**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**
| **(Mark One)** |
|----------------|
| **x**          | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **     | ** ** | ** ** |
| ** **     | ** ** | **For the  Quarterly Period Ended June 30, 2007** |
| ** **     | ** ** | ** ** |
| ** **     | ** ** | **or** |
| ** **     | ** ** | ** ** |
| **o**          | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **     | ** ** | ** ** |
| ** **     | ** ** | **For the  transition period from          to          ** |

 

**Commission file number 0-50514**

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**SUPERIORESSEX INC.**

(Exact name of registrant as specified in its charter)
| **Delaware**                                       | ** ** | **20-0282396**                        |
|----------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or  |       | (I.R.S. Employer  Identification No.) |
| organization)                                      |       |                                  |
|                                               |       |                                  |
| **150  Interstate North Parkway Atlanta, Georgia** | ** ** | **30339**                             |
| (Address of principal  executive offices)          |       | (Zip code)                            |

 

**770-657-6000**

Registrant’s telephone number, including area code

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Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports) and (2) has been subject tosuch filing requirements for the past 90 days. Yes xNo o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large acceleratedfiler o               Acceleratedfiler x               Non-acceleratedfiler o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

o Yes xNo

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Section 12, 13 or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmedby a court. Yes x No o

As of July 30, 2007, theregistrant had 20,504,438 shares of common stock, $0.01 par value, outstanding.

 

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**PART I. FINANCIAL INFORMATION**

In this QuarterlyReport on Form 10-Q, the following terms have the meanings indicatedbelow:

·                  Unless thecontext otherwise requires, the terms “we,” “us,” “our,” and “registrant,” aswell as the term “Superior Essex,” refer to Superior Essex Inc. and itssubsidiaries on and after November 10, 2003, the effective date of theplan of reorganization of Superior TeleCom Inc. and its subsidiaries.

·       “COMEX” refers to CommodityExchange Inc., a subsidiary of the New York Mercantile Exchange, Inc. thatoperates the principal U.S. copper futures and options trading market.

·       “Essex Group” refers toEssex Group, Inc., a wholly owned subsidiary of Essex International.

·       “Essex International”refers to Essex International Inc., a wholly owned subsidiary of SuperiorEssex Holding.

·       “Essex Europe” refers toEssex Europe S.A.S (formerly known as Essex Nexans Europe S.A.S.), and itssubsidiaries.

·       “LME” refers to the LondonMetal Exchange, which operates the principal European copper futures andoptions trading market.

·       “Superior EssexCommunications” refers to Superior Essex Communications LP.

·       “Superior Essex Holding”refers to Superior Essex Holding Corp., a wholly owned subsidiary of SuperiorEssex  and the sole limited partner of Superior Essex Communications.

·       “Superior TeleCom,” unlessthe context otherwise requires, refers to Superior TeleCom Inc. and itssubsidiaries and the business carried on by them prior to November 10,2003.

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**Forward-Looking Statements**

*Certainexpectations and projections regarding our future performance referenced inthis Form 10-Q, in other materials we file with the SEC or otherwiserelease to the public, and on our website are forward-looking statements.Senior officers also may make verbal statements to analysts, investors,regulators, the media and others that are forward-looking. Forward-lookingstatements involve matters that are not historical facts, such as statements in“Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and elsewhere regarding our future operations, prospects, productdemand, strategies, investments, financial condition (including liquidity andcapital resources), economic performance (including growth and earnings),benefits expected as a result of our projected growth, and industry conditions.We have tried, whenever possible, to identify these statements using words suchas “anticipate,” “assume,” “believe,” “can,” “could,” “estimate,” “expect,” “forecast,”“future,” “goal,” “indicate,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,”“project,” “seek,” “should,” target,” “will,” “would,” and similar expressions.*

*You arecautioned not to place undue reliance on our forward-looking statements. Ourforward-looking statements are not guarantees of future performance and arebased on currently available competitive, financial and economic data, ourcurrent expectations and assumptions, and our operating plans. While we believethat our expectations for the future are reasonable in view of the currentlyavailable information, our expectations are subject to future events, risks andinherent uncertainties, as well as potentially inaccurate expectations andassumptions, and there are numerous factors—many beyond our control—that couldcause results to differ significantly from our expectations. Such events, risksand uncertainties include, but are not limited to, those set forth under thecaption “Risk Factors” in our Annual Report on Form 10-K for the year endedDecember 31, 2006 and in the other documents that we file with the SEC. We notethese factors for investors as permitted by the Private Securities LitigationReform Act of 1995. There also may be other factors that we cannot anticipateor that are not described in this Form 10-Q or in our Annual Reporton Form 10-K for the year ended December 31, 2006, generally because we do notperceive them to be material, that could cause results to differ significantlyfrom our expectations.*

*Forward-lookingstatements are only as of the date they are made, and we do not undertake anyobligation to update these statements to reflect subsequent circumstances orevents except as required by federal securities laws. You are advised, however,to review any further disclosures we make on related subjects in ourForm 10-Q and Form 8-K reports to the SEC.*

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**ITEM1. FINANCIAL STATEMENTS**

**SUPERIOR ESSEX INC. ANDSUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(in thousands, except share data)**

**(unaudited)**
| ** **                                                                                                                                                           | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                                           | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                                      |       |                    |       |                        |       |
| Cash and cash equivalents                                                                                                                                            |       | $                       | 58,743     |                        | $          | 53,493 |   |
| Accounts receivable (less allowance for doubtful  accounts of $5,358 and $5,652 at June 30, 2007 and December 31,  2006, respectively)                     |       | 398,021                 |       | 335,620                     |       |
| Inventories, net                                                                                                                                                     |       | 285,648                 |       | 289,334                     |       |
| Other current assets                                                                                                                                                 |       | 27,874                  |       | 46,878                      |       |
| Total current assets                                                                                                                                                 |       | 770,286                 |       | 725,325                     |       |
| Property, plant  and equipment, net                                                                                                                                  |       | 255,013                 |       | 258,480                     |       |
| Intangible and  other long-term assets, net                                                                                                                          |       | 47,071                  |       | 43,014                      |       |
| Total assets                                                                                                                                                         |       | $                       | 1,072,370  |                        | $          | 1,026,819 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                        | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current  liabilities:                                                                                                                                                |       |                    |       |                        |       |
| Short-term borrowings                                                                                                                                                |       | $                       | 37,559     |                        | $          | 30,176 |   |
| Current portion of long-term debt                                                                                                                                    |       | 1,234                   |       | 1,192                       |       |
| Accounts payable                                                                                                                                                     |       | 199,142                 |       | 161,106                     |       |
| Accrued expenses                                                                                                                                                     |       | 91,798                  |       | 94,620                      |       |
| Total current liabilities                                                                                                                                            |       | 329,733                 |       | 287,094                     |       |
| Long-term debt                                                                                                                                                       |       | 278,585                 |       | 292,675                     |       |
| Other long-term  liabilities                                                                                                                                         |       | 72,585                  |       | 59,396                      |       |
| Total liabilities                                                                                                                                                    |       | 680,903                 |       | 639,165                     |       |
| Minority  interest in consolidated subsidiaries (note 5)                                                                                                             |       | —                  |       | 28,666                      |       |
| Stockholders’  equity:                                                                                                                                          |       |                    |       |                        |       |
| Preferred stock, $.01 par value; 7,000,000 shares  authorized, none issued or outstanding                                                                            |       | —                  |       | —                      |       |
| Common stock, $.01 par value; 33,000,000 shares  authorized; 20,869,705 and 20,691,373 shares issued at June 30, 2007 and  December 31, 2006, respectively |       | 209                     |       | 207                         |       |
| Capital in excess of par value                                                                                                                                       |       | 280,768                 |       | 271,821                     |       |
| Accumulated other comprehensive income (loss)                                                                                                                        |       | 2,644                   |       | (961                        | )          |
| Retained earnings (note 1)                                                                                                                                           |       | 120,051                 |       | 97,306                      |       |
| Treasury stock, at cost (382,653 shares and 302,843  shares at June 30, 2007 and December 31, 2006, respectively)                                                    |       | (12,205                 | )          | (9,385                      | )          |
| Total stockholders’ equity                                                                                                                                      |       | 391,467                 |       | 358,988                     |       |
| Total  liabilities and stockholders’ equity                                                                                                                     |       | $                       | 1,072,370  |                        | $          | 1,026,819 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements

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**SUPERIOR ESSEX INC. ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(in thousands, except per share data)**

**(unaudited)**
| ** **                                                            | ** ** | **Three Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                            | ** ** | **2007**                                        | ** ** | **2006** | ** ** |
| Net sales                                                             |       | $                                               | 772,440    |   | $ | 818,193 |   |
| Cost of goods  sold                                                   |       | 697,989                                         |       | 731,494 |   |
| Gross profit                                                          |       | 74,451                                          |       | 86,699 |   |
| Selling, general  and administrative expenses                         |       | (37,987                                         | )          | (38,238 | ) |
| Restructuring  and other charges                                      |       | (413                                            | )          | (197 | ) |
| Operating income                                                      |       | 36,051                                          |       | 48,264 |   |
| Interest expense                                                      |       | (7,472                                          | )          | (8,011 | ) |
| Interest income                                                       |       | 869                                             |       | 61 |   |
| Other income  (expense), net                                          |       | 103                                             |       | (122 | ) |
| Income before income taxes, minority interest and  extraordinary gain |       | 29,551                                          |       | 40,192 |   |
| Income tax  expense                                                   |       | (11,885                                         | )          | (15,225 | ) |
| Income before minority interest and extraordinary  gain               |       | 17,666                                          |       | 24,967 |   |
| Minority  interest in earnings of subsidiaries                        |       | (1,307                                          | )          | (2,148 | ) |
| Income before extraordinary gain                                      |       | 16,359                                          |       | 22,819 |   |
| Extraordinary  gain (note 5)                                          |       | 3,539                                           |       | — |   |
| Net income                                                            |       | $                                               | 19,898     |   | $ | 22,819 |   |
|                                                                  |       |                                            |       |   |   |
| Net income per  share of common stock:                                |       |                                            |       |   |   |
| Basic:                                                                |       |                                            |       |   |   |
| Income before extraordinary gain                                      |       | $                                               | 0.81       |   | $ | 1.31 |   |
| Extraordinary gain (note 5)                                           |       | 0.17                                            |       | — |   |
| Net income                                                            |       | $                                               | 0.98       |   | $ | 1.31 |   |
| Diluted:                                                              |       |                                            |       |   |   |
| Income before extraordinary gain                                      |       | $                                               | 0.80       |   | $ | 1.27 |   |
| Extraordinary gain (note 5)                                           |       | 0.17                                            |       | — |   |
| Net income                                                            |       | $                                               | 0.97       |   | $ | 1.27 |   |
| Weighted average  shares outstanding:                                 |       |                                            |       |   |   |
| Basic                                                                 |       | 20,253                                          |       | 17,427 |   |
| Diluted                                                               |       | 20,527                                          |       | 17,992 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements

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| ** **                                                                | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| Net sales                                                                 |       | $                                             | 1,468,068  |   | $ | 1,469,887 |   |
| Cost of goods  sold                                                       |       | 1,332,372                                     |       | 1,324,739 |   |
| Gross profit                                                              |       | 135,696                                       |       | 145,148 |   |
| Selling, general  and administrative expenses                             |       | (73,586                                       | )          | (73,850 | ) |
| Restructuring  and other charges                                          |       | (1,287                                        | )          | (978 | ) |
| Operating income                                                          |       | 60,823                                        |       | 70,320 |   |
| Interest expense                                                          |       | (15,122                                       | )          | (16,089 | ) |
| Interest income                                                           |       | 1,615                                         |       | 103 |   |
| Gain on sale of  investment (note 5)                                      |       | —                                        |       | 5,788 |   |
| Other income  (expense), net                                              |       | (648                                          | )          | 34 |   |
| Income before income taxes, minority interest and  extraordinary gain     |       | 46,668                                        |       | 60,156 |   |
| Income tax  expense                                                       |       | (18,794                                       | )          | (22,928 | ) |
| Income before minority interest and extraordinary  gain                   |       | 27,874                                        |       | 37,228 |   |
| Minority  interest in earnings of subsidiaries                            |       | (2,357                                        | )          | (2,181 | ) |
| Income before extraordinary gain                                          |       | 25,517                                        |       | 35,047 |   |
| Extraordinary  gain (net of minority interest of $581 in 2006) - (note 5) |       | 3,539                                         |       | 871 |   |
| Net income                                                                |       | $                                             | 29,056     |   | $ | 35,918 |   |
| Net income per  share of common stock:                                    |       |                                          |       |   |   |
| Basic:                                                                    |       |                                          |       |   |   |
| Income before extraordinary gain                                          |       | $                                             | 1.26       |   | $ | 2.05 |   |
| Extraordinary gain (note 5)                                               |       | 0.18                                          |       | 0.05 |   |
| Net income                                                                |       | $                                             | 1.44       |   | $ | 2.10 |   |
| Diluted:                                                                  |       |                                          |       |   |   |
| Income before extraordinary gain                                          |       | $                                             | 1.25       |   | $ | 1.99 |   |
| Extraordinary gain (note 5)                                               |       | 0.17                                          |       | 0.05 |   |
| Net income                                                                |       | $                                             | 1.42       |   | $ | 2.04 |   |
| Weighted average  shares outstanding:                                     |       |                                          |       |   |   |
| Basic                                                                     |       | 20,203                                        |       | 17,095 |   |
| Diluted                                                                   |       | 20,491                                        |       | 17,598 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements

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**SUPERIOR ESSEX INC. ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(in thousands)**

**(unaudited)**
| ** **                                                                                | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| Cash flows from  operating activities:                                                    |       |                                          |       |   |   |
| Net income                                                                                |       | $                                             | 29,056     |   | $ | 35,918 |   |
| Adjustments to reconcile net income to net cash used  for operating activities:           |       |                                          |       |   |   |
| Depreciation and amortization                                                             |       | 15,030                                        |       | 13,493 |   |
| Amortization of deferred financing costs and  discount                                    |       | 1,061                                         |       | 1,122 |   |
| Gain on sale of investment (note 5)                                                       |       | —                                        |       | (5,788 | ) |
| Minority interest in earnings of subsidiary                                               |       | 2,357                                         |       | 2,181 |   |
| Extraordinary gain (net of minority interest in  2006)                                    |       | (3,539                                        | )          | (871 | ) |
| Settlement of derivatives, net                                                            |       | 3,564                                         |       | 7,030 |   |
| Share-based compensation                                                                  |       | 4,016                                         |       | 3,285 |   |
| Change in assets and liabilities:                                                         |       |                                          |       |   |   |
| Accounts receivable, net                                                                  |       | (58,638                                       | )          | (155,208 | ) |
| Inventories, net                                                                          |       | 28,169                                        |       | (12,016 | ) |
| Other current and non-current assets                                                      |       | 16,350                                        |       | (2,843 | ) |
| Accounts payable, accrued expenses and other  liabilities                                 |       | 38,619                                        |       | 55,771 |   |
| Other, net                                                                                |       | 795                                           |       | (63 | ) |
| Cash flows  provided by (used for) operating activities                                   |       | 76,840                                        |       | (57,989 | ) |
| Cash flows from  investing activities:                                                    |       |                                          |       |   |   |
| Capital expenditures                                                                      |       | (18,351                                       | )          | (17,903 | ) |
| Acquisitions, net of cash acquired (note 5)                                               |       | (48,334                                       | )          | (947 | ) |
| Proceeds from sale of investment (note 5)                                                 |       | —                                        |       | 8,500 |   |
| Other                                                                                     |       | 26                                            |       | 59 |   |
| Cash flows used  for investing activities                                                 |       | (66,659                                       | )          | (10,291 | ) |
| Cash flows from  financing activities:                                                    |       |                                          |       |   |   |
| Repayments of senior secured revolving credit  facility, net                              |       | —                                        |       | (13,049 | ) |
| Short-term borrowings, net                                                                |       | 6,551                                         |       | 13,793 |   |
| Repayments of long-term debt                                                              |       | (15,021                                       | )          | (258 | ) |
| Proceeds from common stock offering                                                       |       | —                                        |       | 76,541 |   |
| Proceeds from exercise of stock options                                                   |       | 2,413                                         |       | 1,880 |   |
| Excess tax benefits resulting from exercise of stock  options and vesting of stock awards |       | 1,737                                         |       | 566 |   |
| Cash flows  provided by (used for) financing activities                                   |       | (4,320                                        | )          | 79,473 |   |
| Effect of  exchange rate changes on cash                                                  |       | (611                                          | )          | 192 |   |
| Net increase in  cash and cash equivalents                                                |       | 5,250                                         |       | 11,385 |   |
| Cash and cash  equivalents at beginning of period                                         |       | 53,493                                        |       | 8,184 |   |
| Cash and cash  equivalents at end of period                                               |       | $                                             | 58,743     |   | $ | 19,569 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements

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**SUPERIOR ESSEX INC. ANDSUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**June 30, 2007**

**(unaudited)**

**1.****                                      General**

***Basis of presentation***

Theaccompanying balance sheet as of December 31, 2006, which has been derived fromaudited financial statements, and the unaudited consolidated financialstatements as of June 30, 2007 and for the three and six months ended June 30,2007 and 2006, have been prepared in accordance with the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, as amended,and, therefore, do not include all disclosures required by accountingprinciples generally accepted in the United States for complete financialstatements. However, in the opinion of management, these statements reflect alladjustments (which consist only of normal recurring accruals) necessary for afair presentation of the results of operations for the relevant periods.Results for the six months ended June 30, 2007 are not necessarilyindicative of the results to be expected for the entire fiscal year. Thesefinancial statements should be read in conjunction with the auditedconsolidated financial statements and notes thereto included in SuperiorEssex Inc.’s Annual Report on Form 10-K for the year endedDecember 31, 2006.

TheCompany is a manufacturer and supplier of communications wire and cableproducts to telephone companies, CATV companies, distributors and systemsintegrators, and magnet wire and fabricated insulation materials to majororiginal equipment manufacturers, or OEMs, for use in motors, transformers,generators and electrical controls and, through its distribution operations, tosmaller OEMs and the motor repair industry. The Company also convertscopper cathode to copper rod for internal consumption and for sale to otherwire and cable manufacturers and OEMs. The Company currently operatesmanufacturing facilities in the United States, the United Kingdom, France,Germany, Portugal, Mexico, Canada, Italy and China.

