asset purchase agreement, the
Company purchased the assets, operations and certain liabilities for $9,250 in cash, subject to
a working capital adjustment ($61). The Company records assets acquired and liabilities assumed
in business combinations at their respective fair values at the date of acquisition, with any
excess purchase price recorded as goodwill. At June 30, 2008, the Hamilton Products purchase
price allocation is preliminary and subject to revision, and any change to the fair value of net
assets acquired will lead to a corresponding change to the purchase price allocable to goodwill.
Hamilton Products manufacturing facility is located in Sherburne, New York.This acquisition has been accounted for as a purchase on January 2, 2008 and results of
operations of Hamilton Products have been included in the Bare Wire segment in the accompanying
condensed consolidated statements of income since the date of acquisition.The total purchase price of the Hamilton Products acquisition was $9,410 and the payment of
related purchase price, fees and costs is summarized as follows:
 Purchase of assets and operations
    
    $
    9,250Working capital adjustment
    
    
    (61
    )Fees and costs
    
    
    221$
    9,410
 The total acquisition costs have been preliminarily allocated to the acquired net assets at
fair value as follows:
 Current assets
    
    $
    2,851Property, plant and equipment
    
    
    1,987Identifiable intangibles
    
    
    4,200Goodwill
    
    
    764Current liabilities
    
    
    (392
    )$
    9,410
 The following table shows summary unaudited pro forma results of operations as if the Company
and Hamilton Products had been combined as of the beginning of the period presented. The
unaudited pro forma results of operations are based on estimates and assumptions and have been
made solely for purposes of developing such pro forma information. The pro forma information
for the six months ended June 30, 2007 reflects adjustments for interest expense and income
taxes. 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 at the beginning of the period presented:
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Pro Forma For the SixMonths EndedJune 30, 2007Net sales
    
    $
    377,318Income from continuing operations
    
    
    8,465Net income
    
    
    8,605Basic net income per share
    
    
    0.86Diluted net income per share
    
    
    0.84
 3.
    
    Recently Issued Accounting StandardsIn September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements(SFAS No. 157). This
statement defines fair value, establishes a framework for using fair value to measure assets and
liabilities and expands disclosures about fair value measurements. The statement applies
whenever other pronouncements require or permit assets or liabilities to be measured at fair
value. In February 2008, the FASB issued Final FASB Staff Position (FSP FAS 157-2). FSP FAS
157-2, which was effective upon issuance, delays the effective date of SFAS No. 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are recognized or
disclosed at fair value at least once a year, to fiscal years beginning after November 15, 2008.
SFAS No. 157 was effective for the Company on January 1, 2008. The Company did not adopt the
provisions of SFAS No. 157 as it relates to nonfinancial assets pursuant to FSP FAS No. 157-2.
The adoption of SFAS No. 157 did not have an impact on the Companys consolidated financial
statements.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Liabilities- including an amendment to FASB Statement No. 115(SFAS No. 159). This statement
permits entities to choose to measure many financial instruments and certain other items at fair
value in order to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently. SFAS No. 159 is effective for the Companys fiscal year beginning
January 1, 2008. The Company has not adopted the fair value option for its current financial
assets or liabilities. Accordingly, the adoption of SFAS No. 159 did not have an impact on its
consolidated financial statements.In December 2007, the FASB issued SFAS No. 141(R), Business Combinations(SFAS No. 141R).
SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed,
any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141R also
establishes disclosure requirements to enable the evaluation of the nature and financial effects
of the business combination. This statement is effective for the Companys fiscal year
beginning January 1, 2009. The Company is currently evaluating the potential impact of the
adoption of SFAS No. 141R will have on its consolidated financial statements.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements-an amendment of ARB No. 51(SFAS No. 160). SFAS No. 160 establishes
accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
retained interest and gain or loss when a subsidiary is deconsolidated. This statement is
effective for financial statements issued for fiscal years beginning on or after December 15,
2008 with earlier adoption prohibited. The Company is currently evaluating the potential impact
of the adoption of SFAS No. 160 will have on its consolidated financial statements.In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities-an amendment of FAS 133(SFAS No. 161). SFAS No. 161 requires an entity
with derivatives to describe how and why it uses derivative instruments, how derivative
instruments and related hedged items are accounted for under SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities and related interpretations, and how derivative
instruments and related hedged items affect the entitys financial position, financial
performance, and cash flows. This statement is effective for the Companys fiscal year
beginning January 1, 2009. The Companys adoption of SFAS No. 161 is not expected to have a
material impact on its consolidated financial statements.
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4.
    
    InventoriesThe composition of inventories is as follows:
 June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    17,763
    
    
    $
    16,712Work-in-process
    
    
    20,985
    
    
    
    11,198Finished goods
    
    
    32,902
    
    
    
    29,436Total inventories
    
    $
    71,650
    
    
    $
    57,346
 Inventories are valued at the lower of cost or current estimated market value. Cost is
determined using the last-in, first-out (LIFO) method for the Bare Wire and High Performance
Conductors segments and the first-in, first-out (FIFO) method for the Engineered Wire Products
  Europe segment. The primary components of inventory costs include raw materials used in the
production process (copper, tin, nickel, silver, alloys and other) and production related labor
and overhead costs net of scrap sales. Had all inventories been valued at the FIFO cost method,
inventories would have been $47,214 and $37,691 higher as of June 30, 2008 and December 31,
2007, respectively.
 5.
    
    Goodwill and Intangible AssetsThe carrying amounts of goodwill are as follows:
 June 30,
    
    
    December 31,2008
    
    
    2007Balance, beginning of period
    
    $
    61,560
    
    
    $
    62,148Reversal of deferred income tax valuation allowance
    
    
    
    
    
    
    (588
    )Purchase of Hamilton Products
    
    
    764
    
    
    
    Balance, end of period
    
    $
    62,324
    
    
    $
    61,560
 At June 30, 2008 and December 31, 2007, all goodwill is included in the Bare Wire segment. The
Company completed its annual impairment test at December 31, 2007 and concluded that goodwill
was not impaired.The components of identifiable intangibles are as follows:
 June 30, 2008
    
    
    December 31, 2007Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationCustomer contracts and relationships
    
    $
    13,734
    
    
    $
    2,489
    
    
    $
    9,534
    
    
    $
    2,035Trade names and trademarks
    
    
    10,568
    
    
    
    1,928
    
    
    
    10,568
    
    
    
    1,663Leases
    
    
    2,671
    
    
    
    2,671
    
    
    
    2,671
    
    
    
    2,671Alloys
    
    
    92
    
    
    
    10
    
    
    
    92
    
    
    
    8Total identifiable intangibles
    
    $
    27,065
    
    
    $
    7,098
    
    
    $
    22,865
    
    
    $
    6,377
 Amortization expense for the six months ended June 30, 2008 and June 30, 2007 was $721 and
$1,030, respectively. Amortization expense for identifiable intangibles for the next five fiscal
years and thereafter is as follows:
 Amount2008 (remaining six months)
    
    $
    7282009
    
    
    1,4492010
    
    
    1,4492011
    
    
    1,4492012
    
    
    1,449Thereafter
    
    
    13,443
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6.
    
    Stock Option Plans and Compensation ExpenseEffective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment(SFAS No.
123(R)) which requires measurement of compensation cost for all stock awards at fair value on
the date of grant and recognition of compensation cost spread over the service periods for
awards expected to vest. SFAS No. 123(R) was adopted using the modified-prospective transition
method. Under this method, compensation cost recognized in the six-month periods ended June 30,
2008 and 2007 includes: (a) compensation cost for all unvested share-based awards granted prior
to January 1, 2006, based on the grant date fair value estimated in accordance with SFAS 123,
Accounting For Stock-Based Compensation, and (b) compensation cost for all share-based awards
granted subsequent to December 31, 2005, based on the grant date fair value estimated in
accordance with SFAS 123(R). Stock-based compensation expense is included in selling, general
and administrative expenses in the accompanying condensed consolidated statements of income.The Company uses the Black-Scholes option model to estimate fair value of share-based awards
with the following weighted average assumptions:
 For the Six Months EndedJune 30, 2008
    
    June 30, 2007Stock Options and Awards:Expected life  employees
    
    6 years
    
    6 yearsExpected life  non-employee directors
    
    5.5 years
    
    6 yearsExpected volatility
    
    
    50.0
    %
    
    
    58.0
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    3.5
    %
    
    
    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 as these awards meet the definition of plain-vanilla options under the rules
prescribed by Staff Accounting Bulletin No. 110.Stock option activity for the six months ended June 30, 2008 is summarized as follows:
 Weighted
    