***New accounting pronouncements***

The Companyadopted the provisions of FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes*(“FIN 48”), on January 1, 2007. FIN 48 prescribes a consistent recognitionthreshold and measurement attribute, as well as establishes criteria forsubsequently recognizing, derecognizing and measuring uncertain tax positionsfor financial statement purposes. As a result of the implementation of FIN 48,the Company recognized a net increase of $6.6 million in the liability forunrecognized tax benefits, which was accounted for as a decrease to the January1, 2007 balance of retained earnings of $6.3 million and a decrease in minorityinterest in consolidated subsidiaries of $0.3 million. As of the date ofadoption and after the impact of recognizing the increase in liability notedabove, the Company’s net liability for unrecognized tax benefits totaled $9.1million, all of which, if recognized, would affect the annual effective incometax rate.

The Companyrecognizes potential interest and penalties related to unrecognized taxbenefits as a component of income tax expense. The liability for unrecognized tax benefits of $9.1 million at January1, 2007 includes approximately $2.1 million for potential interest andpenalties associated with uncertain tax positions. During the three and sixmonths ended June 30, 2007, the Company incurred an income tax expense chargeof $0.6 million and $0.9 million, respectively, for uncertain tax positions and$0.1 million and $0.3 million, respectively, for potential interest andpenalties associated with uncertain tax positions.  To the extent interest and penalties are notassessed with respect to uncertain tax positions, amounts accrued will bereduced and reflected as a reduction of the overall income tax provision.

The tax years 2003through 2006 remain open to examination by the major taxing jurisdictions inwhich the Company operates. Certain tax carryforward attributes generated inperiods prior to 2003 may still be subject to adjustment.

The Companybelieves it is reasonably possible that approximately $2.4 million in netunrecognized tax benefits will be recognized during 2007 primarily as a resultof statutes of limitations closing in certain state tax jurisdictions.

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In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).SFAS No. 157 establishes a common definition for fair value to beapplied to guidance regarding U.S. generally accepted accountingprinciples, requiring use of fair value, establishes a framework for measuringfair value, and expands disclosure about such fair value measurements.SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007. The Company is currently assessing the impact, if any,the adoption of SFAS No. 157 will have on its 2008 consolidated financialstatements.

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities,” (“SFAS No. 159”).SFAS No. 159 provides companies with an option to report selectedfinancial assets and liabilities at fair value and to provide additionalinformation that will help investors and other users of financial statements tounderstand more easily the effect on earnings of a company ‘s choice to usefair value. It also requires companies to display the fair value of thoseassets and liabilities for which the company has chosen to use fair value onthe face of the balance sheet. The Company is required to adoptSFAS No. 159 on January 1, 2008 and is currently evaluating theimpact, if any, of SFAS No. 159 on its consolidated financialstatements.

**2.****                                      Inventories,net**

AtJune 30, 2007 and December 31, 2006, the components of inventorieswere as follows:
|                 | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **      | ** ** | **(in thousands)** | ** ** |
| Raw materials   |       | $                       | 36,695     |                        | $          | 41,786 |   |
| Work in process |       | 87,503                  |       | 75,647                      |       |
| Finished goods  |       | 283,706                 |       | 289,839                     |       |
|            |       | 407,904                 |       | 407,272                     |       |
| LIFO reserve    |       | (122,256                | )          | (117,938                    | )          |
|            |       | $                       | 285,648    |                        | $          | 289,334 |   |

 

Inventoriesvalued using the LIFO method amounted to $132.4 million and$125.5 million at June 30, 2007 and December 31, 2006,respectively.

**3.****                                      Comprehensiveincome**

Thecomponents of comprehensive income for the three and six months endedJune 30, 2007 and 2006 were as follows:
|                                                                                                                                                                                        | ** ** | **Three Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                                                                                                                             | ** ** | **2007**                                        | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                                             | ** ** | **(in thousands)**                         | ** ** |
| Net income                                                                                                                                                                             |       | $                                               | 19,898     |   | $ | 22,819 |   |
| Foreign currency  translation adjustment, net of income tax of $40 for the three months ended  June 30, 2007                                                                           |       | 1,037                                           |       | 1,411 |   |
| Reclassification  adjustment for unrecognized actuarial gains of defined benefit pension plans  included in net income, net of income tax of $2                                        |       | (3                                              | )          | — |   |
| Reclassification  adjustment for unrecognized prior service costs of defined benefit pension  plans included in net income, net of income tax of $7                                    |       | 12                                              |       | — |   |
| Unrealized  holding gains on derivatives during the period, net of income tax of $1,478  and $3,730 for the three months ended June 30, 2007 and 2006,  respectively              |       | 2,311                                           |       | 5,833 |   |
| Reclassification  adjustment for gains on derivatives included in net income, net of income tax  of $1,561 and $2,683 for the three months ended June 30, 2007 and 2006,  respectively |       | (2,442                                          | )          | (4,197 | ) |
| Net unrealized gains (losses) on derivatives                                                                                                                                           |       | (131                                            | )          | 1,636 |   |
| Other                                                                                                                                                                                  |       | —                                          |       | (10 | ) |
| Comprehensive income                                                                                                                                                                   |       | $                                               | 20,813     |   | $ | 25,856 |   |

 

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|                                                                                                                                                                                      | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                                                                                           | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| ** **                                                                                                                                                                           | ** ** | **(in thousands)**                       | ** ** |
| Net income                                                                                                                                                                           |       | $                                             | 29,056     |   | $ | 35,918 |   |
| Foreign currency  translation adjustment, net of income tax of $361 for the six months ended  June 30, 2007                                                                          |       | 1,417                                         |       | 1,910 |   |
| Reclassification  adjustment for unrecognized actuarial gains of defined benefit pension plans  included in net income, net of income tax of $4                                      |       | (6                                            | )          | — |   |
| Reclassification  adjustment for unrecognized prior service costs of defined benefit pension  plans included in net income, net of income tax of $14                                 |       | 24                                            |       | — |   |
| Unrealized  holding gains on derivatives during the period, net of income tax of $2,451  and $6,357 for the six months ended June 30, 2007 and 2006, respectively               |       | 3,828                                         |       | 9,935 |   |
| Reclassification  adjustment for gains on derivatives included in net income, net of income tax  of $1,057 and $3,613 for the six months ended June 30, 2007 and 2006,  respectively |       | (1,658                                        | )          | (5,650 | ) |
| Net unrealized gains on derivatives                                                                                                                                                  |       | 2,170                                         |       | 4,285 |   |
| Other                                                                                                                                                                                |       | —                                        |       | 49 |   |
| Comprehensive income                                                                                                                                                                 |       | $                                             | 32,661     |   | $ | 42,162 |   |

 

Thecomponents of accumulated other comprehensive income (loss) at June 30,2007 and December 31, 2006 were as follows:
|                                                                                                                                                        | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                             | ** ** | **(in thousands)** | ** ** |
| Foreign currency  translation adjustment, net of tax of $361 at June 30, 2007                                                                          |       | $                       | 6,174      |                        | $          | 4,757 |   |
| Unrecognized actuarial  losses of defined benefit pension plans, net of tax of $3,550 and $3,546 at  June 30, 2007 and December 31, 2006, respectively |       | (4,660                  | )          | (4,654                      | )          |
| Unrecognized  prior service costs of defined benefit pension plans, net of tax of $272 and  $286 at June 30, 2007 and December 31, 2006, respectively  |       | (478                    | )          | (502                        | )          |
| Unrealized gain  (loss) on derivatives, net of tax of $1,027 and $367 at June 30, 2007  and December 31, 2006, respectively                  |       | 1,608                   |       | (562                        | )          |
|                                                                                                                                                   |       | $                       | 2,644      |                        | $          | (961 | ) |

 

**4.****                                      Restructuringand other charges**

EssexEurope recorded a restructuring provision of $0.3 million during the six monthsended June 30, 2007 related to a workforce reduction at its Viana de Castelo,Portugal manufacturing facility. The majority of the costs related to severancepayments and related benefits. All amounts are expected to be paid during 2007.Restructuring and other charges for the six months ended June 30, 2007 alsoinclude the write-off of $0.4 million of deferred business acquisition costs,$0.3 million of ongoing facility exit costs related to a former North Americanmagnet wire and distribution segment warehouse and $0.2 million of professionalfees incurred in connection with the administration of Superior TeleCom’s planof reorganization. During the six months ended June 30, 2006, Essex Europerecorded a restructuring provision of $0.9 million related to workforcereductions at its U.K. magnet wire operation. In addition, restructuring andother charges for the six months ended June 30, 2006 included $0.3 million ofongoing facility exit costs primarily related to the closure of an insulationmanufacturing facility in our North American magnet wire and distributionsegment and $0.2 million of professional fees incurred in connection withthe administration of Superior TeleCom’s plan of reorganization. These chargeswere offset by a $0.4 million gain on the favorable  settlement of anemployee related dispute in our European magnet wire and distribution segment.

10

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**5.****                                      Acquisitionsand dispositions**

***Invex acquisition***

On July31, 2007, Essex Europe acquired all of the outstanding common stock of InvexS.p.A., a leading European magnet wire producer based in Italy for a cashpurchase price of $41.3 million. The Company believes the acquisition willcomplement its existing European operations and should provide near- andlong-term synergy opportunities in the areas of sales and administration,internal enamel usage, and other logistical, procurement and manufacturingarrangements. The purchase was financed with cash on hand.

***Essex Europe minority interest acquisition***

OnJune 27, 2007, the Company exercised its option to purchase Nexans’ 40%minority interest in Essex Europe for a cash payment of $29.4 million,including acquisition costs of $0.1 million. As a result of the acquisition,the €11.3 million subordinated note payable to Nexans was fully repaid (Seenote 6). The acquisition of the minority interest has been accounted for usingthe purchase method of accounting. The purchase price allocation resulted in anadjustment to the carrying value of recorded assets and liabilities based ontheir relative fair values as of the acquisition date. The preliminaryallocation of the purchase price resulted in unallocated negative goodwill,after elimination of the acquired portion of property, plant and equipment andcertain other long-term assets, of $3.5 million, or $0.17 per diluted share ofcommon stock, which has been reflected as an extraordinary gain in thestatement of operations for the three and six months ended June 30, 2007. TheCompany is in the process of finalizing certain asset and liability valuationsand therefore the allocation of the purchase price, including the amount ofunallocated negative goodwill, is subject to refinement and adjustment. The applicationof the purchase price and the adjustments to the carrying value of the assetsand liabilities are summarized as follows: 
|                                        | ** ** | **(in  thousands)** | ** ** |
|----------------------------------------|------------|---------------------|------------|
| Current assets                         |       | $                   | 9,770      |   |
| Property, plant  and equipment         |       | (7,284              | )          |
| Intangible and other  long-term assets |       | 2,347               |       |
| Current  liabilities                   |       | (3,406              | )          |
| Minority  interest                     |       | 31,519              |       |
|                                   |       | 32,946              |       |
| Purchase price                         |       | 29,407              |       |
| Extraordinary gain                     |       | $                   | 3,539      |   |

 

The following proforma consolidated results of operations have been prepared as if theacquisition of the Essex Europe minority interest had occurred atJanuary 1, 2006. The extraordinary gain directly attributable to thetransaction is included in the pro forma consolidated results of operations forthe six months ended June 30, 2007.
|                                   | ** ** | **Six Months Ended  June 30,**                     | ** ** |
|-----------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                                          | ** ** | **2006** | ** ** |
| ** **                        | ** ** | **(in thousands, except  per share amounts)** | ** ** |
|                              |       |                                                              |       |   |   |
| Net sales                         |       | $                                                                 | 1,468,068  |   | $ | 1,469,887 |   |
| Income before  extraordinary gain |       | 28,317                                                            |       | 37,893 |   |
| Net income                        |       | 31,856                                                            |       | 39,345 |   |
| Net income per  share:            |       |                                                              |       |   |   |
| Basic                             |       |                                                              |       |   |   |
| Income before extraordinary gain  |       | 1.40                                                              |       | 2.22 |   |
| Net income                        |       | 1.58                                                              |       | 2.30 |   |
| Diluted                           |       |                                                              |       |   |   |
| Income before extraordinary gain  |       | 1.38                                                              |       | 2.15 |   |
| Net income                        |       | 1.55                                                              |       | 2.24 |   |
|                                   |            |                                                                   |            |  |  |  |  |

 

11

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***Simcoe and Tianjin acquisitions***

InJanuary 2007, the Company entered into two definitive agreements, one toacquire certain assets and assume certain liabilities related to Nexans’remaining North American magnet wire business in Simcoe, Canada and the otherto acquire Nexans’ 80% ownership interest in a company which owns and operatesa magnet wire facility located in Tianjin, China. These transactions providethe Company with a significant market presence in the North American andChinese markets for rectangular wires, including continuous transposed cable,or CTC, and related products used primarily by large transformer manufacturersin high-performance power generators and transformers. The Simcoe acquisitionwas completed on April 27, 2007 for a cash purchase price, after adjustment, of$12.7 million. The acquisition was accounted for using the purchase method ofaccounting and the results of the acquired operations have been included in theconsolidated results of operations of the Company from the date of acquisition.The pro forma results of operations reflecting the Simcoe acquisition are notsignificant. The Company is in the process of finalizing certain asset andliability valuations and therefore the allocation of the purchase price issubject to refinement and adjustment. The preliminary allocation of the Simcoepurchase price is summarized as follows (in thousands):
| Cash purchase price                                        |   | $      | 12,742 |   |
|------------------------------------------------------------|--------|--------|--------|--------|
| Acquisition  costs                                         |   | 900    |   |
|                                                       |   | $      | 13,642 |   |
| Allocated to:                                              |   |   |   |
| Inventory and other current assets                         |   | 12,456 |   |
| Property, plant and equipment                              |   | 1,967  |   |
| Other long-term assets                                     |   | 1,573  |   |
| Current liabilities                                        |   | (829   | )      |
| Long-term pension and post-retirement benefit  liabilities |   | (1,525 | )      |
|                                                       |   | $      | 13,642 |   |

 

Thepurchase of Nexan’s 80% ownership interest in the Tianjin company was completedon July 26, 2007 for a cash purchase price of $9.9 million subject toadjustment for finalization of net indebtedness at the closing date.

***SDS acquisition***

On January 4, 2006, Essex Europe acquired all ofthe outstanding capital stock of Societe de Distribution et de Services (“SDS”)from Nexans for a cash payment of $1.2 million. SDS is engaged in the businessof distributing magnet wire and related products in France. In connection withthe acquisition, Essex Europe recorded a restructuring reserve of $0.6 millionrelated primarily to workforce reductions and the closure of certain of SDS’sleased warehouse locations. Nexans reduced the purchase price by €0.7 millionfor certain restructuring costs incurred by Essex Europe. The acquisition ofSDS was accounted for as a purchase and the results of operations of SDS havebeen included in the Company’s results of operations from the date ofacquisition. The allocation of the purchase price resulted in unallocatednegative goodwill of $1.5 million which has been reflected as an extraordinarygain (net of minority interest of $0.6 million) in the statement of operationsfor the six months ended June 30, 2006.

***Essex Electricdisposition***

InJanuary 2006 the Company sold its investment in the common stock of EssexElectric Inc. together with its warrant to purchase additional shares of EssexElectric Inc. to The Alpine Group, Inc. for a cash payment of $8.5 million. Asa result of the transaction the Company recognized a pre-tax gain of $5.8million. Following the sale the Company no longer has any equity interest inEssex Electric Inc.

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**6.****                                      Debt**

AtJune 30, 2007 and December 31, 2006, short-term borrowings and long-termdebt consist of the following:
|                                                                                                                        | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                             | ** ** | **(in thousands)** | ** ** |
| Short-term  borrowings:                                                                                                |       |                    |       |                        |       |
| Essex Europe factoring agreement                                                                                       |       | $                       | 29,245     |                        | $          | 27,185 |   |
| Other                                                                                                                  |       | 8,314                   |       | 2,991                       |       |
|                                                                                                                   |       | $                       | 37,559     |                        | $          | 30,176 |   |
| Long-term debt:                                                                                                        |       |                    |       |                        |       |
| 9% senior notes (net of discount of $4,859 and  $5,252 at June 30, 2007 and December 31, 2006, respectively) |       | $                       | 252,241    |                        | $          | 251,848 |   |
| Series A redeemable preferred stock of Superior  Essex Holding                                                         |       | 5,000                   |       | 5,000                       |       |
| 8.975% subordinated note of Essex Europe                                                                               |       | —                  |       | 14,847                      |       |
| Term loan of Essex Magnet Wire (Suzhou) Ltd.                                                                           |       | 12,590                  |       | 12,270                      |       |
| Other                                                                                                                  |       | 9,988                   |       | 9,902                       |       |
|                                                                                                                   |       | 279,819                 |       | 293,867                     |       |
| Less current portion of long-term debt                                                                                 |       | 1,234                   |       | 1,192                       |       |
| Total long-term debt                                                                                                   |       | $                       | 278,585    |                        | $          | 292,675 |   |

 

SuperiorEssex Communications and Essex Group are borrowers under a $225 million seniorsecured credit facility. Interest on the senior secured credit facility accrueson outstanding borrowings at an annual rate equal to, at the borrowers’ option,LIBOR or a base rate, plus, in each case, an applicable margin, determinedquarterly based on average borrowing availability, ranging from 1.00% to 2.00%for LIBOR loans and  from 0% to 0.75% forbase rate loans. Obligations under the senior secured credit facility aresecured by substantially all domestic assets of the Company and 65% of thevoting stock of certain of the Company’s foreign subsidiaries. Availabilityunder the senior secured credit facility is subject to a borrowing base equalto the lesser of (1) $225 million less outstanding letters of credit and (2) aspecified percentage of eligible accounts receivable and inventory lessspecified reserves. The specified percentages are (i) 85% of the value of theeligible accounts receivable and with respect to inventory the lesser of (a)$110 million or (b) the lesser of (x) 65% of the value of eligible inventoryand (y) 85% multiplied by the net orderly liquidation percentage thenapplicable multiplied by the value of the eligible inventory. Certain of thespecified reserves that reduce availability are not fixed and may be increasedor imposed by the administrative agent for the amended and restated seniorsecured credit facility at its reasonable credit judgment. The borrowers areobligated to pay an unused commitment fee of 0.25% per annum on the unusedamount of the maximum committed amounts and a fee of 0.125% per annum on theoutstanding face amount of outstanding letters of credit. No borrowings wereoutstanding under the senior secured credit facility at June 30, 2007 and undrawnavailability was $224.2 million.

Thesenior secured credit facility contains covenants which may limit SuperiorEssex Communications’ and Essex Group’s and their subsidiaries’ ability to (i)pay dividends, redeem capital stock or make other restricted payments, (ii)sell or dispose of assets, (iii) incur additional indebtedness or permit liensto exist on Company property, (iv) engage in transactions with affiliates and(v) make additional investments or acquisitions. Capital expenditures,distributions, acquisitions and asset dispositions are not limited so long asno event of default exists and the borrowers meet certain availability andliquidity conditions specified in the senior secured credit facility.