    WeightedAverage
    
    Average
    
    AggregateOptions
    
    Exercise
    
    Remaining
    
    IntrinsicOutstanding
    
    Price
    
    Term in Years
    
    Value (1)Outstanding at January 1, 2008
    
    
    1,124,400
    
    
    $
    15.49Granted
    
    
    Exercised
    
    
    (60,200
    )
    
    $
    15.00Outstanding at June 30, 2008
    
    
    1,064,200
    
    
    $
    15.52
    
    
    
    8.1
    
    
    $
    8,516Vested or expected to vest at June 30, 2008
    
    
    1,010,990
    
    
    $
    15.52
    
    
    
    8.1
    
    
    $
    8,090Exercisable at June 30, 2008
    
    
    930,100
    
    
    $
    15.62
    
    
    
    7.8
    
    
    $
    7,919
 
 (1)
    
    The aggregate intrinsic value was calculated using the difference between the market price
of the Companys common stock at June 30 and the grant price for only those awards that have
a grant price less than the market price of the Companys common stock at June 30. The Company recorded stock-based compensation expense of $436 and $1,565 for the six months
ended June 30, 2008 and 2007, respectively. As of June 30, 2008, the Company had total
unrecognized compensation costs of $855 which will be recognized as compensation expense over a
weighted average period of 1.4 years. The Company estimates a 5% forfeiture rate in recording
stock-based compensation expense. As of June 30, 2008, 100,200 stock option awards have been
exercised under the 2006 Management Stock Option Plan, no stock option awards have been
exercised under the 2006 Stock Option Plan for Non-Employee Directors, and 15,000 stock option
awards have been exercised under the grant to Lane Pennington. The stock options are
non-qualified which results in the creation of a deferred tax asset until the time the option is
exercised.
 7




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7.
    
    Stock Repurchase ProgramOn September 4, 2007, the Company announced that its Board of Directors approved a $3,700 stock
repurchase program. Under this stock repurchase program, the Company was authorized to
repurchase up to $3,700 of its common stock through open market and privately negotiated
transactions from time to time. On May 9, 2008, the Company announced that its Board of
Directors approved a $16,300 increase in its share repurchase program
to acquire the Companys shares in the open market or in privately negotiated transactions from time to time, bringing
the total amount approved for repurchase to $20,000. The stock repurchase program may be
terminated at any time without prior notice. Prior to January 1, 2008, the Company repurchased
144,000 shares of its common stock for an aggregate price of $3,036 including broker
commissions, resulting in an average price of $21.09 per share. The Company had no repurchases
in 2008.8.
    
    Comprehensive IncomeComprehensive income is comprised of:
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    5,557
    
    
    $
    4,297
    
    
    $
    12,791
    
    
    $
    8,274Foreign currency translation adjustment
    
    
    (288
    )
    
    
    225
    
    
    
    2,126
    
    
    
    479Total comprehensive income
    
    $
    5,269
    
    
    $
    4,522
    
    
    $
    14,917
    
    
    $
    8,753
 9.
    
    Net Income Per ShareNet income 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 SFAS No. 128, Earnings
Per Share (as amended). The following table provides a reconciliation of the number of shares
outstanding for basic and dilutive earnings per share:
 For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted  average shares
outstanding-basic
    
    
    9,937,972
    
    
    
    10,001,431
    
    
    
    9,929,620
    
    
    
    10,000,720Dilutive effect of stock options
    
    
    300,190
    
    
    
    254,504
    
    
    
    298,226
    
    
    
    161,874Weighted  average shares
outstanding-dilutive
    
    
    10,238,162
    
    
    
    10,255,935
    
    
    
    10,227,846
    
    
    
    10,162,594
 Weighted  average shares outstanding for the three and six month periods ended June 30, 2008 and 2007 exclude 113,100 and 1,041,300
options, because they are antidilutive under the treasury stock method.
 10.
    
    Long-Term DebtThe composition of long-term debt is as follows:
 June 30,
    
    
    December 31,2008
    
    
    2007Senior Revolver Credit Facility
    
    $
    12,952
    
    
    $
    17,02210% Secured Senior Subordinated Notes
    
    
    75,000
    
    
    
    75,000Other
    
    
    396
    
    
    
    1,126Total long-term debt
    
    
    88,348
    
    
    
    93,148Less current maturities
    
    
    396
    
    
    
    1,126Long-term portion of long-term debt
    
    $
    87,952
    
    
    $
    92,022
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Senior Revolver Credit FacilityThe Company and its domestic subsidiaries are parties to a credit agreement (the Revolver
Credit Facility) with Wachovia Capital Financial Corporation (Central), formerly known as
Congress Financial Corporation (Central), as administrative agent, and several banks and
financial institutions parties. The Revolver Credit Facility is a senior revolver credit
facility in the amount of up to $200,000 subject to borrowing availability (including, as a
sub-facility of the Revolver Credit Facility, a $25,000 letter of 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 and equipment. As of June 30, 2008, letters of credit in the amount of
$11,219 were outstanding and $12,952 was drawn under the Revolver Credit Facility. Availability
under the Revolver Credit Facility was $136,342 as of June 30, 2008.The Company may choose to pay interest on advances under the Revolver Credit Facility at either
a Eurodollar rate or a base rate plus the following applicable margin: (1) for base rate
Revolver Credit Facility advances, 0.00 percent (2) for Eurodollar rate advances, 1.25 percent
to 1.75 percent per annum, subject to adjustment in accordance with a pricing grid based on
excess availability and (3) for letters of credit, 1.50 percent per annum. The default rate is
2.00 percent above the rate otherwise applicable. The Company also has an annual commitment fee
of 0.25 percent on the unused balance of its Revolver Credit Facility and an issuance letter of
credit fee equal to 2.00 percent.The Company and its domestic subsidiaries are the primary parties to the Revolver Credit
Facility. The collateral for the Revolver 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 Companys Revolver Credit Facility requires the Company to observe conditions, affirmative
covenants and negative covenants (including financial covenants). These covenants include
limitations on the Companys ability to pay dividends, make acquisitions, dispose of assets,
incur additional indebtedness, incur guarantee obligations, create liens, make investments,
engage in mergers, pledge assets as collateral, repurchase, redeem or acquire its common stock
subject to a $20,000 limit, change the nature of its business or engage in certain transactions
with affiliates. The Company must also comply with a fixed charge coverage ratio when either
(1) the minimum availability under the credit facility falls below $30,000 or (2) there is a
default or event of default.The Companys Revolver Credit Facility commitment expires on August 22, 2011.The Company may prepay the loans or reduce the commitments under its credit facility in a
minimum amount of $5,000 and additional integral amounts in multiples of $1,000 in respect of
the Revolver Credit Facility. The commitments under the Revolver Credit Facility may not be
reduced by more than $10,000 in any twelve-month period.The Company must prepay the loans under the Revolver Credit Facility by the following amounts
(subject to certain exceptions):
 
    
    An amount equal to 100 percent of the net proceeds of any incurrence of indebtedness by
the Company or any of its subsidiaries;
    
    An amount equal to 100 percent of the net proceeds of any non-ordinary course sale or
other disposition by us or any of its subsidiaries of any assets, except for certain
exceptions.
 Secured Senior Subordinated NotesThe 10 percent Secured Senior Subordinated Notes due 2011 (Notes) are: senior subordinated
obligations of the Company; senior in right of payment to any of future subordinated
obligations; guaranteed by the Companys domestic subsidiaries; and secured by a second-priority
lien on all or substantially all of the
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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 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 October 15 and April 15. Interest on overdue principal
accrues at 2 percent per annum in excess of the above rate and pay interest on overdue
installments of interest at such higher rate to the extent lawful.The indenture governing the Notes contains restrictive covenants which, among other things,
limit the Companys ability and some of 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.11.
    
    Income TaxesThe Companys liability for unrecognized tax benefits totaled $4,774 and $4,654 as of June 30,
2008 and December 31, 2007, respectively, which includes interest and penalties. The total
unrecognized tax benefits balance at June 30, 2008 and December 31, 2007 was comprised of tax
benefits that, if recognized, would affect the effective rate. The Company recognizes interest
and penalties accrued related to unrecognized tax benefits in income tax expense.The Company is subject to taxation in the United States and various state and foreign
jurisdictions. The Companys tax years from 2001 to 2007 are subject to examination by the
taxing authorities due to the Companys net operating loss carryforwards.12.
    