InJuly 2007, Essex Europe entered into a new factoring to replace their existingfactoring agreement. Under the new agreement the amount of advances availableto Essex Europe is limited to 85% of assigned receivables up to a maximum of€50 million ($67.3 million at June 30, 2007). Advances under the newagreement bear interest at the monthly average of the European Overnight IndexAverage rate plus 0.35%. The new factoring agreement expires in July 2010.The new agreement was subsequently amended to increase the borrowingavailability by €40 million in order to provide working capital financingfor Invex.

Theindenture governing the 9% senior notes contains covenants which restrict theability of the Company and certain of its subsidiaries to, among other things:incur additional debt and issue preferred stock; make certain distributions,investments and other restricted payments; create certain liens; enter intotransactions with affiliates; and merge, consolidate or sell substantially allof the Company’s assets.

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The8.975% subordinated note of Essex Europe was repaid in connection with theacquisition of Nexans’ 40% minority interest in Essex Europe (See note 5).

**7.****                                      Incomeper share**

Thecomputation of basic and diluted income before extraordinary gain per share forthe three and six months ended June 30, 2007 and 2006 is as follows:
|                                                                | ** ** | **Three Months Ended June 30,**                   | ** ** |
|----------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                     | ** ** | **2007**                                                              | ** ** | **2006** | ** ** |
| ** **                                                     | ** ** | **Net  Income**                                                       | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** | **Net  Income** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| ** **                                                     | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Basic income per  common share before extraordinary gain       |       | $                                                                     | 16,359     |   | 20,253 |   | $ | 0.81 |   | $ | 22,819 |   | 17,427 |   | $ | 1.31 |   |
| Effect of  dilutive securities:                                |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Restricted stock  awards                                       |       | —                                                                |       | 96 |   |   |   | — |   | 233 |   |   |   |
| Stock options                                                  |       | —                                                                |       | 178 |   |   |   | — |   | 281 |   |   |   |
| Warrants                                                       |       | —                                                                |       | — |   |   |   | — |   | 51 |   |   |   |
| Diluted net income per  common share before extraordinary gain |       | $                                                                     | 16,359     |   | 20,527 |   | $ | 0.80 |   | $ | 22,819 |   | 17,992 |   | $ | 1.27 |   |

 
| ** **                                                 | ** ** | **Six Months Ended June 30,**                     | ** ** |
|------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                 | ** ** | **2007**                                                              | ** ** | **2006** | ** ** |
| ** **                                                 | ** ** | **Net  Income**                                                       | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** | **Net  Income** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| ** **                                                 | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Basic income per  common share before extraordinary gain   |       | $                                                                     | 25,517     |   | 20,203 |   | $ | 1.26 |   | $ | 35,047 |   | 17,095 |   | $ | 2.05 |   |
| Effect of  dilutive securities:                            |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Restricted stock  awards                                   |       | —                                                                |       | 104 |   |   |   | — |   | 223 |   |   |   |
| Stock options                                              |       | —                                                                |       | 184 |   |   |   | — |   | 254 |   |   |   |
| Warrants                                                   |       | —                                                                |       | — |   |   |   | — |   | 26 |   |   |   |
| Diluted income per  common share before extraordinary gain |       | $                                                                     | 25,517     |   | 20,491 |   | $ | 1.25 |   | $ | 35,047 |   | 17,598 |   | $ | 1.99 |   |

 

Atotal of 26,138 and 23,663 anti-dilutive weighted average shares with respectto outstanding stock options and restricted stock awards have been excludedfrom the computation of diluted income per share for the three months endedJune 30, 2007 and 2006, respectively. A total of 24,335 and 575,548anti-dilutive weighted average shares with respect to outstanding stock options,restricted stock awards and Superior Essex’s warrant have been excluded fromthe computation of diluted income per share for the six months endedJune 30, 2007 and 2006, respectively. Anti-dilutive weighted averageshares for six months ended June 30, 2006 includes warrants issued inconnection with Superior TeleCom’s plan of reorganization to purchase 868,421shares of the Company’s common stock. The warrants expired unexercised on May10, 2006. Additionally, 193,620 shares contingently issuable pursuant toperformance awards granted in March 2006 (see note 8) have been excluded fromthe computation of basic and diluted income per share for all periods presentedas the performance conditions have not been satisfied. A total of 264,194 and264,966 shares contingently issuable pursuant to performance awards granted inApril 2007 (see note 8) have been excluded from the computation of basic anddiluted earnings per share for the three and six months ended June 30, 2007,respectively, because the performance conditions have not been satisfied.

**8.****                                      Stock-basedcompensation plans**

In November 2003, the Company adopted the SuperiorEssex Inc. 2003 Stock Incentive Plan (the “2003 Plan”) pursuant to which acommittee of the Company’s board of directors was authorized to grant stockoptions or restricted stock awards to employees, non-employee directors andcertain service providers. The 2003 Plan permitted grants of awards or optionsto purchase up to 1,833,333 shares of authorized but unissued common stock,stock held in treasury or both. Stock options under the 2003 Plan could begranted with an exercise price less than, equal to or greater than the stock’sfair market value at the date of grant. The term of stock options granted underthe 2003 Plan could not exceed 10 years.

14

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In May 2005 the shareholders of the Companyapproved the Superior Essex Inc. 2005 Incentive Plan (the “2005 Plan”) pursuantto which a committee of the Company’s board of directors may grant stockoptions, stock appreciation rights, restricted stock, restricted stock units,deferred stock units, performance awards, dividend and interest equivalents andcash-based awards to eligible employees, officers, non-employee directors andconsultants. The 2005 Incentive Plan was subsequently amended and restated inMay 2007 to, among other things, increase the number of shares that may beissued by 500,000 shares. Stock options can be granted under the 2005 Plan withan exercise price equal to or greater than the stock’s fair market value at thedate of grant. The term of stock options granted may not exceed 10 years.A total of 1,000,000 shares of common stock is reserved for issuance under the2005 Plan, as amended. In addition, unissued awards and any shares underlyingcurrently outstanding options granted under the 2003 Plan which expireunexercised are available for issuance under the 2005 Plan as well as certainshares delivered or withheld to cover the exercise price or income taxwithholdings. As a result of adoption of the 2005 Plan, no further grants orawards may be made pursuant to the 2003 Plan.

In March 2006 the Company’s board of directors grantedperformance share awards to certain of the Company’s executive officers underthe 2005 Plan. Under the terms of the award the executives may vest in up to193,620 shares of the Company’s common stock on December 31, 2007 contingentupon meeting specified performance goals with respect to return on net assetsand core business revenues (as defined in the award) for the year endedDecember 31, 2007. In April 2007, the Company’s board of directors grantedperformance share awards to certain of the Company’s officers and key employeesunder the 2005 Plan, as amended. Under the terms of the award the executivesmay vest in up to 265,738 shares of the Company’s common stock on December 31,2009 contingent upon meeting specified performance goals during the three yearperiod ended December 31, 2009. Compensation expense related to the performanceshare awards is based on the grant date fair value of the award and theestimated number of shares that will ultimately vest. Compensation expense forthe three and six months ended June 30, 2007 increased by $0.4 million and $1.3million, respectively, as a result of changes in the estimated number ofperformance shares that will ultimately vest. Compensation expense is subjectto future adjustment based upon changes in expected performance.

Total compensation cost related to all stock-basedcompensation plans was $2.0 million and $2.0 million for the three months endedJune 30, 2007 and 2006, respectively. Total compensation cost related to allstock-based compensation plans was $4.0 million and $3.3 million for the sixmonths ended June 30, 2007 and 2006, respectively. As of June 30, 2007, therewas $9.5 million of unrecognized compensation cost related to the Company’sstock-based compensation plans which is expected to be recognized over aweighted average period of 2.0 years.

Thefollowing table summarizes stock option activity for the six months endedJune 31, 2007:
| ** **                        | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term (in  years)** | ** ** | **Aggregate  Intrinsic  Value (in  thousands)** | ** ** |
|-----------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                        | ** ** | ** ** | ** ** | ** **                             | ** ** | ** **                                                           | ** ** | ** **                                           | ** ** |
| Outstanding at  December 31, 2006 |       | 607,764    |       | $                                      | 15.56      |                                                                 |       |                                                 |       |   |
| Granted                           |       | 28,429     |       | 34.97                                  |       |                                                                 |       |                                                 |       |
| Exercised                         |       | (165,732   | )          | 14.53                                  |       |                                                                 |       |                                                 |       |
| Forfeitures                       |       | (1,681     | )          | 25.75                                  |       |                                                                 |       |                                                 |       |
| Outstanding at  June 30, 2007     |       | 468,780    |       | $                                      | 17.06      |                                                                 | 7.4        |                                                 | $          | 9,512 |   |
| Exercisable at June 30,  2007     |       | 285,733    |       | $                                      | 14.48      |                                                                 | 6.9        |                                                 | $          | 6,535 |   |

 

Options topurchase 28,429 shares and 24,195 shares of common stock with a weightedaverage Black Scholes fair value per option of $16.54 and $12.26 were grantedduring the six months ended June 30, 2007 and 2006, respectively. The fairvalue for options granted during the following periods was estimated at thedate of grant using the Black Scholes option pricing model and the followingweighted average assumptions:
|                          | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------|------------|-----------------------------------------------|------------|
| ** **               | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| Volatility               |       | 40                                            | %          | 40 | % |
| Dividend yield           |       | 0                                             | %          | 0 | % |
| Risk-free  interest rate |       | 4.7                                           | %          | 4.9 | % |
| Expected life (years)    |       | 6.2                                           |       | 6.2 |   |

 

15

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Theexpected volatility is estimated using the historical daily volatility of theCompany’s stock as well as the historical volatilities of publicly-traded stockof certain of the Company’s competitors. The Company has not made any dividendpayments on its common stock and does not intend to declare cash dividends onits stock in the foreseeable future. The risk-free interest rate is based onU.S. Treasury yields in effect at the time of grant for the expected term ofthe stock options. The expected term was determined using the “simplified”method, as prescribed by the Securities and Exchange Commission’s StaffAccounting Bulletin No. 107.

Thefollowing table summarizes the status of the Company’s unvested share awards,including the performance share awards discussed above, for the six monthsended June 30, 2007:
| ** **                                                    | ** ** | **Shares  Outstanding** | ** ** | **Weighted Average  Grant Date  Fair Value** | ** ** |
|---------------------------------------------------------------|------------|-------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                    | ** ** | ** **              | ** ** | ** **                                                  | ** ** |
| Nonvested share  awards outstanding at December 31, 2006 |       | 463,721                 |       | $                                                           | 21.07      |   |
| Granted                                                       |       | 293,424                 |       | 34.91                                                       |       |
| Vested                                                        |       | (102,939                | )          | 14.85                                                       |       |
| Forfeited                                                     |       | (1,898                  | )          | 27.70                                                       |       |
| Nonvested share awards  outstanding at June 30, 2007     |       | 652,308                 |       | $                                                           | 28.26      |   |

 

**9.****                                      Employeebenefits**

Thecomponents of net periodic benefit cost of the Company’s defined benefitpension plans for the three and six months ended June 30, 2007 and 2006are presented below.
|                                               | ** ** | **Three Months   Ended June 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                              | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | **(in thousands)**                               | ** ** |
| **Components  of net periodic benefit cost:** |       |                                                  |       |   |   |
| Service cost                                  |       | $                                                     | 730        |   | $ | 657 |   |
| Interest cost                                 |       | 2,250                                                 |       | 2,085 |   |
| Expected return  on plan assets               |       | (2,528                                                | )          | (2,024 | ) |
| Amortization of  actuarial losses (gains)     |       | (5                                                    | )          | 201 |   |
| Amortization of  prior service costs          |       | 19                                                    |       | 19 |   |
|                                          |       | $                                                     | 466        |   | $ | 938 |   |

 
|                                               | ** ** | **Six Months  Ended June 30,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
| ** **                                    | ** ** | **(in thousands)**                       | ** ** |
| **Components  of net periodic benefit cost:** |       |                                          |       |   |   |
| Service cost                                  |       | $                                             | 1,407      |   | $ | 1,282 |   |
| Interest cost                                 |       | 4,352                                         |       | 4,036 |   |
| Expected return  on plan assets               |       | (4,831                                        | )          | (4,059 | ) |
| Amortization of  actuarial losses (gains)     |       | (10                                           | )          | 230 |   |
| Amortization of  prior service costs          |       | 38                                            |       | 38 |   |
|                                          |       | $                                             | 956        |   | $ | 1,527 |   |

 

TheCompany’s cash contributions to the defined benefit plans amounted to$3.5 million and $2.5 million during the six months ended June 30,2007 and 2006, respectively. The Company expects to make additional cashcontributions of $5.6 million for the remainder of 2007.

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**10.****                               Derivativefinancial instruments**

TheCompany, to a limited extent, uses or has used forward fixed price contractsand derivative financial instruments to manage commodity price, interest rateand foreign currency exchange risks. The Company does not hold or issuefinancial instruments for investment or trading purposes. The Company isexposed to credit risk in the event of nonperformance by counterparties forforeign exchange forward contracts, metal forward price contracts and metalsfutures contracts but the Company does not anticipate nonperformance by any ofthese counterparties. The amount of such exposure is generally limited to anyunrealized gains within the underlying contracts.

***Commodity price risk management***

Thecost of copper, the Company’s most significant raw material, has historicallybeen subject to considerable volatility. To manage the risk associated withsuch volatility, the Company enters into futures contracts to match the metalcomponent of customer product pricing with the cost component of the inventoryshipped. These futures contracts have been designated as cash flow hedges withunrealized gains and losses recorded in other comprehensive income. Gains andlosses are reclassified into earnings, as a component of cost of goods sold,when the hedged sales transactions are reflected in the income statement. Hedgeineffectiveness, which is not significant, is immediately recognized inearnings. The Company’s commodities futures purchase contracts are summarizedas follows at June 30, 2007:
| Type       | ** ** | **Notional  Amount**                    | ** ** | **Maturity  Date** | ** ** | **Weighted  Average  Contract Rate** | ** ** | **Fair Value  Gain** | ** ** |
|------------|------------|-----------------------------------------|------------|--------------------|------------|-------------------------------------------|------------|---------------------------|------------|
| ** ** | ** ** | **(in thousands of  pounds)** | ** ** | ** **         | ** ** | ** **                                | ** ** | **(in  thousands)**       | ** ** |
|       |       |                                    |       |               |       |                                      |       |                      |       |
| Copper     |       | 5,875                                   |       | 2007               |       | $                                         | 3.01       |                      | $          | 2,544 |   |
| Copper     |       | 250                                     |       | 2008               |       | 2.99                                      |       | 91                        |       |
|       |       |                                    |       |               |       |                                      |       | $                         | 2,635      |   |
|            |            |                                         |            |                    |            |                                           |            |                           |            |  |  |

 

All ofthe unrealized gains on commodity futures outstanding at June 30, 2007 areexpected to be reclassified in earnings within the next twelve months.

EssexEurope periodically enters into commodity futures contracts to match the coppercomponent of customer product pricing with the cost component of the inventoryshipped. These futures contracts are intended to minimize the risks associatedwith forward product pricing for customers and changing copper prices. Thesecontracts generally have maturities of less than two months and representeconomic hedges but have not been designated as hedges for accounting purposes.Accordingly, gains and losses on these contracts are recorded in income as acomponent of cost of goods sold. Net losses on these contracts were $0.3million for the three and six months ended June 30, 2007. Net gains on thesecontracts were $1.9 million and $3.4 million for the three and six months endedJune 30, 2006. Essex Europe had no open copper futures positions at June 30,2007.

***Foreign currency exchange risk management***

TheCompany engages in the sale and purchase of products which result in accountsreceivable and accounts payable denominated in foreign currencies.Additionally, the Company enters into intercompany loans, some of which are notconsidered long-term investments, among our subsidiaries with differingfunctional currencies. As a result, fluctuations in the value of foreigncurrencies create exposures, which can adversely affect the Company’s resultsof operations. The Company attempts to manage its transactional foreigncurrency exchange risk by economically hedging foreign currency cash flowforecasts arising from the settlement of accounts receivable, accounts payableand intercompany accounts. Where naturally offsetting foreign currencypositions do not occur, the Company hedges certain, but not all, of its foreigncurrency exposures through the use of foreign currency forward exchangecontracts. These contracts generally have maturities of less than two months andrepresent economic hedges but have not been designated as hedges for accountingpurposes. Changes in the fair value of these contracts are reflected in currentearnings.

TheCompany is also exposed to foreign currency translation risk resulting from thetranslation of the financial statements of foreign subsidiaries with functionalcurrencies other than the U.S. dollar. The Company’s most significanttranslation exposure is the Euro in relation to the U.S. dollar. The Companyenters into foreign currency put options to hedge

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against adversefluctuations in the results of operations of certain of its foreignsubsidiaries resulting from foreign currency translation. The put optionsexpire in 2007.

Thefollowing table summarizes information about foreign currency relatedderivatives as of June 30, 2007.
| Derivatives                              | ** ** | **Notional Amount** | ** ** | **Weighted  Average  Contract  Rate** | ** ** | **Fair Value  Gain (Loss)** | ** ** |
|------------------------------------------|------------|--------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| ** **                               | ** ** | **(in thousands)**  | ** ** | ** **                            | ** ** | **(in thousands)**               | ** ** |
| Forward exchange  contracts:             |       |                     |       |                                  |       |                                  |       |   |   |
| U.S. dollars (sell for Euros)            |       | 1,300                    |       | USD                                   |       | .74                                   |       | $ | — |   |
| U.S. dollars (buy with Canadian dollars) |       | 3,200                    |       | USD                                   |       | 1.06                                  |       | — |   |
| Canadian dollars (sell for U.S. dollars) |       | 20,500                   |       | CAD                                   |       | .94                                   |       | (3 | ) |
| Euros (buy with British pounds)          |       | 3,700                    |       | EURO                                  |       | .68                                   |       | — |   |
| British pounds (sell for euros)          |       | 2,400                    |       | GBP                                   |       | 1.48                                  |       | — |   |
| Put options:                             |       |                     |       |                                  |       |                                  |       |   |   |
| Euros (sell for U.S. dollars)            |       | 3,719                    |       | EURO                                  |       | 1.35                                  |       | 37 |   |
|                                     |       |                     |       |                                  |       |                                  |       | $ | 34 |   |

 

**11.****                               Commitmentsand contingencies**

The Company is involvedin lawsuits, claims, investigations and proceedings, including those describedbelow, consisting of commercial, employment, employee benefits, environmentaland other matters which arise in the ordinary course of business. In accordancewith SFAS No. 5, *Accounting forContingencies*, the Company records a liability when managementbelieves it is both probable that a liability has been incurred and the amountof loss can be reasonably estimated. Management believes it has adequateprovisions for any such matters. The Company reviews these provisions at leastquarterly and adjusts these provisions to reflect the impact of negotiations,settlement, rulings, advice of legal counsel and other information and eventspertaining to a particular matter. Litigation is inherently unpredictable.However, management believes it has valid defenses with respect to all legalmatters against the Company and its subsidiaries and does not believe any suchmatters, either individually or in the aggregate, will have a material adverseeffect on its business, financial condition, liquidity or results ofoperations.

In 2003, Superior TeleComand Essex Electric Inc. (“Essex Electric”) each filed lawsuits under Section 1of the Sherman Act against certain defendants based on an alleged conspiracy toelevate the prices of certain copper products during certain periods from 1993to 1996. The lawsuits were consolidated with several other lawsuits involvingother plaintiffs later in 2003 (collectively, the “2003 Copper Action”). In2003, Essex Electric was a subsidiary of The Alpine Group, Inc. (“Alpine”).Alpine was the controlling shareholder of Superior TeleCom. On November 10,2003, Superior Essex acquired the business formerly conducted by SuperiorTeleCom and its subsidiaries. On June 4, 2007, the parties to the 2003 CopperAction (including all plaintiffs and defendants) entered into a settlementpursuant to which the 2003 Copper Action was dismissed with prejudice. Theterms of the settlement are confidential. A portion of the settlement proceeds(approximately $27,000,000) are being held in escrow by plaintiffs’ counsel(the “Escrowed Settlement Proceeds”). The Company and Essex Electric, now knownas Exeon Inc. (“Exeon”), each claim to be entitled to the Escrowed SettlementProceeds. On June 18, 2007, Exeon filed an action for declaratory judgment andrelated relief against the Company and certain of its subsidiaries in theSupreme Court of the State of New York, New York County (the “2007 Exeon Action”).In the 2007 Exeon Action, Exeon seeks a declaration that the claims giving riseto the Escrowed Settlement Proceeds were transferred to Exeon in connectionwith the sale of a portion of the electrical wire business of the Company’ssubsidiary, Essex Group, to Exeon in 2002 and that Exeon is entitled to all ofthe Escrowed Settlement Proceeds. The 2007 Exeon Action also alleges that theCompany, by claiming the Escrowed Settlement Proceeds attributable to theelectrical wire business, is in breach of the Purchase and Sale Agreementrelated to the sale of a portion of the Essex Group electrical wire business toExeon and seeks damages in excess of $40 million resulting from the allegedbreach.

On June 20, 2007, theCompany and Essex Group filed suit in the Superior Court of Cobb County,Georgia against Essex Electric and the other defendants named therein (the “2007Superior Action”). The 2007 Superior Action seeks a declaratory judgment thatthe Company is entitled to all of the Escrowed Settlement Proceeds. Inaddition, the 2007 Superior

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Action seeks damages as aresult of a breach of fiduciary duty to the extent it is determined that anyportion of the Escrowed Settlement Proceeds or the claims giving rise theretowere transferred to Exeon and seeks damages in excess of $40 million resultingfrom the alleged breach.

Since approximately 1990,Essex International and certain subsidiaries have been named as defendants in anumber of product liability lawsuits brought by electricians, other skilledtradesmen and others claiming injury, in a substantial majority of cases, fromexposure to asbestos found in electrical wire products produced many years ago.Litigation against various past insurers of Essex International who hadpreviously refused to defend and indemnify Essex International against these lawsuitswas settled during 1999. Under the settlement, Essex International wasreimbursed for substantially all of its costs and expenses incurred in thedefense of these lawsuits, and the insurers have undertaken to defend, arecurrently directly defending and, if it should become necessary, will indemnifyEssex International against those asbestos lawsuits, subject to the terms andlimits of the respective policies. Under the plan of reorganization, certain ofthe claimants in these actions will be able to assert claims under applicableinsurance coverage and other similar arrangements. Management believes thatEssex International’s liability, if any, in these matters will not have amaterial adverse effect either individually, or in the aggregate, upon theCompany’s business, financial condition, liquidity or results of operations.There can be no assurance, however, that future developments will not alterthis conclusion.

The Company is subject tofederal, foreign, state and local environmental laws and regulations in each ofthe jurisdictions in which it owns or operates facilities governing, amongother things, emissions into the air, discharges to water, the use, handlingand disposal of hazardous substances and the investigation and remediation ofsoil and groundwater contamination both on-site at past and current facilitiesand at off-site disposal locations. The Company does not believe thatcompliance with environmental laws and regulations will have a material effecton its capital expenditures, net income or competitive position.

A liability forenvironmental remediation and other environmental costs is accrued when it isconsidered probable and the costs can be reasonably estimated. The Company hasaccrued amounts with respect to environmental matters that it believes wereadequate at June 30, 2007. These accruals are not material to the Company’soperations or financial position.

The Company acceptscertain customer orders for future delivery at fixed prices. As copper is themost significant raw material used in the manufacturing process, the Companyenters into forward fixed-price purchase commitments for copper to properlymatch its cost to the value of the copper expected to be billed to customers.At June 30, 2007, the Company had forward fixed-price copper purchasecommitments for delivery of 19.7 million pounds through January 2008 for$66.1 million. Additionally, at June 30, 2007, the Company had forwardpurchase fixed-price commitments for 0.8 million pounds of aluminum through August 2008,187,000 megawatts of electricity through December 2009 and 520,000 MMBTUs ofnatural gas through December 2007 amounting to $1.2 million, $13.3 millionand $4.0 million, respectively.

**12.****                               Relatedparty transactions**

Essex Europe has entered into agreements to purchase asignificant portion of its copper rod and pre-drawn copper wire requirementsfrom Nexans. The purchase agreements expire on December 31, 2008 withautomatic one year renewals unless cancelled by either party upon six monthsprior notice in the case of copper rod and twelve months prior notice in thecase of pre-drawn copper wire. Total purchases pursuant to these agreementsamounted to $96.2 million and $88.4 million for the three months ended June 30,2007 and 2006, respectively, and $171.1 million and $152.6 million for the sixmonths ended June 30, 2007 and 2006, respectively.

The Company sells magnet wire to and provides certaintolling services for its 50% owned joint venture, Femco Magnet Wire Corporation(“Femco”). Net sales to Femco were $5.4 million and $5.9 million for the threemonths ended June 30, 2007 and 2006, respectively, and $11.7 million and $10.3million for the six months ended June 30, 2007 and 2006, respectively. TheCompany’s equity in the loss of Femco was $0.3 million for the six months endedJune 30, 2007 and the equity in Femco’s earnings for the six months ended June30, 2006 was not significant.

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**13.****                               Businesssegments**

Reportable segments are strategic businesses thatoffer different products and services to different customers. These segmentsare communications cable, North American magnet wire and distribution, Europeanmagnet wire and distribution and copper rod. The communications cable segmentincludes copper and fiber optic outside plant wire and cable for voice and datatransmission in telecommunications networks and copper and fiber optic datacomor premises wire and cable for use within homes and offices for local areanetworks, Internet connectivity and other applications. The North Americanmagnet wire and distribution segment, which includes our operations in China,manufactures and markets magnet wire and related products to major OEMs for usein motors, transformers and electrical coils and controls primarily in NorthAmerica. The North American magnet wire and distribution segment alsodistributes magnet wire and fabricated insulation products manufactured by theCompany and related accessory products purchased from third parties to smallOEMs and motor repair facilities. The European magnet wire and distributionsegment consists of Essex Europe and manufactures and markets magnet wire usedin motors, transformers and electrical coils and controls primarily in Europe.The European magnet wire and distribution segment also produces enamels thatare used both for internal consumption in the production of magnet wire and forsale to third parties. The copper rod segment includes sales of copper rodproduced by the Company’s North American continuous casting units to externalcustomers. The copper rod segment also produces copper rod for internalprocessing which is recorded by the consuming segment at cost as a component ofcost of goods sold. Corporate and other charges consist primarily of parentcompany and corporate payroll costs, including stock-based compensationcharges, corporate headquarters costs and corporate legal, audit and accountingfees and compliance costs. The components of restructuring and other chargesare discussed in note 4.

The Company’s chief operating decision maker evaluatessegment performance based on a number of factors with operating income,excluding corporate and other costs and restructuring and other charges, beingthe most critical. Accordingly, corporate and other costs and restructuring andother charges are not allocated to the Company’s reportable segments.

Financialinformation with respect to reportable segments is presented below. Corporateand other items shown below are provided to reconcile to the accompanyingconsolidated statements of operations.
| ** **                                   | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                   | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                   | ** ** | **(in thousands)**                         | ** ** |
| Net sales:                                   |       |                                            |       |                                          |       |   |   |   |   |
| Communications  cable                        |       | $                                               | 235,738    |                                          | $          | 237,135 |   | $ | 451,736 |   | $ | 423,708 |   |
| North American  magnet wire and distribution |       | 296,326                                         |       | 274,340                                       |       | 543,166 |   | 507,877 |   |
| European magnet  wire and distribution       |       | 175,541                                         |       | 174,270                                       |       | 335,934 |   | 312,879 |   |
| Copper rod                                   |       | 64,835                                          |       | 132,448                                       |       | 137,232 |   | 225,423 |   |
|                                         |       | $                                               | 772,440    |                                          | $          | 818,193 |   | $ | 1,468,068 |   | $ | 1,469,887 |   |
| Operating income  (loss):                    |       |                                            |       |                                          |       |   |   |   |   |
| Communications  cable                        |       | $                                               | 25,911     |                                          | $          | 32,454 |   | $ | 43,912 |   | $ | 50,807 |   |
| North American  magnet wire and distribution |       | 11,661                                          |       | 13,446                                        |       | 20,207 |   | 22,712 |   |
| European magnet  wire and distribution       |       | 5,801                                           |       | 9,096                                         |       | 11,856 |   | 10,880 |   |
| Copper rod                                   |       | (136                                            | )          | 256                                           |       | (182 | ) | 117 |   |
| Corporate and  other                         |       | (6,773                                          | )          | (6,791                                        | )          | (13,683 | ) | (13,218 | ) |
| Restructuring  and other charges             |       | (413                                            | )          | (197                                          | )          | (1,287 | ) | (978 | ) |
|                                         |       | $                                               | 36,051     |                                          | $          | 48,264 |   | $ | 60,823 |   | $ | 70,320 |   |

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|                                              | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **(in thousands)** | ** ** |
| Total assets:                                |       |                    |       |                        |       |
| Communications  cable                        |       | $                       | 392,787    |                        | $          | 388,892 |   |
| North American  magnet wire and distribution |       | 409,376                 |       | 339,045                     |       |
| European magnet  wire and distribution       |       | 243,777                 |       | 247,337                     |       |
| Copper rod                                   |       | 21,020                  |       | 41,323                      |       |
| Corporate and  other                         |       | 5,410                   |       | 10,222                      |       |
|                                         |       | $                       | 1,072,370  |                        | $          | 1,026,819 |   |

 

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**14.****                               Supplementalguarantor information**

The 9%senior unsecured notes were issued by Superior Essex Communications and EssexGroup, as joint and several obligors. The notes are jointly and severallyguaranteed by the Company and each of its existing and future domesticrestricted subsidiaries (as defined in the indenture governing the notes). Allof the Company’s current domestic subsidiaries, other than IP Licensing LLP,are restricted subsidiaries. The following consolidating information presentsinformation about the Company (the “Parent”), the issuers, guarantorsubsidiaries and non-guarantor subsidiaries. Investments in subsidiaries arepresented on the equity method. Intercompany transactions are eliminated inconsolidation.
| ** **                                     | ** ** | **Balance Sheet Information** | ** ** |
|------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                     | ** ** | **June 30, 2007**             | ** ** |
| ** **                                     | ** ** | **Parent**                              | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                     | ** ** | **(in thousands)**                 | ** ** |
| **ASSETS**                                     |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                     |       | $                                       | 73         |   | $ | 50,335 |   | $ | 49 |   | $ | 8,286 |   | $ | — |   | $ | 58,743 |   |
| Accounts  receivable, net                      |       | —                                  |       | 235,269 |   | 3,943 |   | 158,809 |   | — |   | 398,021 |   |
| Inventories, net                               |       | —                                  |       | 175,248 |   | 13,192 |   | 97,208 |   | — |   | 285,648 |   |
| Other current  assets                          |       | 5,433                                   |       | 11,035 |   | 631 |   | 10,775 |   | — |   | 27,874 |   |
| Total current  assets                          |       | 5,506                                   |       | 471,887 |   | 17,815 |   | 275,078 |   | — |   | 770,286 |   |
| Property, plant and  equipment, net            |       | 602                                     |       | 188,616 |   | 14,413 |   | 51,382 |   | — |   | 255,013 |   |
| Intangible and other  long-term assets         |       | 3,584                                   |       | 32,676 |   | 10 |   | 15,085 |   | (4,284 | ) | 47,071 |   |
| Investment in  subsidiaries                    |       | 296,717                                 |       | 122,334 |   | 247,293 |   | — |   | (666,344 | ) | — |   |
| Intercompany accounts                          |       | 108,522                                 |       | — |   | 29,258 |   | — |   | (137,780 | ) | — |   |
| Total assets                                   |       | $                                       | 414,931    |   | $ | 815,513 |   | $ | 308,789 |   | $ | 341,545 |   | $ | (808,408 | ) | $ | 1,072,370 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY** |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                           |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings                          |       | $                                       | —     |   | $ | — |   | $ | — |   | $ | 37,559 |   | — |   | $ | 37,559 |   |
| Current portion  of long-term debt             |       | —                                  |       | — |   | — |   | 1,234 |   | — |   | 1,234 |   |
| Accounts payable                               |       | 248                                     |       | 125,441 |   | 3,396 |   | 70,057 |   | — |   | 199,142 |   |
| Accrued expenses                               |       | 5,290                                   |       | 29,833 |   | 226 |   | 56,449 |   |   |   | 91,798 |   |
| Total current  liabilities                     |       | 5,538                                   |       | 155,274 |   | 3,622 |   | 165,299 |   | — |   | 329,733 |   |
| Long term-debt, less  current portion          |       | —                                  |       | 259,241 |   | 5,000 |   | 14,344 |   | — |   | 278,585 |   |
| Other long-term  liabilities                   |       | 17,926                                  |       | 42,005 |   | 3,450 |   | 13,488 |   | (4,284 | ) | 72,585 |   |
| Intercompany accounts                          |       | —                                  |       | 57,784 |   | — |   | 79,996 |   | (137,780 | ) | — |   |
| Total  liabilities                             |       | 23,464                                  |       | 514,304 |   | 12,072 |   | 273,127 |   | (142,064 | ) | 680,903 |   |
| Stockholders’ equity                      |       | 391,467                                 |       | 301,209 |   | 296,717 |   | 68,418 |   | (666,344 | ) | 391,467 |   |
|                                           |       | $                                       | 414,931    |   | $ | 815,513 |   | $ | 308,789 |   | $ | 341,545 |   | $ | (808,408 | ) | $ | 1,072,370 |   |

 

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| ** **                                      | ** ** | **Balance Sheet Information** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                      | ** ** | **December 31, 2006**         | ** ** |
| ** **                                      | ** ** | **Parent**                              | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                      | ** ** | **(in thousands)**                 | ** ** |
| **ASSETS**                                      |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                 |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                       |       | $                                       | 94         |   | $ | 44,071 |   | $ | 2 |   | $ | 9,326 |   | $ | — |   | $ | 53,493 |   |
| Accounts receivable, net                        |       | —                                  |       | 192,648 |   | 3,979 |   | 138,993 |   | — |   | 335,620 |   |
| Inventories, net                                |       | —                                  |       | 203,041 |   | 13,344 |   | 72,949 |   | — |   | 289,334 |   |
| Other current assets                            |       | 9,288                                   |       | 22,398 |   | 623 |   | 14,569 |   | — |   | 46,878 |   |
| Total current assets                            |       | 9,382                                   |       | 462,158 |   | 17,948 |   | 235,837 |   | — |   | 725,325 |   |
| Property, plant  and equipment, net             |       | 497                                     |       | 193,398 |   | 15,227 |   | 49,358 |   | — |   | 258,480 |   |
| Intangible and  other long-term assets          |       | 4,014                                   |       | 34,275 |   | — |   | 8,780 |   | (4,055 | ) | 43,014 |   |
| Investment in  subsidiaries                     |       | 266,174                                 |       | 102,222 |   | 223,683 |   | — |   | (592,079 | ) | — |   |
| Intercompany  accounts                          |       | 95,378                                  |       | — |   | 21,378 |   | — |   | (116,756 | ) | — |   |
| Total assets                                    |       | $                                       | 375,445    |   | $ | 792,053 |   | $ | 278,236 |   | $ | 293,975 |   | $ | (712,890 | ) | $ | 1,026,819 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**  |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Current  liabilities:                           |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings                           |       | $                                       | —     |   | $ | — |   | $ | — |   | $ | 30,176 |   | $ | — |   | 30,176 |   |
| Current portion of long-term debt               |       | —                                  |       | — |   | — |   | 1,192 |   | — |   | 1,192 |   |
| Accounts payable                                |       | 4,537                                   |       | 82,611 |   | 3,392 |   | 70,566 |   | — |   | 161,106 |   |
| Accrued expenses                                |       | 6,862                                   |       | 32,127 |   | 220 |   | 55,411 |   | — |   | 94,620 |   |
| Total current liabilities                       |       | 11,399                                  |       | 114,738 |   | 3,612 |   | 157,345 |   | — |   | 287,094 |   |
| Long term-debt,  less current portion           |       | —                                  |       | 258,848 |   | 5,000 |   | 28,827 |   | — |   | 292,675 |   |
| Other long-term  liabilities                    |       | 5,058                                   |       | 45,760 |   | 3,450 |   | 9,183 |   | (4,055 | ) | 59,396 |   |
| Intercompany  accounts                          |       | —                                  |       | 101,946 |   | — |   | 14,810 |   | (116,756 | ) | — |   |
| Total liabilities                               |       | 16,457                                  |       | 521,292 |   | 12,062 |   | 210,165 |   | (120,811 | ) | 639,165 |   |
| Minority  interest in consolidated subsidiaries |       | —                                  |       | — |   | — |   | 28,666 |   | — |   | 28,666 |   |
| Stockholders’  equity                      |       | 358,988                                 |       | 270,761 |   | 266,174 |   | 55,144 |   | (592,079 | ) | 358,988 |   |
|                                            |       | $                                       | 375,445    |   | $ | 792,053 |   | $ | 278,236 |   | $ | 293,975 |   | $ | (712,890 | ) | $ | 1,026,819 |   |