    Business Segment and Geographic InformationThe Companys three reportable segments are Bare Wire, Engineered Wire Products-Europe, and High
Performance Conductors. 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.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 original equipment manufacturers (OEMs) for use in
aerospace, 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. The Company may provide such copper to its customers or use their copper in the
fabrication process. 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 Wire 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 OEMs for use in electrical
appliances, power supply, aircraft and railway, and automotive products.The High Performance Conductors segment, 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:
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##### Table of Contents



EngineeredWire
    
    HighProducts-
    
    PerformanceBare Wire
    
    Europe
    
    Conductors
    
    Corporate
    
    Eliminations
    
    TotalNet salesThree months ended
June 30, 2008
    
    $
    145,524
    
    
    $
    20,844
    
    
    $
    34,036
    
    
    $
    
    
    
    $
    (541
    )
    
    $
    199,863Three months ended
June 30, 2007
    
    
    152,475
    
    
    
    16,936
    
    
    
    31,191
    
    
    
    
    
    
    
    (572
    )
    
    
    200,030Six months ended
June 30, 2008
    
    
    295,501
    
    
    
    41,500
    
    
    
    70,306
    
    
    
    
    
    
    
    (938
    )
    
    
    406,369Six months ended
June 30, 2007
    
    
    278,580
    
    
    
    34,037
    
    
    
    62,403
    
    
    
    
    
    
    
    (865
    )
    
    
    374,155Operating incomeThree months ended
June 30, 2008
    
    
    5,513
    
    
    
    1,814
    
    
    
    3,784
    
    
    
    (218
    )
    
    
    
    
    
    
    10,893Three months ended
June 30, 2007
    
    
    4,654
    
    
    
    1,500
    
    
    
    3,449
    
    
    
    (1,285
    )
    
    
    
    
    
    
    8,318Six months ended
June 30, 2008
    
    
    12,923
    
    
    
    3,629
    
    
    
    8,201
    
    
    
    (436
    )
    
    
    
    
    
    
    24,317Six months ended
June 30, 2007
    
    
    9,417
    
    
    
    2,524
    
    
    
    6,721
    
    
    
    (2,069
    )
    
    
    
    
    
    
    16,593GoodwillJune 30, 2008
    
    
    62,324
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,324December 31, 2007
    
    
    61,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,560Total assetsJune 30, 2008
    
    
    275,606
    
    
    
    51,361
    
    
    
    65,606
    
    
    
    28,562
    
    
    
    (8,335
    )
    
    
    412,800December 31, 2007
    
    
    240,145
    
    
    
    43,979
    
    
    
    64,309
    
    
    
    25,508
    
    
    
    (4,804
    )
    
    
    369,137
 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 30,2008
    
    
    2007
    
    
    2008
    
    
    2007United States
    
    $
    177,151
    
    
    $
    181,093
    
    
    $
    359,767
    
    
    $
    335,543Europe
    
    
    22,712
    
    
    
    18,937
    
    
    
    46,602
    
    
    
    38,612Total
    
    $
    199,863
    
    
    $
    200,030
    
    
    $
    406,369
    
    
    $
    374,155
 The following table presents property, plant and equipment, net, by geographic region based on
the location of the asset:
 June 30,
    
    
    December 31,2008
    
    
    2007United States
    
    $
    96,278
    
    
    $
    96,916Europe
    
    
    11,271
    
    
    
    10,438Total
    
    $
    107,549
    
    
    $
    107,354
 13.
    
    Related Party TransactionsThe Company sells a portion of its production scrap to Prime Materials Recovery, Inc. (Prime)
and Prime also performs certain scrap processing services for the Company. 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 $5,953 and $6,275 for
the three months ended June 30, 2008 and 2007, respectively, and $13,451 and $9,573 for the six
months ended June 30, 2008 and 2007, respectively. The outstanding trade receivables were
$4,403 and $3,460 at June 30, 2008 and December 31, 2007, respectively. The Company incurred
scrap conversion costs from Prime of $45 and $389 for the three months ended June 30, 2008 and
2007, respectively, and $81 and $414 for the six months ended June 30, 2008 and 2007,
respectively. The outstanding payables were $0 and $291 at June 30, 2008 and December 31, 2007,
respectively.
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##### Table of Contents



14.
    
    LitigationIn connection with the sale of its former wire harness business to Viasystems International,
Inc. (Viasystems), the Company agreed to indemnify Viasystems for certain claims and
litigation including any claims related to the claims for water inlet hoses previously assembled
by the Company. The Companys policy is to record the probable and reasonably estimable loss
related to the product liability claims. Over time, the level of claims, insurance coverage and
settlements has varied. Accordingly, the Company has revised its estimated liability
outstanding, or balance sheet reserve, based on actual claims reported and costs incurred and
its estimate of claims and cost incurred but not reported. The Company has reached global
settlements with various claimants related to such claims which are also considered in
determining the balance sheet reserve. There are no recoveries from third parties considered in
the balance sheet reserve.The Company is insured for all claims and damages that have occurred prior to April 1, 2002. As
of June 30, 2008, the Company had $75,000 of remaining insurance coverage under its excess
umbrella policies for each of the insured years prior to April 1, 2002.For claims arising subsequent to April 1, 2002, the Company had a reserve of $432 and $965 as of
June 30, 2008 and December 31, 2007, respectively, related to the estimated future payments to
be made to the claimants in the settlement of the remaining incurred claims and claims incurred
but not reported. The Companys (income)/expense related to these claims totaled $0 for the
three months ended June 30, 2008 and 2007, respectively and ($182) and $0 for the six months
ended June 30, 2008 and 2007, respectively. The income for the six months ended June 30, 2008
resulted from the Company settling certain outstanding claims. The majority of payments are
expected to be made over approximately the next year. Due to the uncertainties associated with
these product claims, such as greater than expected amount of unreported claims and amounts to
be paid under reached global settlements, the future cost 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 consolidated financial statements 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s consolidated
financial statements.15.
    
    Subsequent EventOn July 1, 2008, the Company announced that it had completed the acquisition of the U.S. assets
and operations of Global Wire Inc. and its subsidiaries (Global Wire) and certain equipment
owned by an affiliated company. Under the terms of the asset purchase agreement, the Company
acquired the assets and operations of Global Wires plants located in Littleton, New Hampshire
and Jewett City, Connecticut. The Littleton, New Hampshire plant was purchased outright, and
the Jewett City, Connecticut plant is leased, with an option to purchase at a later date. In
addition, certain equipment purchased is being moved from Israel to the U.S. plants.The Company paid a purchase price of $31,250 (which includes a working capital adjustment
estimated at closing to be $3,450) and is subject to customary post-closing adjustments. The
Company has an additional payment obligation to Global Wire of $750 and an option to purchase
the Jewett City property at a later date for $750, subject to adjustment. The Company funded
the acquisition with borrowings under its revolving credit facility.
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the unaudited consolidated financial
statements and the notes thereto included in this Form 10-Q.We make forward-looking statements in this Form 10-Q that are based on managements beliefs and
assumptions and on information currently available to management. Forward-looking statements
include the information concerning our possible or assumed future results of operations,
business strategies, financing plans, competitive position, potential growth opportunities, the
effects of competition, outlook, objectives,
plans, intentions and goals. For those statements, we claim the protection of the safe harbor
for forward-looking
 12




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statements provided for by Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements include all statements that are not historical
facts and can be identified by the use of forward-looking terminology such as the words 
believes, expects,  may,  will, should, seeks, pro forma,  anticipates,
intends,  plans,  estimates, or the negative of any thereof or other variations thereof
or comparable terminology, or by discussions of strategy or intentions.Forward-looking statements involve risks, uncertainties and assumptions. Actual results may
differ materially from those expressed in these forward-looking statements. Undue reliance
should not be placed on any forward-looking statements. We do not have any intention or
obligation to update forward-looking statements after the filing of this Form 10-Q.Many important factors could cause our results to differ materially from those expressed in
forward-looking statements. These factors include, but are not limited to, fluctuations in our
operating results and customer orders, unexpected decreases in demand or increases in inventory
levels, changes in the price of copper, tin, nickel and silver, copper premiums and alloys, the
failure of our acquisitions and expansion plans to perform as expected, the competitive
environment, our reliance on our significant customers, lack of long-term contracts, substantial
dependence on business outside of the U.S. and risks associated with our international
operations, limitations due to our indebtedness, loss of key employees or the deterioration in
our relationship with employees, litigation, claims, liability from environmental laws and
regulations and other factors. For additional information regarding risk factors, see our
discussion in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31,
2007.OverviewWe, together with our subsidiaries, manufacture and market wire products, including bare and
tin-plated copper wire, engineered wire products and high performance conductors for other wire
suppliers and original equipment manufacturers or  OEMs. Our products include a broad
spectrum of copper wire configurations and gauges with a variety of electrical and conductive
characteristics and are utilized by a wide variety of customers primarily in the aerospace,
appliance, automotive, electronics/data communications, general industrial/energy and medical
device industries. As of June 30, 2008, we manufacture and distribute our products at 16
facilities located in the United States, Belgium, France and Italy. For the period ended
June 30, 2008, we operated our business in the following three segments:
 
    
    Bare Wire. 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
OEMs for use in aerospace, computer and data communications products, general
industrial, energy, appliances, automobiles and other applications.
    