 

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| ** **                                                                                                | ** ** | **Statement of Operations Information**        | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                                | ** ** | **Three Months Ended June 30, 2007** | ** ** |
| ** **                                                                                                | ** ** | **Parent**                                                    | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                                                | ** ** | **(in thousands)**                                       | ** ** |
| Net sales                                                                                                 |       | $                                                             | 6,922      |   | $ | 569,055 |   | $ | 70,727 |   | $ | 205,396 |   | $ | (79,660 | ) | $ | 772,440 |   |
| Cost of goods  sold                                                                                       |       | —                                                        |       | 515,512 |   | 64,355 |   | 190,860 |   | (72,738 | ) | 697,989 |   |
| Gross profit                                                                                              |       | 6,922                                                         |       | 53,543 |   | 6,372 |   | 14,536 |   | (6,922 | ) | 74,451 |   |
| Selling, general  and administrative expenses                                                             |       | (6,766                                                        | )          | (29,765 | ) | (185 | ) | (8,193 | ) | 6,922 |   | (37,987 | ) |
| Restructuring  and other charges                                                                          |       | (121                                                          | )          | (248 | ) | — |   | (44 | ) | — |   | (413 | ) |
| Operating income                                                                                          |       | 35                                                            |       | 23,530 |   | 6,187 |   | 6,299 |   | — |   | 36,051 |   |
| Interest expense                                                                                          |       | (1                                                            | )          | (8,222 | ) | (119 | ) | (1,591 | ) | 2,461 |   | (7,472 | ) |
| Interest income                                                                                           |       | 1,919                                                         |       | 893 |   | 518 |   | — |   | (2,461 | ) | 869 |   |
| Other income,  net                                                                                        |       | (35                                                           | )          | 295 |   | (4 | ) | (153 | ) | — |   | 103 |   |
| Income before income taxes, equity in earnings of  subsidiaries, minority interest and extraordinary gain |       | 1,918                                                         |       | 16,496 |   | 6,582 |   | 4,555 |   | — |   | 29,551 |   |
| Income tax  expense                                                                                       |       | (859                                                          | )          | (6,377 | ) | (2,335 | ) | (2,314 | ) | — |   | (11,885 | ) |
| Equity in  earnings of subsidiaries                                                                       |       | 18,839                                                        |       | 8,447 |   | 14,592 |   | — |   | (41,878 | ) | — |   |
| Minority  interest in income of subsidiaries                                                              |       | —                                                        |       | — |   | — |   | (1,307 | ) | — |   | (1,307 | ) |
| Extraordinary  gain                                                                                       |       | —                                                        |       | 350 |   | — |   | 3,189 |   | — |   | 3,539 |   |
| Net income                                                                                                |       | $                                                             | 19,898     |   | $ | 18,916 |   | $ | 18,839 |   | $ | 4,123 |   | $ | (41,878 | ) | $ | 19,898 |   |

 
| ** **                                                                            | ** ** | **Statement of Operations Information**        | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **Three Months Ended June 30, 2006** | ** ** |
| ** **                                                                            | ** ** | **Parent**                                                    | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                            | ** ** | **(in thousands)**                                       | ** ** |
| Net sales                                                                             |       | $                                                             | 6,868      |   | $ | 638,953 |   | $ | 66,917 |   | $ | 180,567 |   | $ | (75,112 | ) | $ | 818,193 |   |
| Cost of goods  sold                                                                   |       | —                                                        |       | 575,242 |   | 60,748 |   | 163,748 |   | (68,244 | ) | 731,494 |   |
| Gross profit                                                                          |       | 6,868                                                         |       | 63,711 |   | 6,169 |   | 16,819 |   | (6,868 | ) | 86,699 |   |
| Selling, general  and administrative expenses                                         |       | (6,773                                                        | )          | (30,645 | ) | (258 | ) | (7,430 | ) | 6,868 |   | (38,238 | ) |
| Restructuring  and other charges                                                      |       | (111                                                          | )          | (291 | ) | — |   | 205 |   | — |   | (197 | ) |
| Operating income (loss)                                                               |       | (16                                                           | )          | 32,775 |   | 5,911 |   | 9,594 |   | — |   | 48,264 |   |
| Interest expense                                                                      |       | 16                                                            |       | (7,386 | ) | (118 | ) | (523 | ) | — |   | (8,011 | ) |
| Interest income                                                                       |       | —                                                        |       | 20 |   | — |   | 41 |   | — |   | 61 |   |
| Other income  (expense), net                                                          |       | —                                                        |       | 199 |   | 29 |   | (350 | ) | — |   | (122 | ) |
| Income before income taxes, equity in earnings of  subsidiaries and minority interest |       | —                                                        |       | 25,608 |   | 5,822 |   | 8,762 |   | — |   | 40,192 |   |
| Income tax  expense                                                                   |       | —                                                        |       | (9,470 | ) | (2,242 | ) | (3,513 | ) | — |   | (15,225 | ) |
| Equity in  earnings of subsidiaries                                                   |       | 22,819                                                        |       | 6,760 |   | 19,239 |   | — |   | (48,818 | ) | — |   |
| Minority  interest in income of subsidiaries                                          |       | —                                                        |       | — |   | — |   | (2,148 | ) | — |   | (2,148 | ) |
| Net income                                                                            |       | $                                                             | 22,819     |   | $ | 22,898 |   | $ | 22,819 |   | $ | 3,101 |   | $ | (48,818 | ) | $ | 22,819 |   |

 

24

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| ** **                                                                                                 | ** ** | **Statement of Operations Information**      | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                                 | ** ** | **Six Months Ended June 30, 2007** | ** ** |
| ** **                                                                                                 | ** ** | **Parent**                                                  | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                                                 | ** ** | **(in thousands)**                                     | ** ** |
| Net sales                                                                                                  |       | $                                                           | 13,859     |   | $ | 1,098,222 |   | $ | 122,989 |   | $ | 374,208 |   | $ | (141,210 | ) | $ | 1,468,068 |   |
| Cost of goods sold                                                                                         |       | —                                                      |       | 999,288 |   | 113,148 |   | 347,287 |   | (127,351 | ) | 1,332,372 |   |
| Gross profit                                                                                               |       | 13,859                                                      |       | 98,934 |   | 9,841 |   | 26,921 |   | (13,859 | ) | 135,696 |   |
| Selling, general and  administrative expenses                                                              |       | (13,669                                                     | )          | (58,324 | ) | (367 | ) | (15,085 | ) | 13,859 |   | (73,586 | ) |
| Restructuring and other  charges                                                                           |       | (201                                                        | )          | (287 | ) | — |   | (799 | ) | — |   | (1,287 | ) |
| Operating income  (loss)                                                                                   |       | (11                                                         | )          | 40,323 |   | 9,474 |   | 11,037 |   | — |   | 60,823 |   |
| Interest expense                                                                                           |       | (3                                                          | )          | (16,604 | ) | (238 | ) | (2,480 | ) | 4,203 |   | (15,122 | ) |
| Interest income                                                                                            |       | 3,677                                                       |       | 1,623 |   | 518 |   | — |   | (4,203 | ) | 1,615 |   |
| Other income (expense),  net                                                                               |       | 11                                                          |       | (235 | ) | (15 | ) | (409 | ) | — |   | (648 | ) |
| Income before  income taxes, equity in earnings of subsidiaries, minority interest and  extraordinary gain |       | 3,674                                                       |       | 25,107 |   | 9,739 |   | 8,148 |   | — |   | 46,668 |   |
| Income tax expense                                                                                         |       | (1,509                                                      | )          | (9,336 | ) | (3,550 | ) | (4,399 | ) | — |   | (18,794 | ) |
| Equity in earnings of  subsidiaries                                                                        |       | 26,891                                                      |       | 10,925 |   | 20,702 |   | — |   | (58,518 | ) | — |   |
| Minority interest in  income of subsidiaries                                                               |       | —                                                      |       | — |   | — |   | (2,357 | ) | — |   | (2,357 | ) |
| Extraordinary gain                                                                                         |       | —                                                      |       | 350 |   | — |   | 3,189 |   | — |   | 3,539 |   |
| Net income                                                                                                 |       | $                                                           | 29,056     |   | $ | 27,046 |   | $ | 26,891 |   | $ | 4,581 |   | $ | (58,518 | ) | $ | 29,056 |   |

 
| ** **                                                                                                      | ** ** | **Statement of Operations Information**      | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                                      | ** ** | **Six Months Ended June 30, 2006** | ** ** |
| ** **                                                                                                      | ** ** | **Parent**                                                  | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                                                      | ** ** | **(in thousands)**                                     | ** ** |
| Net sales                                                                                                       |       | $                                                           | 13,363     |   | $ | 1,148,511 |   | $ | 113,174 |   | $ | 323,657 |   | $ | (128,818 | ) | $ | 1,469,887 |   |
| Cost of goods sold                                                                                              |       | —                                                      |       | 1,039,602 |   | 103,266 |   | 297,326 |   | (115,455 | ) | 1,324,739 |   |
| Gross profit                                                                                                    |       | 13,363                                                      |       | 108,909 |   | 9,908 |   | 26,331 |   | (13,363 | ) | 145,148 |   |
| Selling, general and  administrative expenses                                                                   |       | (13,195                                                     | )          | (58,520 | ) | (501 | ) | (14,997 | ) | 13,363 |   | (73,850 | ) |
| Restructuring and other  charges                                                                                |       | (195                                                        | )          | (330 | ) | — |   | (453 | ) | — |   | (978 | ) |
| Operating income  (loss)                                                                                        |       | (27                                                         | )          | 50,059 |   | 9,407 |   | 10,881 |   | — |   | 70,320 |   |
| Interest expense                                                                                                |       | 25                                                          |       | (14,829 | ) | (237 | ) | (1,048 | ) | — |   | (16,089 | ) |
| Interest income                                                                                                 |       | —                                                      |       | 20 |   | — |   | 83 |   | — |   | 103 |   |
| Gain on sale of  investment                                                                                     |       | 5,788                                                       |       | — |   | — |   | — |   |   |   | 5,788 |   |
| Other income (expense),  net                                                                                    |       | 2                                                           |       | 232 |   | 29 |   | (229 | ) | — |   | 34 |   |
| Income before  income taxes, equity in earnings of subsidiaries, minority interest and  extraordinary gain |       | 5,788                                                       |       | 35,482 |   | 9,199 |   | 9,687 |   | — |   | 60,156 |   |
| Income tax expense                                                                                              |       | (2,257                                                      | )          | (12,774 | ) | (3,542 | ) | (4,355 | ) | — |   | (22,928 | ) |
| Equity in earnings of  subsidiaries                                                                             |       | 32,387                                                      |       | 9,839 |   | 26,730 |   | — |   | (68,956 | ) | — |   |
| Minority interest in  income of subsidiaries                                                                    |       | —                                                      |       | — |   | — |   | (2,181 | ) | — |   | (2,181 | ) |
| Extraordinary gain                                                                                              |       | —                                                      |       | — |   | — |   | 871 |   | — |   | 871 |   |
| Net income                                                                                                      |       | $                                                           | 35,918     |   | $ | 32,547 |   | $ | 32,387 |   | $ | 4,022 |   | $ | (68,956 | ) | $ | 35,918 |   |

25

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| ** **                                                            | ** ** | **Statement of Cash Flows Information** | ** ** |
|-----------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **Six Months Ended June 30, 2007** | ** ** |
| ** **                                                            | ** ** | **Parent**                                                  | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                            | ** ** | **(in thousands)**                                     | ** ** |
| Cash flows  provided by operating (used for) activities               |       | $                                                           | 10,242     |   | $ | 65,258 |   | $ | 7,273 |   | $ | (5,933 | ) | $ | — |   | $ | 76,840 |   |
| Cash flows from  investing activities:                                |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                                  |       | (210                                                        | )          | (6,818 | ) | (88 | ) | (11,235 | ) | — |   | (18,351 | ) |
| Acquisitions                                                          |       | (1,059                                                      | )          | — |   | — |   | (47,275 | ) | — |   | (48,334 | ) |
| Investment in subsidiaries                                            |       | —                                                      |       | (9,000 | ) | — |   | — |   | 9,000 |   | — |   |
| Dividends received                                                    |       | —                                                      |       | 1,295 |   | 237 |   | — |   | (1,532 | ) | — |   |
| Other                                                                 |       | —                                                      |       | 26 |   | — |   | — |   | — |   | 26 |   |
| Cash flows  provided by (used for) investing activities               |       | (1,269                                                      | )          | (14,497 | ) | 149 |   | (58,510 | ) | 7,468 |   | (66,659 | ) |
| Cash flows from  financing activities:                                |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings, net                                            |       | —                                                      |       | — |   | — |   | 6,551 |   | — |   | 6,551 |   |
| Repayments of long-term debt                                          |       | —                                                      |       | — |   | — |   | (15,021 | ) | — |   | (15,021 | ) |
| Proceeds from exercise of stock options and employee  stock purchases |       | 2,413                                                       |       | — |   | — |   | — |   | — |   | 2,413 |   |
| Capital contributions                                                 |       | —                                                      |       | — |   | — |   | 7,200 |   | (7,200 | ) | — |   |
| Dividends paid                                                        |       | —                                                      |       | (237 | ) | (1,295 | ) | — |   | 1,532 |   | — |   |
| Other                                                                 |       | 1,737                                                       |       | — |   | — |   | — |   | — |   | 1,737 |   |
| Intercompany accounts                                                 |       | (13,144                                                     | )          | (44,260 | ) | (6,080 | ) | 65,284 |   | (1,800 | ) | — |   |
| Cash flows  provided by (used for) financing activities               |       | (8,994                                                      | )          | (44,497 | ) | (7,375 | ) | 64,014 |   | (7,468 | ) | (4,320 | ) |
| Effect of  exchange rate changes on cash                              |       | —                                                      |       | — |   | — |   | (611 | ) | — |   | (611 | ) |
| Net increase  (decrease) in cash and cash equivalents                 |       | (21                                                         | )          | 6,264 |   | 47 |   | (1,040 | ) | — |   | 5,250 |   |
| Cash and cash  equivalents at beginning of period                     |       | 94                                                          |       | 44,071 |   | 2 |   | 9,326 |   | — |   | 53,493 |   |
| Cash and cash  equivalents at end of period                           |       | $                                                           | 73         |   | $ | 50,335 |   | $ | 49 |   | $ | 8,286 |   | $ | — |   | $ | 58,743 |   |

26

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| ** **                                                      | ** ** | **Statement of Cash Flows Information** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **Six Months Ended June 30, 2006** | ** ** |
| ** **                                                      | ** ** | **Parent**                                                  | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                      | ** ** | **(in thousands)**                                     | ** ** |
| Cash flows  provided by (used for) operating activities         |       | $                                                           | (3,008     | ) | $ | (53,830 | ) | $ | 8,350 |   | $ | (9,501 | ) | — |   | $ | (57,989 | ) |
| Cash flows from  investing activities:                          |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                            |       | (68                                                         | )          | (7,531 | ) | — |   | (10,304 | ) | — |   | (17,903 | ) |
| SDS acquisition, net of cash acquired                           |       | —                                                      |       | — |   | — |   | (947 | ) | — |   | (947 | ) |
| Proceeds from sale of investment                                |       | 8,500                                                       |       | — |   | — |   | — |   | — |   | 8,500 |   |
| Investment in subsidiaries                                      |       | —                                                      |       | (5,900 | ) | — |   | — |   | 5,900 |   | — |   |
| Dividends received                                              |       |                                                        |       |   |   | 238 |   | — |   | (238 | ) | — |   |
| Other                                                           |       |                                                        |       | 56 |   | — |   | 3 |   | — |   | 59 |   |
| Cash flows  provided by (used for) investing activities         |       | 8,432                                                       |       | (13,375 | ) | 238 |   | (11,248 | ) | 5,662 |   | (10,291 | ) |
| Cash flows from  financing activities:                          |       |                                                        |       |   |   |   |   |   |   |   |   |   |   |
| Borrowings under senior secured revolving credit  facility, net |       | —                                                      |       | (13,049 | ) | — |   | — |   | — |   | (13,049 | ) |
| Essex Europe short-term borrowings, net                         |       | —                                                      |       | — |   | — |   | 13,793 |   | — |   | 13,793 |   |
| Repayments of long-term debt                                    |       | —                                                      |       | — |   | — |   | (258 | ) | — |   | (258 | ) |
| Proceeds from common stock offering                             |       | 76,541                                                      |       | — |   | — |   | — |   | — |   | 76,541 |   |
| Proceeds from exercise of stock options                         |       | 1,880                                                       |       | — |   | — |   | — |   | — |   | 1,880 |   |
| Capital contributions                                           |       | —                                                      |       | — |   | — |   | 1,475 |   | (1,475 | ) | — |   |
| Dividends paid                                                  |       |                                                        |       | (238 | ) | — |   | — |   | 238 |   | — |   |
| Other                                                           |       | 566                                                         |       | — |   | — |   | — |   | — |   | 566 |   |
| Intercompany accounts                                           |       | (84,478                                                     | )          | 92,073 |   | (8,519 | ) | 5,349 |   | (4,425 | ) | — |   |
| Cash flows  provided by (used for) financing activities         |       | (5,491                                                      | )          | 78,786 |   | (8,519 | ) | 20,359 |   | (5,662 | ) | 79,473 |   |
| Effect of  exchange rate changes on cash                        |       | —                                                      |       | 11 |   | — |   | 181 |   | — |   | 192 |   |
| Net increase  (decrease) in cash and cash equivalents           |       | (67                                                         | )          | 11,592 |   | 69 |   | (209 | ) | — |   | 11,385 |   |
| Cash and cash  equivalents at beginning of period               |       | 69                                                          |       | 395 |   | 125 |   | 7,595 |   | — |   | 8,184 |   |
| Cash and cash  equivalents at end of period                     |       | $                                                           | 2          |   | $ | 11,987 |   | $ | 194 |   | $ | 7,386 |   | — |   | $ | 19,569 |   |

 

27

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**ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

**General**

Wecurrently manufacture a portfolio of wire and cable products grouped into thefollowing segments: (i) our communications cable segment; (ii) ourNorth American magnet wire and distribution segment; (iii) our Europeanmagnet wire and distribution segment and (iv) our copper rod segment.

Industrysegment financial data (including sales and operating income by industrysegment) for the three and six months ended June 30, 2007 and 2006 isincluded in note 13 to the accompanying condensed consolidated financialstatements.

**Overview**

Our results for the three and six months ended June30, 2007 continue to be impacted by the weakness in the U.S. residential constructionmarket and comparative declines in demand in the manufacturing sector. Thesefactors had a negative impact on product demand for our communications cable,North American magnet wire and distribution and copper rod segments. Copper isthe principal raw material we use in the manufacture of our wire and cableproducts and our results are impacted by the level and volatility of copperprices. Our operating profits for the three and six months ended June 30, 2007have declined compared to the three and six months ended June 30, 2006 dueprimarily to an estimated $13.4 million of transitional gross profit gains inthe second quarter of 2006 attributable to the significant upward volatility incopper prices experienced during the first half of 2006, as well as volumedeclines (exclusive of the impact of the Simcoe acquisition discussed below) inall of our business segments.  Inaddition, we estimate that our communications cable segment experienced a $4.0million negative impact on gross profit in the first quarter of 2007 as aresult of an unfavorable match of copper cost to sales prices. This was theresult of the combination of lower than forecasted sales in the fourth quarterof 2006 together with the decline in copper prices during the later stages of thefourth quarter of 2006 and the first half of the first quarter of 2007. Weproduced inventory early in the fourth quarter of 2006 at higher copper coststo support forecasted fourth quarter demand. Due to the significantly lowerthan forecasted fourth quarter 2006 demand this inventory was carried over to2007 and matched against lower copper price sales. The unfavorable comparativeimpact of the prior year transitional gross profit gains and current yearvolume declines on operating profits was partially offset by the incrementalcontribution of the Simcoe acquisition, improved pricing and product mix alongwith reduced production costs in our communications cable segment and improvedpricing in our European magnet wire and distribution segment.

OnApril 27, 2007, we completed the acquisition of Nexans’ magnet wire operationsin Simcoe, Ontario, Canada for a cash purchase price of $12.7 million. Weexpect the acquisition to provide us with a significant market presence in theNorth American market for rectangular wires, including continuous transposedcable, or CTC, and related products used primarily by large transformermanufacturers in high-performance power generators and transformers. The Simcoeoperation is included in our North America magnet wire and distributionsegment.

**Resultsof Operations**

***Non-GAAP Financial Measures***

Indiscussing our results of operations below, we present supplemental net salesinformation adjusted to a constant $3.00/lb COMEX cost of copper or theequivalent Euro/kilogram LME value for our European operations, which we referto as copper-adjusted net sales or sales adjusted for a constant cost ofcopper. We also present and discuss copper-adjusted gross profit margin (grossprofit divided by copper-adjusted net sales). Copper-adjusted net sales andcopper-adjusted gross profit margin are financial measures that are notcalculated in accordance with accounting principles generally accepted in theUnited States of America, or non-GAAP financial measures. A non-GAAP financialmeasure is defined as a numerical measure of a company’s financial performance,financial position or cash flows that (i) excludes amounts, or is subjectto adjustments that have the effect of excluding amounts, that are included inthe most directly comparable measure calculated and presented in accordancewith GAAP in the statement of operations, balance sheet or statement of cashflows; or (ii) includes amounts, or is subject to adjustments that havethe effect of including amounts, that are excluded from the comparable measureso calculated and presented. We believe sales adjusted for a constant cost ofcopper and copper-adjusted gross profit margin are useful measures to aid inanalyzing period-to-period net sales and gross profit margins, particularly in periodsof changing copper prices. We also use copper-adjusted sales to evaluateperformance for certain executive compensation items. Copper-adjusted net saleshas distinct limitations as compared to GAAP net sales. By copper-adjusting

28

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net sales, in a decliningcopper cost environment, it may not be apparent that net sales are declining onan actual basis. Furthermore, by copper-adjusting gross profit margins in arising copper cost environment, it may not be apparent the gross profit marginsare declining on an actual basis. Management compensates for these limitationsby using the GAAP results in conjunction with copper-adjusted net sales andgross profit margins. Net sales adjusted for a constant cost of copper andcopper-adjusted gross profit margin as used by us may not be comparable tosimilarly titled measures of other companies.

Inperiods prior to 2007 we presented supplemental copper-adjusted net sales andcopper-adjusted gross profit margin information using a constant $2.00/lb COMEXcost of copper. The 2007 presentation utilizes a constant $3.00/lb COMEX costof copper as management believes this more closely approximates the currentlevel of copper prices. All prior period amounts presented have been restatedto reflect a constant $3.00/lb COMEX cost of copper for our U.S. operations orthe equivalent Euro/kilogram LME cost of copper for our European operations.

***Three Months Ended June 30, 2007 Compared to the ThreeMonths Ended June 30, 2006***

*Net sales*

Thefollowing table provides net sales and supplemental copper-adjusted salesinformation for the three months ended June 30, 2007 and 2006:
| ** **                                     | ** ** | **Actual**                                      | ** ** | **Copper-adjusted** | ** ** |
|------------------------------------------------|------------|-------------------------------------------------|------------|---------------------|------------|
| ** **                                     | ** ** | **Three Months Ended  June 30,** | ** ** | **%**               | ** ** | **Three Months Ended  June 30,** | ** ** | **%** | ** ** |
| ** **                                     | ** ** | **2007**                                        | ** ** | **2006**            | ** ** | **Change** | ** ** | **2007** | ** ** | **2006** | ** ** | **Change** | ** ** |
| Net sales:                                     |       |                                            |       |                |       |   |   |   |   |   |   |   |   |
| Communications cable                           |       | $                                               | 235,738    |                | $          | 237,135 |   | (1 | )% | $ | 237,028 |   | $ | 262,146 |   | (10 | )% |
| North American magnet wire and distribution    |       | 296,326                                         |       | 274,340             |       | 8 | % | 279,447 |   | 275,854 |   | 1 | % |
| European magnet wire and distribution          |       | 175,541                                         |       | 174,270             |       | 1 | % | 168,970 |   | 171,558 |   | (2 | )% |
| Copper rod                                     |       | 64,835                                          |       | 132,448             |       | (51 | )% | 56,461 |   | 117,817 |   | (52 | )% |
|                                           |       | 772,440                                         |       | 818,193             |       | (6 | )% | 741,906 |   | 827,375 |   | (10 | )% |
| Constant cost of copper adjustment             |       | —                                          |       | —              |       |   |   | 30,534 |   | (9,182 | ) |   |   |
| Total                                          |       | $                                               | 772,440    |                | $          | 818,193 |   | (6 | )% | $ | 772,440 |   | $ | 818,193 |   | (6 | )% |
| Average daily  COMEX price per pound of copper |       | $                                               | 3.46       |                | $          | 3.39 |   | 2 | % |   |   |   |   |   |   |

 

Consolidatedsales for the three months ended June 30, 2007 were $772.4 million, adecrease of 6% as compared to consolidated sales of $818.2 million for thequarter ended June 30, 2006. Sales adjusted for a constant cost of copperdecreased 10% for the quarter ended June 30, 2007. The decline in actualand copper-adjusted sales for the 2007 quarter as compared to the 2006 quarterwas attributable to volume declines in all of our business segments,particularly our communications cable and copper rod segments. These declineswere partially offset by the impact of the Simcoe acquisition (actual sales of$21.3 million and copper-adjusted sales of $19.7 million) and the effects onour European magnet wire and distribution segment’s sales of the strengtheningEuro against the U.S. dollar.

Salesfor our communications cable segment for the June 30, 2007 quarter were$235.7 million, a decrease of 1%, as compared to sales of$237.1 million for the quarter ended June 30, 2006. Sales adjustedfor a constant cost of copper decreased 10%. The copper-adjusted decreaseprimarily reflects declines in copper outside plant, or OSP, unit volumeattributable to overall decreases in market-related demand due to the slowdownin new home construction, continued loss of access lines by major telephonecompanies and the continued use of fiber optic cable in telephone networks. Thedecline in copper-adjusted OSP sales was partially offset by an 11% increase inpremise wire product sales. We believe the 2007 increase in our premise productsales reflects an increase in our market share as well as improved pricing andproduct mix as compared to the quarter ended June 30, 2006.

Salesfor our North American magnet wire and distribution segment were$296.3 million for the quarter ended June 30, 2007, an increase of 8%as compared to the prior year. On a copper-adjusted basis, sales for thequarter ended June 30, 2007 increased 1% from the same quarter in the prior year.Sales for the three months ended June 30, 2007 include $21.3 million ($19.7million on a copper-adjusted basis) attributable to the Simcoe acquisition. Theoffsetting decrease in copper-adjusted sales was principally attributable toweakness in the heating, ventilation and air conditioning, heavy appliance andother end markets tied to residential construction activity.

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Salesfor the European magnet wire and distribution segment were $175.5 million forthe three months ended June 30, 2007 compared to $174.3 million for the threemonths ended June 30, 2006, an increase of 1%. On a copper-adjusted basis,sales decreased 2% for the three months ended June 30, 2007 compared to theprior year quarter. Excluding the effects of the strengthening Euro against theU.S. dollar, copper-adjusted sales decreased 8% for the three months ended June30, 2007 compared to the three months ended June 30, 2006. This decrease wasprimarily the result of reductions in unit volumes due to a plannedrationalization of low margin customers implemented in the first quarter of2007.

Copperrod sales for the three months ended June 30, 2007 were $64.8 millioncompared to $132.4 million for the comparable 2006 period. On acopper-adjusted basis, sales for our copper rod segment decreased by 52% forthe three months ended June 30, 2007 compared to the prior year period.The copper-adjusted decrease in the 2007 quarter reflects a planned reductionin total copper rod production including a rationalization of third-partycopper rod sales as well as reduced demand. Copper rod segment sales consistprimarily of external sales of processed copper rod that cannot be used forinternal production. Copper rod volumes fluctuate from period to period due tochanges in internal consumption needs and external market conditions.

*Gross profit*

Forthe quarter ended June 30, 2007, gross profit was $74.5 million, adecrease of $12.2 million, or 14%, as compared to the prior year quarterprimarily due to the estimated $13.4 million of transitional gross profit gainsin the second quarter of 2006 discussed above, as well as volume declines(exclusive of the impact of the Simcoe acquisition) in all of our businesssegments. These negative factors were partially offset by the positive impactof price increases, lower production costs and improved product mix in ourcommunications cable segment, the Simcoe acquisition and favorable foreigncurrency exchange rate translation in our European magnet wire and distributionsegment. The gross profit margin in the 2007 quarter was 9.6% compared to 10.6%for the same quarter in 2006. Gross profit margin on a copper-adjusted basiswas 10.0% for the three months ended June 30, 2007 compared to 10.5% forthe three months ended June 30, 2006 reflecting margin decreases in all ofour business segments. The comparative copper-adjusted gross profit marginswere significantly impacted by the effect of the sales decline for the copperrod segment, whose sales generally allow for fixed cost recovery at grossprofit margins that are generally break even. Accordingly, the decrease incopper-adjusted sales in the copper rod segment for the three months ended June30, 2007 compared to the three months ended June 30, 2006 did not result in aproportionate reduction in gross profit. The combined gross margin for ourcommunications cable, North American  andEuropean magnet wire and distribution segments, which contribute substantiallyall of our gross profit, was 10.8% for the three months ended June 30, 2007compared to 12.1% for the three months ended June 30, 2006. Copper-adjustedgross profit margins in our communications cable business decreased for the2007 quarter compared to the prior year quarter due primarily to an estimated$9.0 million of transitional copper benefits experienced in the second quarterof 2006 offset by the positive impact in 2007 of price increases, productioncost reduction activities and higher margin premises product mix.Copper-adjusted gross profit margin for our North American magnet wire anddistribution business for the three months ended June 30, 2007 decreasedcompared to the prior year quarter due primarily to unfavorable production costabsorption resulting from lower volumes, negative gross margins incurred in ourChina start-up operation, and the comparative effect of transitional copper andLIFO cost benefits realized in the second quarter of 2006. Copper-adjustedgross profit margin for the European magnet wire and distribution segmentdecreased for the three months ended June 30, 2007 due primarily to the effectof transitional copper benefits realized in the second quarter of 2006 and anunfavorable product mix.

*Selling, general and administrative expenses*

Selling,general and administrative expenses (“SG&A expense”) of $38.0 million forthe three month period ended June 30, 2007 decreased slightly as comparedto SG&A expense of $38.2 million for the three months ended June 30,2006 due primarily to reduced group insurance and U.S. pension costs.

*Restructuring and other charges*

Duringthe three months ended June 30, 2007 we recorded  restructuring and other charges of $0.4million consisting of $0.3 million of ongoing facility exit costs related to aformer North American magnet wire and distribution segment warehouse and $0.1million of professional fees incurred in connection with the administration ofSuperior TeleCom’s plan of reorganization. During the three months ended June30, 2006, our European magnet wire and distribution segment recorded aprovision of $0.2 million related to a workforce reduction. In addition,restructuring and other charges for the three months ended June 30, 2006included $0.3 million of ongoing facility exit costs primarily related to theclosure of an insulation manufacturing facility in our North American magnetwire and distribution segment and $0.1 million related to professionalfees incurred in connection with the administration of Superior TeleCom’s planof reorganization. These charges

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were offset by a$0.4 million gain on the favorable settlement of an employee related dispute inour European magnet wire and distribution segment.

*Operating income*

Thefollowing table sets forth information regarding our operating income bysegment for the three months ended June 30, 2007 and 2006. We measure oursegment operating performance based primarily on segment operating income,excluding restructuring and other charges.
|                                             | ** ** | **2007**                | ** ** | **2006** | ** ** |
|---------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                  | ** ** | **(in thousands)** | ** ** |
| Operating income  (loss)                    |       |                    |       |     |       |
| Communications cable                        |       | $                       | 25,911     |     | $          | 32,454 |   |
| North American magnet wire and distribution |       | 11,661                  |       | 13,446   |       |
| European magnet wire and distribution       |       | 5,801                   |       | 9,096    |       |
| Copper rod                                  |       | (136                    | )          | 256      |       |
| Corporate and other                         |       | (6,773                  | )          | (6,791   | )          |
| Restructuring and other charges             |       | (413                    | )          | (197     | )          |
|                                        |       | $                       | 36,051     |     | $          | 48,264 |   |

 

Operatingincome for the communications cable segment decreased $6.5 million for thethree months ended June 30, 2007 compared to the 2006 quarter due to grossprofit decreases attributable to the factors discussed above. Communicationscable segment SG&A expenses for the three months ended June 30, 2007 wereessentially unchanged as compared to the three months ended June 30, 2006.Operating income for our North American magnet wire and distribution segmentdecreased $1.8 million due primarily to lower gross profit ($2.4 million) attributableto the factors discussed above, partially offset by reductions in SG&Aexpenses and the impact of the Simcoe acquisition. Operating income for theEuropean magnet wire and distribution segment decreased $3.3 million for thethree months ended June 30, 2007 compared to the three months ended June 30,2006. The decrease reflects gross profit decreases attributable to the factorsdiscussed above as well as an increase in SG&A expense of $0.6 millionpartially offset by the positive impact of currency exchange rates. The copperrod segment’s operating income decreased slightly for the three months endedJune 30, 2007 compared to the prior year quarter due primarily to reduced salesvolumes. Copper rod sales generally allow for fixed cost recovery at grossprofit margins that are generally break even. Corporate and other chargesconsist primarily of parent company and corporate payroll costs, includingstock-based compensation charges, corporate headquarters costs and corporateprofessional fees and compliance costs and were relatively unchanged for thethree months ended June 30, 2007 compared to the three months ended June 30,2006. Consolidated operating income for the three months ended June 30, 2007included restructuring and other charges of $0.4 million compared to$0.2 million of such charges in the 2006 quarter, the components of whichare discussed above.

*Interest expense and interest income*

Interestexpense for the quarter ended June 30, 2007 was $7.5 million comparedto interest expense of $8.0 million for the quarter ended June 30,2006. The decrease in interest expense in the 2007 quarter is due to the factthat we had no borrowings outstanding on our senior secured credit facilityduring the three months ended June 30, 2007. This positive factor was partiallyoffset by increases in interest expense on borrowings to finance our greenfieldChina operation.  Interest incomeincreased $0.8 million for the three months ended June 30, 2007 compared to thesame period in the prior year due to interest earned on positive cash balancesoutstanding during the 2007 quarter. Increased cash balances primarily reflectthe benefit from positive operating cash flow generated in the second half of2006 and in the first half of 2007.

*Income tax expense*

Oureffective income tax rate for the three months ended June 30, 2007 was 40%compared to an effective tax rate of 38% for the three months endedJune 30, 2006. The effective tax rate for the three months endedJune 30, 2007 exceeds the U.S. statutory rate of 35% due to the effects ofstate and foreign taxes and liabilities for uncertain tax positions recorded inaccordance with FASB Interpretation No. 48 (“FIN 48”). The increase in theeffective tax rate for the three months ended June 30, 2007 compared to thethree months ended June 30, 2006 is due primarily to the effects of FIN 48.

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*Extraordinary gain*

OnJune 27, 2007, we exercised our option to purchase Nexans’ 40% minorityinterest in Essex Europe for a cash payment of $29.4 million, includingacquisition costs of $0.1 million. The acquisition of the minority interest hasbeen accounted for using the purchase method of accounting. The preliminaryallocation of the purchase price resulted in unallocated negative goodwill of$3.5 million which has been reflected as an extraordinary gain in the statementof operations for the three months ended June 30, 2007. We are in the processof finalizing certain asset and liability valuations and therefore theallocation of the purchase price, including the amount of unallocated negativegoodwill, is subject to refinement and adjustment.

***Six Months Ended June 30, 2007Compared to the Six Months Ended June 30, 2006***

*Net sales*

Thefollowing table provides net sales and supplemental copper-adjusted salesinformation for the six months ended June 30, 2007 and 2006:
| ** **                                     | ** ** | **Actual**                                    | ** ** | **Copper-adjusted** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------|------------|---------------------|------------|
| ** **                                     | ** ** | **Six Months Ended  June 30,** | ** ** | **%**               | ** ** | **Six Months Ended  June 30,** | ** ** | **%** | ** ** |
| ** **                                     | ** ** | **2007**                                      | ** ** | **2006**            | ** ** | **Change** | ** ** | **2007** | ** ** | **2006** | ** ** | **Change** | ** ** |
| Net sales:                                     |       |                                          |       |                |       |   |   |   |   |   |   |   |   |
| Communications cable                           |       | $                                             | 451,736    |                | $          | 423,708 |   | 7 | % | $ | 448,941 |   | $ | 488,798 |   | (8 | )% |
| North American magnet wire and distribution    |       | 543,166                                       |       | 507,877             |       | 7 | % | 540,086 |   | 563,056 |   | (4 | )% |
| European magnet wire and distribution          |       | 335,934                                       |       | 312,879             |       | 7 | % | 337,698 |   | 337,177 |   | — | % |
| Copper rod                                     |       | 137,232                                       |       | 225,423             |       | (39 | )% | 136,888 |   | 240,549 |   | (43 | )% |
|                                           |       | 1,468,068                                     |       | 1,469,887           |       | — | % | 1,463,613 |   | 1,629,580 |   | (10 | )% |
| Constant cost of copper adjustment             |       | —                                        |       | —              |       |   |   | 4,455 |   | (159,693 | ) |   |   |
| Total                                          |       | $                                             | 1,468,068  |                | $          | 1,469,887 |   | — | % | $ | 1,468,068 |   | $ | 1,469,887 |   | — | % |
| Average daily  COMEX price per pound of copper |       | $                                             | 3.09       |                | $          | 2.83 |   | 9 | % |   |   |   |   |   |   |

 

Consolidatedsales for the six months ended June 30, 2007 were $1,468.1 million,essentially unchanged as compared to consolidated sales of$1,469.9 million for the six months ended June 30, 2006. Sales for the2007 period as compared to the 2006 period were significantly impacted by the9% increase in average copper prices and, to a lesser extent, the Simcoeacquisition discussed above and the strengthening Euro against the U.S. dollar.Sales adjusted for a constant cost of copper decreased 10% for the six monthsended June 30, 2007 compared to the six months ended June 30, 2006. Thecopper-adjusted sales decline reflects volume decreases in all of our businesssegments.