    Engineered Wire Products  Europe. Our 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 OEMs for use in electrical appliances, power supply,
aircraft and railway and automotive products.
    
    High Performance Conductors. Our High Performance Conductors segment 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.
 Demand for our products is directly related to two primary factors:
 
    
    Demand for the end products in which our products are incorporated.
    
    Our abilities to compete with other suppliers in the industry served.
 Important indicators of demand for all of our products include a number of general economic
factors such as gross domestic product, interest rates and consumer confidence. In specific
industries, management also monitors the following factors:
 13




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
    
    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 2008, automotive industry production volumes decreased 10% compared to
the same period for 2007. In addition, major OEMs have announced continued cut-backs in
production levels for the second half of 2008.
    
    Additional factors for the High Performance Conductors segment include commercial
aircraft, military defense and electronics, electro-medical equipment and
industrial/energy market demand. Deliveries of large civil aircraft in the first six
months of 2008 increased 10% over the same period in 2007. Demand for medical device
components remained strong in the second quarter of 2008 due to the continuing trend in
acceptance and products available for minimally invasive procedures and increased
product development.
 We compete with other suppliers of wire products on the basis of price, quality, delivery and
the ability to provide a sufficient array of products to meet most of our customers needs. We
believe our state-of-the-art production equipment permits us to provide a high quality product
while also permitting us to efficiently manufacture our products, which assists in our ability
to provide competitively priced products. Also, we invest in engineering and product
development so that we can continue to provide our customers with the array of products and
features they demand. Finally, we have located our production facilities near many of our
customers manufacturing facilities which allows us to meet our customers delivery demands,
including assisting with inventory management for just-in-time production techniques.A portion of our revenue is derived from processing customer-owned (tolled) copper. The value
of tolled copper is excluded from both our sales and costs of sales, as title to these materials
and the related risks of ownership do not pass to us at any time. The remainder of our sales
includes non-customer owned copper (owned copper). Accordingly, for these sales, copper is
included in both sales and cost of sales. The main factor that causes fluctuations in the
proportion of tolled copper from one period to the next is the decision by our customers on a
sales order by sales order basis whether to use their copper or purchase our owned copper. We
have some customers who only use their own tolled copper, others who only purchase our owned
copper and others who use some tolled and some owned copper purchased from us. This decision is
based on each customers internal factors which are unknown to us and out of our control.Our expenses in producing these products fall into three main categories  raw materials,
including copper, silver, nickel, tin and alloys, labor and, to a lesser extent, utilities.
Copper is the primary raw material incorporated in all of our products. As a world traded
commodity, copper prices have historically been subject to fluctuations. The average price of
copper based upon The New York Mercantile Exchange, Inc. (COMEX) increased to $3.80 per pound
for the three months ended June 30, 2008 from $3.46 per pound for the three months ended June
30, 2007, or 10%. We attempt, where possible, to minimize the impact of these fluctuations on
our profitability through pass-through arrangements with our customers, which are based on
similar variations of monthly copper price formulas. However, a severe increase in the price of
copper can have a negative impact on our liquidity. Currently, a $0.10 per pound fluctuation in
the price of copper will have an approximate $2.6 million impact on our working capital.
Increased working capital requirements cause us to increase our borrowings, which increases our
interest expense.Copper prices remain volatile. The average copper price for the six months ended June 30, 2008
of $3.67 per pound was higher than the COMEX price of $3.03 as of December 31, 2007. However,
the price of copper on the COMEX was $3.46 per pound on
August 5, 2008.Other raw materials used include silver, nickel and tin. The cost of silver, nickel and tin are
generally passed-through to our customers through a variety of pricing mechanisms. Our price of
silver includes a margin and consequently market fluctuations in the price of silver can result
in an increase or decrease in profitability at a given volume. For the three months ended June
30, 2008, the average price of tin increased by 58%, the average
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price of silver increased by 29% and the average price of nickel decreased by 47% compared to
the three months ended June 30, 2007.Our labor and utility expenses are directly tied to our level of production. While the number of
employees we use in our operations has fluctuated with sales volume, our cost per employee
continues to rise with increases in wages and the costs of providing medical coverage, workers
compensation and other fringe benefits to employees. The cost of providing medical coverage is
impacted by continued inflation in medical products and services. Utility rates vary by season
and the prices for coal, natural gas and other similar commodities which are used in the
generation of power. We attempt to manage our utility rates through usage agreements which
affect our power usage during peak usage hours.Stock Repurchase ProgramOn September 4, 2007, we announced that our Board of Directors approved a $3.7 million stock
repurchase program. Under this stock repurchase program, we are authorized to repurchase up to
$3.7 million of our common stock through open market and privately negotiated transactions from
time to time. The stock repurchase program may be terminated at any time without prior notice.On May 9, 2008, we announced that our Board of Directors approved a $16.3 million increase in
our share repurchase program to acquire the our shares in the open market or in privately
negotiated transactions from time to time, bringing the total amount approved for repurchase to
$20.0 million. The amount available for stock repurchase is limited by the indenture governing
the 10 percent Secured Senior Subordinated Notes due 2011, which as of today, limits the share
repurchase program to $13.9 million (and of this amount, $3.0 million has already been used for
previously made share repurchases).Through June 30, 2008, we repurchased 144,000 shares of our common stock for an aggregate price
of approximately $3.0 million including broker commissions, resulting in an average price of
$21.09 per share.AcquisitionOn July 1, 2008, we announced that we had completed the acquisition of the U.S. assets and
operations of Global Wire Inc. and its subsidiaries (Global Wire) and certain equipment owned
by an affiliated company. Under the terms of the asset purchase agreement, we acquired the
assets and operations of Global Wires plants located in Littleton, New Hampshire and Jewett
City, Connecticut. The Littleton, New Hampshire plant was purchased outright, and the Jewett
City, Connecticut plant is leased, with an option to purchase at a later date. In addition,
certain equipment purchased is being moved from Israel to the U.S. plants.We paid a purchase price of $31.3 million (which includes a working capital adjustment estimated
at closing to be $3.5 million) and is subject to customary post-closing adjustments. We have an
additional payment obligation to Global Wire of $0.8 million and an option to purchase the
Jewett City property at a later date for $0.8 million, subject to adjustment. We funded the
acquisition with borrowings under our revolving credit facility.Strategic AlternativesOn July 8, 2008, the Company announced that it has retained Jefferies & Company, Inc. as its
exclusive financial advisor to assist the Company in evaluating strategic alternatives,
including a possible sale of the Company.Results of OperationsThe following table sets forth certain unaudited statements of operations data in millions of
dollars and percentage of net sales for the periods indicated:
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##### Table of Contents



For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    199.9
    
    
    
    100.0
    %
    
    $
    200.0
    
    
    
    100.0
    %
    
    $
    406.4
    
    
    
    100.0
    %
    
    $
    374.2
    
    
    
    100.0
    %Operating expenses:Cost of goods sold,
exclusive of depreciation
and amortization expense
shown below
    
    
    173.0
    
    
    
    86.5
    
    
    
    176.2
    
    
    
    88.1
    
    
    
    350.1
    
    
    
    86.1
    
    
    
    327.0
    
    
    
    87.4Selling, general and
administrative expenses
    
    
    11.5
    
    
    
    5.8
    
    
    
    11.6
    
    
    
    5.8
    
    
    
    23.1
    
    
    
    5.7
    
    
    
    22.7
    
    
    
    6.1Depreciation and amortization
    
    
    4.5
    
    
    
    2.2
    
    
    
    3.9
    
    
    
    1.9
    
    
    
    8.9
    
    
    
    2.2
    
    
    
    7.9
    
    
    
    2.1Operating income
    
    
    10.9
    
    
    
    5.5
    
    
    
    8.3
    
    
    
    4.2
    
    
    
    24.3
    
    
    
    6.0
    
    
    
    16.6
    
    
    
    4.4Other income/(expense):Interest expense
    
    
    (2.5
    )
    
    
    (1.3
    )
    
    
    (2.5
    )
    
    
    (1.3
    )
    
    
    (4.9
    )
    
    
    (1.2
    )
    
    
    (4.8
    )
    
    
    (1.3
    )Amortization of
deferred financing
costs
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.3
    )
    
    
    Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from continuing
operations before income tax
provision
    
    
    8.2
    
    
    
    4.1
    
    
    
    5.6
    
    
    
    2.8
    
    
    
    19.1
    
    
    
    4.7
    
    
    
    11.5
    
    
    
    3.1Income tax provision
    
    
    2.6
    
    
    
    1.3
    
    
    
    1.4
    
    
    
    0.7
    
    
    
    6.4
    
    
    
    1.6
    
    
    
    3.3
    
    
    
    0.9Income from continuing
operations
    
    
    5.6
    
    
    
    2.8
    
    
    
    4.2
    
    
    
    2.1
    
    
    
    12.7
    
    
    
    3.1
    
    
    
    8.2
    
    
    
    2.2Income from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    Net income
    
    $
    5.6
    
    
    
    2.8
    %
    
    $
    4.3
    
    
    
    2.2
    %
    
    $
    12.8
    
    
    
    3.1
    %
    
    $
    8.3
    
    
    
    2.2
    %
 We have three reportable segments: Bare Wire, Engineered Wire Products-Europe, and High
Performance Conductors. The following table sets forth unaudited net sales and operating income
for the periods presented in millions of dollars and percentages of totals:
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales:Bare Wire
    
    $
    145.5
    
    
    
    73
    %
    
    $
    152.5
    
    
    
    76
    %
    
    $
    295.5
    
    
    
    73
    %
    
    $
    278.6
    
    
    
    75
    %Engineered Wire
Products  Europe
    
    
    20.9
    
    
    
    10
    
    
    
    16.9
    
    
    
    8
    
    
    
    41.5
    
    
    
    10
    
    
    
    34.0
    
    
    
    9High Performance
Conductors
    
    
    34.0
    
    
    
    17
    
    
    
    31.2
    
    
    
    16
    
    
    
    70.3
    
    
    
    17
    
    
    
    62.4
    
    
    
    16Eliminations
    
    
    (0.5
    )
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.8
    )
    
    
    Total
    
    $
    199.9
    
    
    
    100
    %
    
    $
    200.0
    
    
    
    100
    %
    
    $
    406.4
    
    
    
    100
    %
    
    $
    374.2
    
    
    
    100
    %Operating income:Bare Wire
    
    $
    5.5
    
    
    
    50
    %
    
    $
    4.7
    
    
    
    49
    %
    
    $
    12.9
    
    
    
    52
    %
    
    $
    9.4
    
    
    
    51
    %Engineered Wire
Products  Europe
    
    
    1.8
    
    
    
    16
    
    
    
    1.5
    
    
    
    16
    
    
    
    3.6
    
    
    
    15
    
    
    
    2.5
    
    
    
    13High Performance
Conductors
    
    
    3.8
    
    
    
    34
    
    
    
    3.4
    
    
    
    35
    
    
    
    8.2
    
    
    
    33
    
    
    
    6.7
    
    
    
    36Subtotal
    
    
    11.1
    
    
    
    100
    %
    
    
    9.6
    
    
    
    100
    %
    
    
    24.7
    
    
    
    100
    %
    
    
    18.6
    
    
    
    100
    %Corporate
    
    
    (0.2
    )
    
    
    
    
    
    
    (1.3
    )
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    (2.0
    )Total
    
    $
    10.9
    
    
    
    
    
    
    $
    8.3
    
    
    
    
    
    
    $
    24.3
    
    
    
    
    
    
    $
    16.6
 Three Months Ended June 30, 2008 versus Three Months Ended June 30, 2007Net sales were $199.9 million and $200.0 million for the three months ended June 30, 2008 and
2007, respectively. Sales for the three months ended June 30, 2008 were $0.1 million, or 0.0%,
lower than comparable 2007 levels. This decrease was the result of a higher proportion of tolled
copper shipped in the 2008 period compared to the 2007 period ($21.5 million), lower volume
($1.3 million), partially offset by an increase in the average cost and selling price of copper
($14.9 million), the impact of a stronger euro versus the U.S. dollar ($2.7 million) and higher
customer pricing/mix ($5.1 million). For sales of product comprised of customer-owned (tolled)
copper, the value of the copper material processed is excluded from sales. Accordingly, as the
proportion of tolled sales increases, sales decrease. The average price of copper based upon
COMEX increased to $3.80 per pound for the three months ended June 30, 2008 from $3.46 per pound
for the three months ended June 30, 2007.Bare Wire segment net sales for the three months ended June 30, 2008 were $145.5 million, or a
decrease of $7.0 million, or 4.6%, from net sales of $152.5 million for the comparable 2007
period. This decrease was
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primarily the result of the impact of a higher proportion of tolled copper shipped in the 2008
period compared to the 2007 period ($21.5 million) and lower volume primarily to customers
supplying the automotive market ($3.4 million). These decreases were partially offset by the
impact of an increase in the average cost and selling price of copper ($12.1 million), increased
customer pricing/mix ($3.8 million) and higher volume to customers supplying the
industrial/energy market ($2.0 million). Of the total pounds processed for the three months
ended June 30, 2008 and 2007, respectively, 56.7% and 49.7% were from customers tolled copper.Engineered Wire Products-Europe net sales of $20.9 million for the three months ended June 30,
2008 were $4.0 million, or 23.7%, higher than sales of $16.9 million for the 2007 period. This
increase was the result of the impact of a stronger euro versus the U.S. dollar ($2.7 million),
the increase in the average cost and selling price of copper ($1.1 million), increased volume
from improved customer demand ($0.5 million), partially offset by decreased customer pricing/mix
($0.3 million).High Performance Conductors net sales of $34.0 million for the three months ended June 30, 2008
were $2.8 million, or 9.0%, higher than sales of $31.2 million for the 2007 period. This
increase was the result of an increase in the average cost and selling price of copper ($1.6
million), higher customer pricing/mix including higher silver, tin and nickel prices ($1.6
million), partially offset by the impact of lower volume ($0.4 million).Cost of goods sold, exclusive of depreciation and amortization, as a percentage of sales
decreased to 86.5% for the three months ended June 30, 2008 from 88.1% for the same period in
2007. The decrease of 1.6 percentage points was due to higher customer pricing/mix (1.8
percentage points), the impact of a higher proportion of tolled copper sales in 2008 compared to
2007 (1.5 percentage points), partially offset by the increase in the average cost and selling
price of copper (1.1 percentage points), and increased production costs, net of cost reductions
including the impact of the Sherrill, New York plant cost structure (0.6 percentage points).Selling, general and administrative expenses were $11.5 million for the three months ended June
30, 2008 compared to $11.6 million for the same period in 2007. This decrease of $0.1 million
was the result of lower stock-based compensation expense ($0.6 million), lower professional fees
($0.6 million), partially offset by higher transportation costs ($0.5 million), higher salaries
and bonus accruals ($0.3 million) and other cost increases, net ($0.3 million). These expenses,
as a percent of net sales, remained constant at 5.8% for the three months ended June 30, 2008
and for the three months ended June 30, 2007.Depreciation and amortization was $4.5 million for the three months ended June 30, 2008 compared
to $3.9 million for the same period in 2007. This increase of $0.6 million was primarily the
result of higher depreciation property, plant and equipment on the Sherrill, New York plant that
became operational in late 2007.Operating income for the three months ended June 30, 2008 was $10.9 million compared to $8.3
million for the 2007 period, an increase of $2.6 million, or 31.3%, primarily from a higher
customer pricing/mix and cost reduction initiatives, with increases in all three segments. Bare
Wire segments operating income of $5.5 million for the 2008 period increased by $0.8 million,
or 17.0%, compared to $4.7 million for the 2007 period, primarily from higher customer
pricing/mix and cost reduction initiatives which were partially offset by lower sales volume and
higher depreciation. Engineered Wire Products-Europe operating income was $1.8 million, an
increase of $0.3 million from the 2007 period as a result of operating efficiencies and the
favorable effects from foreign currency. High Performance Conductors operating income was $3.8
million, an increase of $0.4 million from the 2007 period of $3.4 million from increased
customer pricing/mix which was partially offset by slightly lower sales volume. Operating income
in the 2008 period also increased by $1.1 million from a lower charge for stock-based
compensation expense of $0.6 million and lower professional fees of $0.5 million.Interest expense was $2.5 million for both the three months ended June 30, 2008 and June 30,
2007. Interest expense was constant as a result of the impact of higher levels of borrowings
from the acquisition of Hamilton Products during the 2008 period compared to 2007, offset by
lower interest rates in 2008.Amortization of deferred financing costs was $0.2 million for both the three months ended June
30, 2008 and 2007.Income tax provision was $2.6 million and $1.4 million for the three months ended June 30, 2008
and 2007, respectively. The Companys effective tax rate for the three months ended June 30,
2008 was 32.4% and 24.7% for the three months ended June 30, 2007. The lower effective tax rate
in 2007 was primarily the result of changes in certain state tax laws.
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##### Table of Contents