Salesfor our communications cable segment for the six months ended June 30, 2007were $451.7 million, an increase of 7%, as compared to sales of$423.7 million for the six months ended June 30, 2006. Sales adjusted fora constant cost of copper decreased 8%. The copper-adjusted decrease primarilyreflects declines in copper OSP unit volume attributable to overall decreasesin market-related demand due to the slowdown in new home construction, theabsence of hurricane restoration demand as compared to 2006, continued loss ofaccess lines by major telephone companies and the continued use of fiber opticcable in telephone networks. The decline in copper-adjusted OSP sales waspartially offset by a 19% increase in premise wire product sales. We believethe 2007 increase in our premise product sales reflects increased demand as distributorsreplenished depleted year end inventory levels in the first quarter of 2007, aswell as an increase in our market share and improved pricing as compared to thesix months ended June 30, 2006.

Salesfor our North American magnet wire and distribution segment were$543.2 million for the six months ended June 30, 2007, an increase of 7%as compared to the prior year six-month period. On a copper-adjusted basis,sales for the six months ended June 30, 2007 decreased 4% from the same periodin the prior year. Sales for the six months ended June 30, 2007 include $21.3 million($19.7 million on a copper-adjusted basis) attributable to the Simcoeacquisition. The offsetting decrease in copper-adjusted sales decrease wasprincipally attributable to weakness in the heating, ventilation and airconditioning, heavy appliance and other end markets tied to residentialconstruction activity.

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Salesfor the European magnet wire and distribution segment were $335.9 million forthe six months ended June 30, 2007 compared to $312.9 million for the sixmonths ended June 30, 2006, an increase of 7%. On a copper-adjusted basis,sales were relatively unchanged for the six months ended June 30, 2007 comparedto the prior year six-month period. Excluding the effects of the strengtheningEuro against the U.S. dollar, copper adjusted sales decreased 7% for the sixmonths ended June 30, 2007 compared to the six months ended June 30, 2006. Thisdecrease was primarily the result of reductions in unit volumes due to aplanned rationalization of low margin customers implemented in the firstquarter of 2007.

Copperrod sales for the six months ended June 30, 2007 were $137.2 millioncompared to $225.4 million for the comparable 2006 six-month period. On acopper-adjusted basis, sales for our copper rod segment decreased by 43% forthe six months ended June 30, 2007 compared to the prior year six-monthperiod. The copper-adjusted decrease in the 2007 period reflects a plannedreduction in total copper rod production including a rationalization ofthird-party copper rod sales and an increase in the percentage of copper rodused for internal production, including copper rod used in our acquired SimcoeCanadian operations.

*Gross profit*

Forthe six months ended June 30, 2007, gross profit was $135.7 million, adecrease of $9.5 million, or 7%, as compared to the prior year six-month periodprimarily due to the estimated $13.4 million of transitional gross profit gainsin the second quarter of 2006, a $4.0 million negative impact on gross profitfor the first quarter of 2007 as a result of an unfavorable match of coppercost to sales prices as discussed above, and volume declines in all of ourbusiness segments. These negative factors were partially offset by the positiveimpact of price increases, lower production costs and improved product mix inour communications cable segment, the Simcoe acquisition and favorable foreigncurrency exchange rate translation in our European magnet wire and distributionsegment. The gross profit margin for the six months ended June 30, 2007 was9.2% compared to 9.9% for the same six-month period in 2006. Gross profitmargin on a copper-adjusted basis was 9.3% for the six months endedJune 30, 2007 compared to 8.9% for the six months ended June 30,2006. The comparative copper-adjusted gross profit margins were significantlyimpacted by the effect of the sales decline for the copper rod segment.Accordingly, the decrease in copper-adjusted sales in the copper rod segmentfor the six months ended June 30, 2007 compared to the six months ended June30, 2006 did not result in a proportionate reduction in gross profit. Thecombined gross margin for our communications cable, North American  and European magnet wire and distributionsegments, which contribute substantially all of our gross profit, was 10.2% forthe six months ended June 30, 2007 compared to 10.4% for the six months endedJune 30, 2006. Copper-adjusted gross profit margins in our communications cablebusiness decreased slightly for the six months ended June 30, 2007 compared tothe prior year six month period due primarily to an estimated $9.0 million oftransitional copper benefits experienced in the second quarter of 2006 as wellas the first quarter 2007 $4.0 million unfavorable copper cost negative impactdiscussed above. These unfavorable factors were largely offset by the positiveimpact in 2007 of price increases, production cost reduction activities andhigher margin premises product mix. Copper-adjusted gross profit margin for ourNorth American magnet wire and distribution business for the six months endedJune 30, 2007 decreased compared to the prior year six-month period dueprimarily to unfavorable production cost absorption resulting from lowervolumes as well as the effect of transitional copper and LIFO cost benefitsrealized in the second quarter of 2006. Copper-adjusted gross profit margin forthe European magnet wire and distribution segment increased for the six monthsended June 30, 2007 due primarily to the planned rationalization of low margincustomers implemented in the first quarter of 2007 offset to some extent by thecomparative effect of transitional copper benefits realized in the secondquarter of 2006.

*Selling, general and administrative expenses*

Selling,general and administrative expenses (“SG&A expense”) of $73.6 million forthe six months ended June 30, 2007 were essentially unchanged as compared toSG&A expense of $73.8 for the six months ended June 30, 2006.

*Restructuring and other charges*

Duringthe six months ended June 30, 2007 we recorded a restructuring provision of$0.3 million related to a workforce reduction at our European magnet wire anddistribution segment’s Viana de Castelo, Portugal manufacturing facility. Themajority of the costs related to severance payments and related benefits. Allamounts are expected to be paid during 2007. We also recorded restructuring andother charges of $0.3 million of ongoing facility exit costs related to aformer North American magnet wire and distribution segment warehouse, $0.4million of deferred business acquisition costs and and $0.2 million ofprofessional fees incurred in connection with the administration of SuperiorTeleCom’s plan of reorganization. During the six months ended June 30, 2006,Essex Europe recorded a restructuring provision of $0.9 million related toworkforce reductions at its U.K. magnet wire operation. In addition,restructuring and other charges for the six

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months ended June30, 2006 included $0.3 million of ongoing facility exit costs primarily relatedto the closure of an insulation manufacturing facility in our North Americanmagnet wire and distribution segment and $0.2 million of professional feesincurred in connection with the administration of Superior TeleCom’s plan ofreorganization. These charges were offset by a $0.4 million gain on thefavorable  settlement of an employee related dispute in our Europeanmagnet wire and distribution segment.

*Operating income*

Thefollowing table sets forth information regarding our operating income by segmentfor the six months ended June 30, 2007 and 2006. We measure our segmentoperating performance based primarily on segment operating income, excludingrestructuring and other charges.
|                                             | ** ** | **2007**                | ** ** | **2006** | ** ** |
|---------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                  | ** ** | **(in thousands)** | ** ** |
| Operating income  (loss)                    |       |                    |       |     |       |
| Communications cable                        |       | $                       | 43,912     |     | $          | 50,807 |   |
| North American magnet wire and distribution |       | 20,207                  |       | 22,712   |       |
| European magnet wire and distribution       |       | 11,856                  |       | 10,880   |       |
| Copper rod                                  |       | (182                    | )          | 117      |       |
| Corporate and other                         |       | (13,683                 | )          | (13,218  | )          |
| Restructuring and other charges             |       | (1,287                  | )          | (978     | )          |
|                                        |       | $                       | 60,823     |     | $          | 70,320 |   |

 

Operatingincome for the communications cable segment decreased $6.9 million for the sixmonths ended June 30, 2007 compared to the 2006 six-month period due to grossprofit decreases attributable to the factors discussed above as well as anincrease in SG&A expense of $0.7 million due primarily to higher salescommissions in 2007 associated with increased premise product sales andincreases in legal fees. Operating income for our North American magnet wireand distribution segment decreased $2.5 million due primarily to lower grossprofit ($3.5 million) attributable to reduced sales volumes, transitionalcopper and LIFO cost gains in 2006 and start-up operating losses related to ourgreenfield facility in China, offset by a $1.0 million reduction in SG&Aexpenses primarily resulting from lower employee compensation and benefitcosts. Operating income for the European magnet wire and distribution segmentincreased $1.0 million for the six months ended June 30, 2007 compared to thesix months ended June 30, 2006 due to the positive impact of currency exchangerates. Corporate and other charges consist primarily of parent company andcorporate payroll costs, including stock-based compensation charges, corporateheadquarters costs and corporate professional fees and compliance costs. Theincrease in corporate and other costs for the six months ended June30, 2007 compared to the six months ended June 30, 2006 is primarily dueto increased stock-based compensation charges resulting from a change in thenumber of outstanding performance shares expected to ultimately vest.Consolidated operating income for the six months ended June 30, 2007 includedrestructuring and other charges of $1.3 million compared to$1.0 million of such charges in the 2006 six-month period, the componentsof which are discussed above.

*Interest expense, interest income and other income(expense)*

Interestexpense for the six months ended June 30, 2007 was $15.1 millioncompared to interest expense of $16.1 million for the six months endedJune 30, 2006. The decrease in interest expense is due to the fact that wehad no borrowings outstanding on our senior secured credit facility during thesix months ended June 30, 2007. This positive factor was partially offset byincreases in interest expense on borrowings to finance our greenfield Chinaoperation. Interest income increased $1.5 million for the six months ended June30, 2007 compared to the same period in the prior year due to interest earnedon positive cash balances outstanding during the 2007 six-month period.Increased cash balances primarily reflect the benefit from positive operatingcash flow generated in the second half of 2006 and in the first half of 2007.Other expense for the six months ended June 30, 2007 of $0.6 million includes a$0.3 million loss related to an equity-method investee due to unusual copperand scrap losses related to start-up of a specialty production line.

*Income tax expense*

Oureffective income tax rate for the six months ended June 30, 2007 was 40%compared to an effective tax rate of 38% for the six months ended June 30,2006. The effective tax rate for the six months ended June 30, 2007exceeds the U.S. statutory rate of 35% due to the effects of state and foreigntaxes and liabilities for uncertain tax positions recorded in

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accordance withFASB Interpretation No. 48 (“FIN 48”). The increase in the effective tax ratefor the six months ended June 30, 2007 compared to the six months ended June30, 2006 is due primarily to the effects of FIN 48.

*Extraordinary gains*

OnJune 27, 2007, we exercised our option to purchase Nexans’ 40% minorityinterest in Essex Europe for a cash payment of $29.4 million, includingacquisition costs of $0.1 million. The acquisition of the minority interest hasbeen accounted for using the purchase method of accounting. The preliminaryallocation of the purchase price resulted in unallocated negative goodwill of$3.5 million which has been reflected as an extraordinary gain in the statementof operations for the six months ended June 30, 2007. We are in the process offinalizing certain asset and liability valuations and therefore the allocationof the purchase price, including the amount of unallocated negative goodwill, issubject to refinement and adjustment.

On January 4, 2006, Essex Europe acquired all ofthe outstanding capital stock of Societe de Distribution et de Services, orSDS, from Nexans. The acquisition of SDS was accounted for as a purchase. Theallocation of the purchase price resulted in unallocated negative goodwill of$1.5 million which was reflected as an extraordinary gain (net of minorityinterest of $0.6 million) in the statement of operations for the sixmonths ended June 30, 2006.

**Liquidityand Capital Resources**

***Cash from Operating, Investing andFinancing Activities***

Wereported cash provided by operating activities of $76.8 million for thesix months ended June 30, 2007 compared to cash used by operatingactivities of $58.0 million for the six months ended June 30, 2006.Cash provided by operating activities for the six months ended June 30,2007 includes a net working capital decrease of $24.5 million compared toa net working capital increase of $114.3 million for the six months ended June30, 2006. Historically, we have experienced a first and second quarter seasonalincrease in our working capital resulting from increased production, inventorystocking levels and related sales attributable to historically higher customerdemand levels in March through October. Conversely, our sales volumes aregenerally lower in our fourth and early first quarters due primarily to coldweather related reduction in demand from our communications cable segmentcustomers and the impact of year end holiday related plant shutdowns of majorOEM customers of our North American and European magnet wire and distributionsegments. While we did experience some seasonal increase in accounts receivableduring the six months ended June 30, 2007, this increase was more than offsetby a decrease in inventories due to reduced production in response to lowersales volumes, particularly in the communications cable segment. Cash providedby operating activities for the six months ended June 30, 2007 was alsopositively impacted by reduced estimated U.S. income tax payments due primarilyto the application of overpayments from 2006. Cash used by investing activitiesfor the six months ended June 30, 2007 includes payments of $29.4 to acquireNexans’ 40% minority interest in Essex Europe, $13.6 million related to theSimcoe acquisition and $4.1 million of additional contingent consideration paidto Nexans based on the achievement of specified levels of profitability byEssex Europe in 2006. All of these payments were financed with cash on hand.Cash provided by financing activities for the six months ended June 30, 2006amounted to $79.4 million primarily due to $76.5 of proceeds received from ourcommon stock offering in June 2006. Outstanding borrowings under the seniorsecured revolving credit facility were fully repaid in the second quarter of2006 with the proceeds from the offering. Cash used for financing activities of$4.3 million for the six months ended June 30, 2007 includes the $15.0 millionrepayment of Essex Europe’s subordinated note which was accelerated as a resultof our acquisition of Nexans’ minority interest. Repayment of the subordinatednote was financed by borrowing under the Essex Europe factoring agreement. Cashfrom financing activities for the six months ended June 30, 2007 also includes$5.2 million of borrowings under our credit facility in China used to financestart-up operations in China.

***Liquidity and Capital Resources***

Our principal cash requirements generally includefunding of our working capital, interest payments on our senior securedrevolving credit facility and the 9% senior notes, dividend payments on oursubsidiary’s series A preferred stock, interest payments on the EssexEurope factoring agreement, capital expenditures currently estimated at approximately$30 million to $45 million annually (excluding investments in China discussedbelow), funding for the Invex and Tianjin acquisitions discussed below andobligations related to our defined benefit pension plans. Copper prices haveincreased during the first half of 2007 as compared to year-end 2006.Significant increases in the price of copper and the resultant increase inaccounts receivable and, to a lesser degree, inventory, impacts our workingcapital funding requirements. We estimate that each $1 per pound increase inthe price of copper has a $60 to $70 million impact on our working capital.

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On July31, 2007, Essex Europe acquired all of the outstanding common stock of InvexS.p.A., a leading magnet wire producer in Europe based in Italy with sales of€213 million in 2006. The cash purchase price of $41.3 million was financedwith cash on hand.

Inorder to finance its ongoing increased working capital requirements, EssexEurope entered into a new factoring agreement in July 2007 to replace theirexisting factoring agreement. Under the new agreement the amount of advancesavailable to Essex Europe is limited to 85% of assigned receivables up to amaximum of €50 million ($67.3 million at June 30, 2007). Advancesunder the new agreement bear interest at the monthly average of the EuropeanOvernight Index Average rate plus 0.35%. The new factoring agreement expires inJuly 2010. The new factoring agreement was subsequently amended toincrease the borrowing availability by €40 million in order to provide workingcapital financing for Invex.

In April 2007, we paid $4.1 million of additionalcontingent consideration to Nexans based on the achievement of specified levelsof profitability by Essex Europe in 2006 as provided for in the contributionand formation agreement establishing Essex Europe. In addition, on June 27,2007, pursuant to our call option under the shareholders agreement, we acquiredNexans’ 40% minority interest in Essex Europe for a cash payment of $29.3million. In accordance with its terms, the Essex Europe’ subordinated notepayable in the amount of $15.0 million was repaid as a result of our purchaseof Nexans’ 40% interest. These transactions were financed by our cash on handand borrowings under Essex Europe’s factoring agreement.

InJanuary 2007, we entered into two definitive agreements, one to acquirecertain assets and assume certain liabilities related to Nexans’ remainingNorth American magnet wire business in Simcoe, Canada and the other to acquireNexans’ 80% ownership interest in a company which owns and operates a magnetwire facility located in Tianjin, China. The Canadian transaction was completedon April 27, 2007 for a cash purchase price, after adjustment, of $12.7 millionfunded with cash on hand. The purchase of Nexan’s 80% ownership interest in theTianjin company was completed on July 26, 2007 for a cash purchase price of$9.9 million which was financed by our cash on hand. The purchase price issubject to adjustment based on finalization of the net indebtedness at theclosing date. In connection with the acquisition, the Tianjin company enteredinto a new credit agreement to provide up to Chinese RMB 110 million ($14.6million at July 26, 2007) to refinance existing debt and provide workingcapital financing. The available amount may be increased by an additionalChinese RMB 60 million upon approval by the lender. Borrowings under theagreement bear interest at 90% of the basic RMB lending rate published by theBank of China. The agreement expires in July 2008.

In the fourth quarter of 2006 we completed the initialphase of construction of our wholly owned “Greenfield” facility near Shanghaiin the New Suzhou district of China. We currently plan to add 8 to 12 millionadditional pounds of capacity to the facility in 2007 at an estimated capitalcost of $6 to $8 million.

We believe that cash provided by operations and borrowingavailability under our amended and restated senior secured revolving creditfacility ($224.2 million undrawn and available at June 30, 2007), togetherwith our cash on hand ($58.7 million at June 30, 2007) andavailability under the Essex Europe amended and restated factoring agreement($24.6 million undrawn and available on a pro forma basis at June 30,2007), will be sufficient to meet our obligations and fund our working capitalrequirements for the foreseeable future.