Income from continuing operations was $5.6 million and $4.2 million for the three months ended
June 30, 2008 and 2007, respectively, an increase of $1.4 million primarily from higher
operating income which was partially offset by an increase in the income tax rate.Income from discontinued operations was $0.0 million and $0.1 million for the three months ended
June 30, 2008 and 2007, respectively. The 2007 amount included a gain of $0.2 million from the
sale of property, plant and equipment of the former Insulated Wire business.As a result of the aforementioned changes, net income was $5.6 million, or $0.56 per basic share
and $0.54 per diluted share, and $4.3 million, or $0.43 per basic and $0.42 per diluted share,
for the three months ended June 30, 2008 and 2007, respectively.Six Months Ended June 30, 2008 versus Six Months Ended June 30, 2007Net sales were $406.4 million and $374.2 million for the six months ended June 30, 2008 and
2007, respectively. Sales for the six months ended June 30, 2008 were $32.2 million, or 8.6%,
above comparable 2007 levels, as a result of an increase in the average cost and selling price
of copper ($39.1 million), higher customer pricing/mix ($10.6 million), higher volume ($1.9
million) and the impact of a stronger euro versus the U.S. dollar ($5.1 million). These factors
were partially offset by a higher proportion of tolled copper shipped in the 2008 period
compared to the 2007 period ($24.5 million). For sales of product comprised of customer-owned
(tolled) copper, the value of the copper material processed is excluded from sales.
Accordingly, as the proportion of tolled sales increases, sales decrease. The average price of
copper based upon COMEX increased to $3.67 per pound for the six months ended June 30, 2008 from
$3.08 per pound for the six months ended June 30, 2007.Bare Wire segment net sales for the six months ended June 30, 2008 were $295.5 million, an
increase of $16.9 million, or 6.1%, from sales of $278.6 million for the comparable 2007 period.
This increase was primarily the result of an increase in the average cost and selling price of
copper ($34.7 million), increased customer pricing/mix ($6.0 million) and higher volume to
customers supplying the industrial/energy market ($3.4 million). These increases were partially
offset by the impact of a higher proportion of tolled copper shipped in the 2008 period compared
to the 2007 period ($24.5 million) and lower volume primarily to customers supplying the
automotive market ($2.7 million). Of the total pounds processed for the six months ended June
30, 2008 and 2007, respectively, 54.9% and 49.5% were from customers tolled copper.Engineered Wire Products-Europe net sales of $41.5 million for the six months ended June 30,
2008 were $7.5 million, or 22.1%, higher than sales of $34.0 million for the 2007 period. This
increase was the result of $5.2 million impact of a stronger euro versus the U.S. dollar, $1.0
million for the increase in the average cost and selling price of copper, and $2.0 million from
increased volume from improved customer demand in all markets partially offset by $0.7 million
lower customer pricing/mix.High Performance Conductors net sales of $70.3 million for the six months ended June 30, 2008
were $7.9 million, or 12.7%, higher than sales of $62.4 million for the 2007 period. This
increase was the result of $3.4 million for the increase in the average cost and selling price
of copper and customer pricing/mix including higher silver, tin and nickel prices of $5.3
million, partially offset by $0.8 million of lower volume.Cost of goods sold, exclusive of depreciation and amortization, as a percentage of sales
decreased to 86.1% for the six months ended June 30, 2008 from 87.4% for the same period in
2007. The decrease of 1.3 percentage points was due to the impact of a higher proportion of toll
copper sales in 2008 compared to 2007 (1.0 percentage points) and higher customer pricing/mix
(2.0 percentage points) partially offset by the increase in the average cost and selling price
of copper (1.5 percentage points) and increased production costs, net of cost reductions
including the impact of the Sherrill, New York plant cost structure (0.2 percentage points).Selling, general and administrative expenses were $23.1 million for the six months ended June
30, 2008 compared to $22.7 million for the same period in 2007. This increase of $0.4 million
was the result of higher transportation costs ($1.1 million), higher salaries and bonus accruals
($0.6 million) and other cost increases, net ($0.5 million), partially offset by lower
stock-based compensation expense ($1.1 million), lower professional fees ($0.7 million). These
expenses, as a percent of net sales, decreased to 5.7% for the six months ended June 30, 2008
from 6.1% for the six months ended June 30, 2007, primarily due to increase in copper prices in
the 2008 period compared to 2007.
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##### Table of Contents



Depreciation and amortization was $8.9 million for the six months ended June 30, 2008 compared
to $7.9 million for the same period in 2007. This increase of $1.0 million was primarily the
result of higher depreciation on property, plant and equipment on the Sherrill, New York plant
that became operational in late 2007.Operating income for the six months ended June 30, 2008 was $24.3 million compared to $16.6
million for the 2007 period, an increase of $7.7 million, or 46.4%, primarily as a result of
higher customer pricing/mix and cost reduction initiatives, with increases in all three
segments. Bare Wire segments operating income of $12.9 million for the 2008 period increased
by $3.5 million, or 37.2%, compared to $9.4 million for the comparable 2007 period, primarily
from higher customer pricing/mix and cost reductions including the impact of the new plant in
Sherrill, New York, partially offset by higher depreciation. Engineered Wire Products-Europe
operating income was $3.6 million, an increase of $1.1 million, or 44.0%, from the 2007 period
of $2.5 million from increased sales volume, operating efficiencies and the favorable foreign
currency impact. High Performance Conductors operating income was $8.2 million, an increase of
$1.5 million, or 22.4%, from the 2007 period of $6.7 million from increased customer pricing/mix
which was partially offset by lower sales volume. Operating income in the 2008 period also
increased by $1.6 million from a lower charge for stock-based compensation expense of $1.1
million and lower professional fees of $0.5 million.Interest expense was $4.9 million for the six months ended June 30, 2008 compared to $4.8
million for the six months ended June 30, 2007. This increase of $0.1 million was the result of
higher levels of borrowings from the acquisition of Hamilton Products during the 2008 period
compared to 2007, partially offset by lower interest rates in 2008.Amortization of deferred financing costs was $0.3 million for both the six months ended June 30,
2008 and 2007.Income tax provision was $6.4 million and $3.3 million for the six months ended June 30, 2008
and 2007, respectively. The Companys effective tax rate for the six months ended June 30, 2008
was 33.6% and 28.7% for the six months ended June 30, 2007. The lower effective tax rate in 2007
was primarily the result of certain changes in state tax laws.Income from continuing operations was $12.7 million and $8.2 million for the six months ended
June 30, 2008 and 2007, respectively, an increase of $4.5 million primarily from higher
operating income partially offset by an increase in the income tax rate.Income from discontinued operations was $0.1 million for both the six months ended June 30, 2008
and 2007. The 2007 amount included a gain of $0.2 million from the sale of property, plant and
equipment of the former Insulated Wire business.As a result of the aforementioned changes, net income was $12.8 million, or $1.29 per basic
share and $1.25 per diluted share, and $8.3 million, or $0.83 per basic and $0.81 per diluted
share, for the six months ended June 30, 2008 and 2007, respectively.Financial ConditionAt the end of the second quarter, total cash and cash equivalents were $5.4 million, up $1.4
million from year-end 2007. During the first six months of 2008, cash levels increased
throughout the period and we used excess cash to reduce outstanding long-term debt borrowings.Accounts receivable increased $25.7 million, or 27.5%, from year-end 2007. This increase was
primarily due to the increase in sales for the immediately preceding period and a slight
increase in the number of days sales outstanding from 54 days at year-end 2007 to 55 days as of
June 30, 2008. The allowance for doubtful accounts as a percentage of accounts receivable
decreased from 1.4% at December 31, 2007 to 1.1% as of June 30, 2008 reflecting the constant
level of allowances and higher levels of accounts receivable at June 30, 2008 compared to
December 31, 2007.Inventories of $71.7 million as of June 30, 2008 increased by $14.3 million from December 31,
2007. This increase was the result of an increase in pounds of copper, price of copper and other
inventory in the Bare Wire segment, including Hamilton Products ($20.1 million), increased
inventory levels primarily from higher metal costs at High Performance Conductors ($1.8 million)
and higher inventory levels in Engineered Wire Products-
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##### Table of Contents



Europe ($1.9 million), partially offset by an increase in the LIFO reserve due to higher metal
prices ($9.5 million).Accounts payable were $58.3 million as of June 30, 2008, an increase of $29.6 million from
December 31, 2007 levels, due to increased copper prices, more pounds purchased and the effect
of the timing of payments. The December 31, 2007 level reflected reduced production activities
due to the year-end holiday work schedules.Recently Issued Accounting StandardsIn September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157,
Fair Value Measurements(SFAS No. 157). This statement defines fair value, establishes a
framework for using fair value to measure assets and liabilities and expands disclosures about
fair value measurements. The statement applies whenever other pronouncements require or permit
assets or liabilities to be measured at fair value. In February 2008, the FASB issued Final
FASB Staff Position (FSP FAS 157-2). FSP FAS 157-2, which was effective upon issuance, delays
the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for
items that are recognized or disclosed at fair value at least once a year, to fiscal years
beginning after November 15, 2008. SFAS No. 157 was effective for the Company on January 1,
2008. The Company did not adopt the provisions of SFAS No. 157 as it relates to nonfinancial
assets pursuant to FSP FAS 157-2. The adoption of SFAS No. 157 did not have an impact on the
Companys consolidated financial statements.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Liabilities- including an amendment to FASB Statement No. 115(SFAS No. 159). This statement
permits entities to choose to measure many financial instruments and certain other items at fair
value in order to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently. SFAS No. 159 is effective for the Companys fiscal year beginning
January 1, 2008. The Company has not adopted the fair value option for its current financial
assets or liabilities. Accordingly, the adoption of SFAS No. 159 did not have an impact on its
consolidated financial statements.In December 2007, the FASB issued SFAS No. 141(R), Business Combinations(SFAS No. 141R).
SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed,
any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141R also
establishes disclosure requirements to enable the evaluation of the nature and financial effects
of the business combination. This statement is effective for the Companys fiscal year
beginning January 1, 2009. The Company is currently evaluating the potential impact of the
adoption of SFAS No. 141R will have on its consolidated financial statements.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements-an amendment of ARB No. 51(SFAS No. 160). SFAS No. 160 establishes
accounting and reporting standards for the noncontrolling interest in a subsidiary and for the
retained interest and gain or loss when a subsidiary is deconsolidated. This statement is
effective for financial statements issued for fiscal years beginning on or after December 15,
2008 with earlier adoption prohibited. The Company is currently evaluating the potential impact
of the adoption of SFAS No. 160 will have on its consolidated financial statements.In March 2008, the FASB issued SFAS No. 161 Disclosures about Derivative Instruments and Hedging
Activities-an amendment of FAS 133(SFAS No. 161). SFAS No. 161 requires an entity with
derivatives to describe how and why it uses derivative instruments, how derivative instruments
and related hedged items are accounted for under SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities and related interpretations, and how derivative instruments
and related hedged items affect the entitys financial position, financial performance, and cash
flows. This statement is effective for the Companys fiscal year beginning January 1,
2009. The Companys adoption of SFAS No. 161 is not expected to have a material impact on its
consolidated financial statements.Liquidity and Capital Resources
 Working Capital and Cash Flows
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Net cash provided by operating activities was $19.8 million for the six months ended June 30,
2008, compared to net cash provided by operating activities of $23.7 million for the six months
ended June 30, 2007. This decrease of $3.9 million was the result of higher accounts receivable
from increased sales ($3.1 million), inventory changes ($7.9 million), decreased accounts
payable ($1.6 million) and other, net ($2.5 million), partially offset by increased net income
($4.5 million), increased accrued and other liabilities and workers compensation due to the
timing of certain payments ($3.4 million) and increased accrued income taxes ($3.3 million).Net cash used in investing activities was $14.6 million for the six months ended June 30, 2008,
compared to $11.9 million for the six months ended June 30, 2007. This increase in net cash used
of $2.7 million resulted primarily from the acquisition of Hamilton Products for $9.1 million in
the 2008 period and $0.3 million other, net, partially offset by lower capital expenditures of
$3.7 million and $3.0 million for the HPC acquisition in the 2007 period.Net cash used in financing activities was $4.0 million for the six months ended June 30, 2008,
compared to net cash used by financing activities of $13.2 million for the six months ended
June 30, 2007. There were net repayments of borrowings of $4.9 million for the six months ended
June 30, 2008, and net repayments of borrowings of $13.3 million for the six months ended
June 30, 2007. In the 2008 period there were $0.9 million in proceeds from the issuance of
common stock and $0.1 million in the 2007 period.
 Financing Arrangements
 We are party to a revolving credit facility with Wachovia Capital Finance Corporation (Central)
(the Revolver Credit Facility). The Revolver Credit Facility provides for a $200 million
revolving credit facility subject to borrowing availability (including a $25 million letter of
credit facility) and matures August 22, 2011.We are party to an indenture governing the Notes we issued in October 2004. For a description of
the terms of the Revolver Credit Facility and the Notes, see Note 10 to the unaudited condensed
consolidated financial statements.
 Liquidity
 We require cash for working capital, capital expenditures, debt service and taxes. Our working
capital requirements generally increase when demand for our products increase or when copper,
copper premiums, silver, nickel, tin and alloy costs increase significantly or rapidly.
Currently, a $0.10 per pound fluctuation in the price of copper will have an approximate $2.6
million impact on our working capital. The average price of copper based upon COMEX increased to
$3.80 per pound for the three months ended June 30, 2008 from $3.46 per pound for the three
months ended June 30, 2007. Copper prices continue to be volatile, and the price of copper on
the COMEX was $3.46 per pound as of August 5, 2008.Our principal sources of cash are generated from operations and availability under our Revolver
Credit Facility.As of June 30, 2008, we had $5.4 million of unrestricted cash and cash equivalents. Actual
borrowings availability under our Revolver Credit Facility is subject to a borrowing base
calculation, generally based upon a percentage of eligible accounts receivable, inventory and
property, plant and equipment. As of June 30, 2008, our borrowing base was $160.5 million and
our outstanding indebtedness under the Revolver Credit Facility (including outstanding letters
of credit) was $24.2 million, resulting in a remaining availability as of such date of $136.3
million.We expect our cash on hand, operating cash flow and available borrowings under the Revolver
Credit Facility, will be sufficient to meet our anticipated future operating expenses, capital
expenditures and debt service requirements for the next twelve months and the foreseeable
future. Our ability to generate sufficient cash flow to meet our operating needs could be
affected by general economic, financial, competitive, legislative, regulatory, business and
other factors beyond our control. Any significant reduction in customer demand for our products,
change in competitive conditions, reduction in vendor terms from our suppliers, increases in
prices of our major raw material components including copper, silver and nickel, increases in
other expenses such as utility costs, or adverse changes in economic conditions in the U.S. or
worldwide could impact our ability to generate sufficient cash flow to fund operations.
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Off-Balance Sheet ArrangementsWe have not historically utilized off-balance sheet financing arrangements and have no such
arrangements as of June 30, 2008. However, we do finance the use of certain facilities and
equipment under lease agreements provided by various institutions. Since the terms of these
agreements meet the definition of operating lease agreements, the sum of future lease payments
is not reflected on our consolidated balance sheets. As of June 30, 2008, the future minimum
lease payments under these arrangements totaled $6.4 million.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 We do not ordinarily hold market risk sensitive instruments for trading purposes.
 Interest Rate Risk
 At June 30, 2008, approximately $13.3 million of $88.3 million of long-term debt, specifically,
$12.9 million of borrowings under our Revolver Credit Facility and $0.4 million of other
indebtedness, bear interest at variable rates. A hypothetical 1% increase in variable interest
rates would increase our interest rate expense by $0.1 million based on the debt outstanding as
of June 30, 2008. We are not currently engaged in any hedging activities.
 Foreign Currency Risk
 As of June 30, 2008, we had operations in Belgium, France and Italy. Our operations may,
therefore, be subject to volatility because of currency fluctuations. Sales and expenses are
denominated in the euro for the Belgium, French and Italian operations. As a result, these
operations are subject to fluctuations in the relative value of the euro. We evaluate from
time-to-time various currency hedging programs that could reduce the risk.In terms of foreign currency translation risk, we are exposed primarily to the euro. Our net
foreign currency investment in foreign subsidiaries and affiliates translated into U.S. dollars
using month-end exchange rates at June 30, 2008 and year-end exchange rates at December 31,
2007, was $33.5 million and $28.4 million, respectively.At June 30, 2008, we had no financial instruments outstanding that were sensitive to changes in
foreign currency rates.
 Commodity Price Risk
 The principal raw material used in our products is 5/16 inch copper rod, which is sourced either
directly from world copper producers or through rod mill operators in North America and Europe.
Copper rod prices are based on market prices, which are generally established by reference to
the COMEX prices, plus a premium charged to convert copper cathode to copper rod and deliver it
to the required location. As a worldwide traded commodity, copper prices have historically been
subject to fluctuations. The average price of copper based upon COMEX increased to $3.80 per
pound for the three months ended June 30, 2008 from $3.46 per pound for the three months ended
June 30, 2007. While fluctuations in the price of copper may directly affect the per unit prices
of our products, these fluctuations have not had, nor are expected to have, a material impact on
our profitability due to copper price pass-through arrangements that we have with our customers.
These sales arrangements are based on similar variations of monthly copper price formulas. Use
of these copper price formulas minimizes the differences between raw material copper costs
charged to the cost of sales and the pass-through pricing charge to customers. However, a severe
increase in the price of copper could negatively impact our short-term liquidity because of the
period of time between our purchase of copper at an increased price and the time at which we
receive cash payments after selling end products to customers reflecting the increased price.
Currently, a $0.10 per pound fluctuation in the price of copper will have an approximate $2.6
million impact on our working capital.Tin is also a component in our products in the Bare Wire and High Performance Conductors
segments. For the three months ended June 30, 2008, the average price of tin increased by 58%
compared to the three months
ended June 30, 2007. The High Performance Conductors segment also uses silver and nickel. For
the three months ended June 30, 2008, the average price of silver increased by 29% and the
average price of nickel
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decreased by 47% compared to the three months ended June 30, 2007. The
cost of silver, nickel and tin is generally passed-through to our customers through a variety of
pricing mechanisms. Our price of silver includes a margin and consequently market fluctuations
in the price of silver can result in an increase or decrease in profitability at a given volume.
 
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Based on an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by
this Form 10-Q, conducted under the supervision of and with the participation of our chief
executive officer (CEO) and chief financial officer (CFO), such officers have concluded that
our disclosure controls and procedures are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and
forms, and are operating in an effective manner. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our CEO and CFO, to allow timely decisions regarding
required disclosure.
 Changes in Internal Control over Financial Reporting
 There was no change in the Companys internal control over financial reporting that occurred
during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 During the three months ended June 30, 2008, there have been no material developments in the
Companys legal proceedings. For more detailed information, see the disclosures provided in Note
14 to the unaudited condensed consolidated financial statements in this Form 10-Q and Note 16 to
our Consolidated Financial Statements and in Item 3-Legal Proceedings set forth in our 2007
Form 10-K.
 
 ITEM 1A. RISK FACTORS
 In addition to the other information set forth in this report, you should carefully consider the
factors discussed in Part I, Item 1A, Risk Factors in our 2007 Form 10-K for the year ended
December 31, 2007, which could materially affect our business, financial condition or future
results. The Risk Factors included in our 2007 10-K have not materially changed. The risks
described in our 2007 10-K are not the only risks we face. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating results.
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 None.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 None.
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 Our Annual Meeting of Stockholders was held on June 5, 2008. At the Annual Meeting,
stockholders voted on three matters and each matter was approved. The number of shares voted
with respect to each matter required to be reported herein are as follows:
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Rodney D. Kent
    
    For: 7,730,381
    
    Withheld: 0Mark K. Holdsworth
    
    For: 7,730,381
    
    Withheld: 0William Lane Pennington
    
    For: 7,730,381
    
    Withheld: 0Peter Blum
    
    For: 7,730,381
    
    Withheld: 0David M. Gilchrist, Jr.
    
    For: 7,730,381
    
    Withheld: 0David H. Robbins
    
    For: 7,730,381
    
    Withheld: 0Lowell W. Robinson
    
    For: 7,730,381
    
    Withheld: 0John T. Walsh
    
    For: 7,730,381
    
    Withheld: 0
     
 ITEM 5. OTHER INFORMATION
 None.
 
 ITEM 6. EXHIBITS
 Exhibit 
Number
    
    Description2.1
    
    Asset Purchase Agreement, dated June 3, 2008, between
International Wire Group, Inc., a Delaware corporation,
Global Wire Inc., a Delaware corporation, Montgomery Wire
Corporation, a Delaware corporation, Wyre Wynd Corporation,
a Delaware corporation, Negev Wire Trading Inc., a Delaware
corporation, and Global Wire Ltd., an Israeli corporation
(filed as Exhibit 2.1 to the Companys Current Report on
Form 8-K filed June 4, 2008, and incorporated herein by
reference).10.1
    
    Third Amended and Restated Employment Agreement, dated
April 25, 2008, by and among Rodney D. Kent, International
Wire Group, Inc. and certain subsidiaries of International
Wire Group, Inc. (filed as Exhibit 10.1 to the Companys
Current Report on Form 8-K filed April 29, 2008, and
incorporated herein by reference).10.2
    
    Third Amended and Restated Employment Agreement, dated
April 25, 2008, by and among Glenn J. Holler, International
Wire Group, Inc. and certain subsidiaries of International
Wire Group, Inc. (filed as Exhibit 10.2 to the Companys
Current Report on Form 8-K filed April 29, 2008, and
incorporated herein by reference).10.3
    
    Amended and Restated International Wire Group, Inc. 2006
Management Stock Option Plan (filed as Exhibit 10.3 to the
Companys Current Report on Form 8-K filed April 29, 2008,
and incorporated herein by reference).10.4
    
    Amended and Restated International Wire Group, Inc. 2006
Stock Option Plan for Nonemployee Directors (filed as
Exhibit 10.4 to the Companys Current Report on Form 8-K
filed April 29, 2008, and incorporated herein by
reference).31.1
    
    Certification of Principal Executive Officer Required by
Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
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##### Table of Contents



Exhibit 
Number
    
    Description31.2
    
    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.
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##### Table of Contents



SIGNATURES
  INTERNATIONAL WIRE GROUP, INC.Dated: August 7, 2008
    By:
    /s/ GLENN J.  HOLLERName:
    Glenn J.  HollerTitle:
    Senior Vice President, Chief Financial 
Officer (Principal Financial and Accounting
Officer) and Secretary 26




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EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Asset Purchase Agreement, dated June 3, 2008, between
International Wire Group, Inc., a Delaware corporation,
Global Wire Inc., a Delaware corporation, Montgomery Wire
Corporation, a Delaware corporation, Wyre Wynd Corporation,
a Delaware corporation, Negev Wire Trading Inc., a Delaware
corporation, and Global Wire Ltd., an Israeli corporation
(filed as Exhibit 2.1 to the Companys Current Report on
Form 8-K filed June 4, 2008, and incorporated herein by
reference).10.1
    
    Third Amended and Restated Employment Agreement, dated
April 25, 2008, by and among Rodney D. Kent, International
Wire Group, Inc. and certain subsidiaries of International
Wire Group, Inc. (filed as Exhibit 10.1 to the Companys
Current Report on Form 8-K filed April 29, 2008, and
incorporated herein by reference).10.2
    
    Third Amended and Restated Employment Agreement, dated
April 25, 2008, by and among Glenn J. Holler, International
Wire Group, Inc. and certain subsidiaries of International
Wire Group, Inc. (filed as Exhibit 10.2 to the Companys
Current Report on Form 8-K filed April 29, 2008, and
incorporated herein by reference).10.3
    
    Amended and Restated International Wire Group, Inc. 2006
Management Stock Option Plan (filed as Exhibit 10.3 to the
Companys Current Report on Form 8-K filed April 29, 2008,
and incorporated herein by reference).10.4
    
    Amended and Restated International Wire Group, Inc. 2006
Stock Option Plan for Nonemployee Directors (filed as
Exhibit 10.4 to the Companys Current Report on Form 8-K
filed April 29, 2008, and incorporated herein by
reference).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.
 27