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**NewAccounting Pronouncements**

We adopted theprovisions of FASB Interpretation No. 48, *Accountingfor Uncertainty in Income Taxes* (FIN48), on January 1, 2007. FIN 48prescribes a consistent recognition threshold and measurement attribute, aswell as establishes criteria for subsequently recognizing, derecognizing andmeasuring uncertain tax positions for financial statement purposes. As a resultof the implementation of FIN 48, we recognized a net increase of $6.6 millionin the liability for unrecognized tax benefits, which was accounted for as adecrease to the January 1, 2007 balance of retained earnings of $6.3 millionand a decrease in minority interest in consolidated subsidiaries of $0.3million. As of the date of adoption and after the impact of recognizing theincrease in liability noted above, our net liability for unrecognized taxbenefits totaled $9.1 million, all of which, if recognized, would affect theannual effective income tax rate.

We recognizepotential interest and penalties related to unrecognized tax benefits as acomponent of income tax expense.  Theliability for unrecognized tax benefits of $9.1 million at January 1, 2007includes approximately $2.1 million for potential interest and penalties associatedwith uncertain tax positions. During the six months ended June 30, 2007, weincurred an income tax expense charge of $0.9 million for uncertain taxpositions and $0.3 million for potential interest and penalties associated withuncertain tax positions.

In September 2006,the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).SFAS No. 157 establishes a common definition for fair value to beapplied to guidance regarding U.S. generally accepted accountingprinciples, requiring use of fair value, establishes a framework for measuringfair value, and expands disclosure about such fair value measurements.SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007. We are currently assessing the impact the adoption ofSFAS No. 157 will have on our 2008 consolidated financial positionand results of operations.

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for FinancialAssets and Financial Liabilities,” (“SFAS No. 159”).SFAS No. 159 provides companies with an option to report selectedfinancial assets and liabilities at fair value and to provide additionalinformation that will help investors and other users of financial statements tounderstand more easily the effect on earnings of a company ‘s choice to usefair value. It also requires companies to display the fair value of thoseassets and liabilities for which the company has chosen to use fair value onthe face of the balance sheet. We are required to adopt SFAS No. 159on January 1, 2008 and are currently evaluating the impact, if any, ofSFAS No. 159 on our consolidated financial statements.

**ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We, toa limited extent, use or have used forward fixed price contracts and derivativefinancial instruments to manage commodity price, interest rate and foreigncurrency exchange risks. We do not hold or issue financial instruments forinvestment or trading purposes. We are exposed to credit risk in the event ofnonperformance by counterparties for foreign exchange forward contracts, metalforward price contracts and metals futures contracts but we do not anticipatenonperformance by any of these counterparties. The amount of such exposure isgenerally limited to any unrealized gains within the underlying contracts.

***Commodity price risk management***

Thecost of copper, our most significant raw material, has historically beensubject to considerable volatility. To manage the risk associated with suchvolatility, we enter into futures contracts to match the metal component ofcustomer product pricing with the cost component of the inventory shipped.These futures contracts have been designated as cash flow hedges withunrealized gains and losses recorded in other comprehensive income. Gains andlosses are reclassified into earnings, as a component of cost of goods sold,when the hedged sales transactions are reflected in the income statement. Hedgeineffectiveness, which is not significant, is immediately recognized inearnings. Our commodities futures purchase contracts are summarized as followsat June 30, 2007:

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| Type       | ** ** | **Notional  Amount**                    | ** ** | **Maturity  Date** | ** ** | **Weighted  Average  Settlement Rate** | ** ** | **Fair Value  Gain (Loss)** | ** ** |
|------------|------------|-----------------------------------------|------------|--------------------|------------|---------------------------------------------|------------|---------------------------------------|------------|
| ** ** | ** ** | **(in thousands of  pounds)** | ** ** | ** **         | ** ** | ** **                                  | ** ** | **(in  thousands)**                   | ** ** |
| ** ** | ** ** | ** **                              | ** ** | ** **         | ** ** | ** **                                  | ** ** | ** **                            | ** ** |
| Copper     |       | 5,875                                   |       | 2007               |       | $                                           | 3.01       |                                  | $          | 2,544 |   |
| Copper     |       | 250                                     |       | 2008               |       | 2.99                                        |       | 91                                    |       |
|       |       |                                    |       |               |       |                                        |       | $                                     | 2,635      |   |
|            |            |                                         |            |                    |            |                                             |            |                                       |            |  |  |

 

All ofthe unrealized gains on commodity futures outstanding at June 30, 2007 areexpected to be reclassified in earnings within the next twelve months.

Essex Europe periodically enters into commodityfutures contracts to match the copper component of customer product pricingwith the cost component of the inventory shipped. These futures contracts areintended to minimize the risks associated with forward product pricing forcustomers and changing copper prices. These contracts generally have maturitiesof less than two months and represent economic hedges but have not beendesignated as hedges for accounting purposes. Accordingly, gains and losses onthese contracts are recorded in income as a component of cost of goods sold.There were no open copper futures positions held by Essex Europe atJune 30, 2007.

***Foreign currency exchange risk management***

Weengage in the sale and purchase of products which result in accounts receivableand accounts payable denominated in foreign currencies. Additionally, we enterinto intercompany loans, some of which are not considered long-terminvestments, among our subsidiaries with differing functional currencies. As aresult, fluctuations in the value of foreign currencies create exposures, whichcan adversely affect our results of operations. We attempt to manage ourtransactional foreign currency exchange risk by economically hedging foreigncurrency cash flow forecasts arising from the settlement of accountsreceivable, accounts payable and intercompany accounts. Where naturallyoffsetting foreign currency positions do not occur, we hedge certain, but notall, of our foreign currency exposures through the use of foreign currencyforward exchange contracts. These contracts generally have maturities of lessthan two months and represent economic hedges but have not been designated ashedges for accounting purposes. Changes in the fair value of these contractsare reflected in current earnings.

We arealso exposed to foreign currency translation risk resulting from thetranslation of the financial statements of foreign subsidiaries with functionalcurrencies other than the U.S. dollar. Our most significant translationexposure is the Euro in relation to the U.S. dollar. We enter into foreigncurrency put options to hedge against adverse fluctuations in the results ofoperations of certain of our foreign subsidiaries resulting from foreigncurrency translation. The put options expire in 2007.

Thefollowing table summarizes information about foreign currency relatedderivatives as of June 30, 2007.

| Derivatives                              | ** ** | **Notional Amount** | ** ** | **Weighted  Average  Contract  Rate** | ** ** | **Fair Value  Gain (Loss)** | ** ** |
|------------------------------------------|------------|--------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| ** **                               | ** ** | **(in thousands)**  |       | ** **                            | ** ** | **(in thousands)**               | ** ** |
| Forward exchange  contracts:             |       |                     |       |                                  |       |                                  |       |   |
| U.S. dollars (sell for Euros)            |       | 1,300          | USD        |                                  | .74        |                                  | $          | — |   |
| U.S. dollars (buy with Canadian dollars) |       | 3,200          | USD        |                                  | 1.06       |                                  | —     |   |
| Canadian dollars (sell for U.S. dollars) |       | 20,500         | CAD        |                                  | .94        |                                  | (3         | ) |
| Euros (buy with British pounds)          |       | 3,700          | EURO       |                                  | .68        |                                  | —     |   |
| British pounds (sell for euros)          |       | 2,400          | GBP        |                                  | 1.48       |                                  | —     |   |
| Put options:                             |       |                     |       |                                  |       |                                  |       |   |
| Euros (sell for U.S. dollars)            |       | 3,719          | EURO       |                                  | 1.35       |                                  | 37         |   |
|                                     |       |                     |       |                                  |       |                                  | $          | 34 |   |

 

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***Purchase Commitments***

Weaccept certain customer orders for future delivery at fixed prices. As copperis the most significant raw material used in the manufacturing process, weenter into forward fixed-price purchase commitments for copper to properlymatch our cost to the value of the copper expected to be billed to customers.At June 30, 2007, we had forward fixed price copper purchase commitmentsfor delivery of 19.7 million pounds through January 2008 for $66.1 million.Additionally at June 30, 2007, we had forward purchase fixed pricecommitments for 0.8 million pounds of aluminum through August 2008, 187,000megawatts of electricity through December 2009 and 520,000 MMBTUs of naturalgas through December 2007 amounting to $1.2 million, $13.3 million and $4.0million, respectively.

**ITEM4. CONTROLS AND PROCEDURES**

*Evaluationof Controls and Procedures*

As ofthe end of the period covered by this Form 10-Q, we carried out anevaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures, as defined in Rule 13a-15(e) under theSecurities Exchange Act of 1934, as amended (“Exchange Act”), under thesupervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer. Based on that evaluation, theChief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective in providing reasonableassurance that information required to be disclosed by us in reports filed orsubmitted under the Exchange Act is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and forms,including reasonable assurance that information required to be disclosed inreports filed or submitted by us under the Exchange Act is accumulated andcommunicated to our management, including the Chief Executive Officer and ChiefFinancial Officer, in a manner to allow timely decisions regarding the requireddisclosure. A system of controls, no matter how well designed and operated,cannot provide absolute assurance that the objectives of the system of controlsare met, and no evaluation of controls provides absolute assurance that allcontrol issues and instances of fraud, if any, within a company have beendetected. Notwithstanding the above, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and proceduresare effective at a reasonable assurance level.

*Changesin Internal Controls Over Financial Reporting*

Therehave been no changes in our internal control over financial reporting thatoccurred during the most recent fiscal quarter that have materially affected,or are reasonably likely to materially affect, our internal control overfinancial reporting.

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**PART II. OTHER INFORMATION**

**ITEM1. LEGAL PROCEEDINGS**

In 2003, Superior TeleComand Essex Electric Inc. (“Essex Electric”) each filed lawsuits under Section 1of the Sherman Act against certain defendants based on an alleged conspiracy toelevate the prices of certain copper products during certain periods from 1993to 1996. The lawsuits were consolidated with several other lawsuits involvingother plaintiffs later in 2003 (collectively, the “2003 Copper Action”). In2003, Essex Electric was a subsidiary of The Alpine Group, Inc. (“Alpine”).Alpine was the controlling shareholder of Superior TeleCom. On November 10,2003, Superior Essex acquired the business formerly conducted by SuperiorTeleCom and its subsidiaries. On June 4, 2007, the parties to the 2003 CopperAction (including all plaintiffs and defendants) entered into a settlementpursuant to which the 2003 Copper Action was dismissed with prejudice. Theterms of the settlement are confidential. A portion of the settlement proceeds(approximately $27,000,000) are being held in escrow by plaintiffs’ counsel(the “Escrowed Settlement Proceeds”). We and Essex Electric, now known as ExeonInc. (“Exeon”), each claim to be entitled to the Escrowed Settlement Proceeds.On June 18, 2007, Exeon filed an action for declaratory judgment and relatedrelief against the Company and certain of its subsidiaries in the Supreme Courtof the State of New York, New York County (the “2007 Exeon Action”). In the2007 Exeon Action, Exeon seeks a declaration that the claims giving rise to theEscrowed Settlement Proceeds were transferred to Exeon in connection with thesale of a portion of the electrical wire business of our subsidiary, EssexGroup, to Exeon in 2002 and that Exeon is entitled to all of the EscrowedSettlement Proceeds. The 2007 Exeon Action also alleges that we, by claimingthe Escrowed Settlement Proceeds attributable to the electrical wire business,are in breach of the Purchase and Sale Agreement related to the sale of aportion of the Essex Group electrical wire business to Exeon and seeks damagesin excess of $40 million resulting from the alleged breach.

OnJune 20, 2007, we and Essex Group filed suit in the Superior Court of CobbCounty, Georgia against Essex Electric and the other defendants named therein(the “2007 Superior Action”). The 2007 Superior Action seeks a declaratoryjudgment that we are entitled to all of the Escrowed Settlement Proceeds. Inaddition, the 2007 Superior Action seeks damages as a result of a breach offiduciary duty to the extent it is determined that any portion of the EscrowedSettlement Proceeds or the claims giving rise thereto were transferred to Exeonand seeks damages in excess of $40 million resulting from the alleged breach.

**ITEM2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

Thefollowing table provides information about our purchases of shares of ourcommon stock during the quarter ended June 30, 2007:
| **Period**         | ** ** | **Total Number of  Shares Purchased** | ** ** | **Average Price Paid  per Share** | ** ** | **Total Number of  Shares Purchased as  Part of Publicly  Announced Plans  or Programs** | ** ** | **Maximum Number of  Shares that May Yet  Be Purchased Under  the Plans or Programs** | ** ** |
|--------------------|------------|------------------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|------------|
|               |       |                                                 |       |                                             |       |                                                                                                                             |       |                                                                                                                                    |       |
| April 2007    |       | —                                               |       | —                                           |       | —                                                                                                                           |       | —                                                                                                                                  |       |
| May 2007  (a) |       | 57,010                                               |       | $                                                | 35.43      |                                                                                                                             | —     |                                                                                                                                    | —     |   |
| June 2007     |       | 7,988                                                |       | 36.27                                            |       | —                                                                                                                           |       | —                                                                                                                                  |       |
|                    |            |                                                      |            |                                                  |            |                                                                                                                                  |            |                                                                                                                                         |            |  |

 

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(a)                                  Representsshares withheld from members of management to satisfy minimum statutory taxwithholdings due upon the vesting of restricted stock awards and exercise ofstock options.

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**ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

Thefollowing matters were submitted to a vote of security holders at the Company’sannual meeting of shareowners held on May 3, 2007:
| ** **                           | ** ** | **Votes Cast For** | ** ** | **Votes Withheld** | ** ** |
|--------------------------------------|------------|------------------------------|------------|-------------------------|------------|
| Election of  Class I directors: |       |                         |       |                    |       |
| Stephen M. Carter                    |       | 18,327,557                   |       | 76,275                  |       |
| Denys Gounot                         |       | 17,988,773                   |       | 415,059                 |       |
| James F. Guthrie                     |       | 18,276,755                   |       | 127,077                 |       |

 
| ** **                                                           | ** ** | **Votes Cast** | ** ** | ** **  | ** ** | ** **  | ** ** |
|----------------------------------------------------------------------|------------|---------------------|------------|-------------|------------|-------------|------------|
| ** **                                                           | ** ** | **For**             | ** ** | **Against** | ** ** | **Abstain** | ** ** | **Broker Non-Votes** | ** ** |
| Company  proposals to:                                               |       |                |       |        |       |        |       |   |   |
| Authorize  amendments to the Superior Essex Inc. 2005 Incentive Plan |       | 14,058,237          |       | 2,367,859   |       | 276,618     |       | — |   |

 

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**ITEM6. EXHIBITS**
| Exhibit    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.1        |       | Disclosure Statement with respect to First Amended  Joint Plan of Reorganization of Superior TeleCom Inc. and its affiliated  debtors and debtors-in-possession (including the Amended Joint Plan of  Reorganization attached as Exhibit A thereto) (incorporated herein by  reference to Exhibit 2(a) to the Registration Statement on  Form 10 (Registration No. 000-50514) of Superior Essex Inc.,  as filed with the Securities and Exchange Commission on December 15,  2003, as amended (the “Superior Essex Form 10”)).           |
| 2.2        |       | Asset Purchase Agreement, dated as of March 18,  2004, by and among Superior Essex Communications LLC, Belden Communications  Company and Belden (Canada) Inc. (incorporated herein by reference to  Exhibit 2.1 to the Current Report on Form 8-K of Superior  Essex Inc. dated June 16, 2004)                                                                                                                                                                                                                                                                   |
| 2.3        |       | Contribution and Formation Agreement dated  July 27, 2005 among Superior Essex Inc., Essex Group, Inc., Nexans,  Nexans Participations, Nexans Wires and Lacroix and Kress GmbH. (incorporated  herein by reference to Exhibit 2.3 to the Quarterly Report on  Form 10Q of Superior Essex Inc. for the quarter ended June 30,  2005)                                                                                                                                                                                                                         |
| 2.4        |       | Side Letter dated October 21, 2005 by and  between Superior Essex Inc., Essex Group, Inc., SE Holding, C.V.,  Nexans, Nexans Participations, Lacroix & Kress GmbH and Nexans Wires  (incorporated by reference to Exhibit 10.2 to the Current Report on  Form 8-K of Superior Essex dated October 21, 2005)                                                                                                                                                                                                                                         |
| 3.1        |       | Amended and Restated Certificate of Incorporation of  Superior Essex Inc. (incorporated herein by reference to Exhibit 3.1 to the  Annual Report on Form 10-K of Superior Essex Inc. for the year ended December  31, 2006 (the “2006 Superior Essex 10-K”))                                                                                                                                                                                                                                                                                                                |
| 3.2        |       | Restated By-Laws of Superior Essex Inc.  (incorporated herein by reference to Exhibit 3(b) to the Superior Essex  Form 10).                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.1        |       | Indenture dated as of April 14, 2004 among  Superior Essex Communications LLC and Essex Group, Inc., as Co-Issuers,  the Guarantors named therein and The Bank of New York Trust Company, N.A., as  Trustee (incorporated herein by reference to Exhibit 10.3 to the  Quarterly Report on Form 10-Q of Superior Essex Inc. for the  quarter ended March 31, 2004 (the “Q1 2004 Form 10-Q”)).                                                                                                                                                  |
| 4.2        |       | Form of 9% Senior Series B Note due 2012  (included in Exhibit 4.1) (incorporated herein by reference to  Exhibit 10.3 to the Q1 2004 Form 10-Q).                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.3        |       | Registration Rights Agreement, dated as of  November 10, 2003, by and among Superior Essex Inc., the holders of  Registrable Common Stock (as defined therein) and the holders of the Warrants  (as defined therein) and such other Persons who may become a party thereto  pursuant to Section 16 or 19(i) thereof (incorporated herein by  reference to Exhibit 10(b) to the Superior Essex Form 10).                                                                                                                                                 |
| 4.4        |       | Specimen Common Stock Certificate (incorporated  herein by reference to Exhibit 4.11 to the Superior Essex Form S-3).                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4.5        |       | Third Supplemental Indenture dated  September 12, 2005 among Superior Essex Communications LP, Essex  Group, Inc., certain subsidiary guarantors named therein and The Bank of  New York Trust Company, N.A. (incorporated by reference to Exhibit 10.1  to the Current Report on Form 8-K of Superior Essex dated  September 12, 2005).                                                                                                                                                                                                                     |
| 10.1       |       | Amended and Restated Loan and Security Agreement,  dated April 14, 2006, by and among Superior Essex Communications LP, as  a borrower, Essex Group, Inc., as a borrower, the financial institutions  party thereto, as lenders, General Electric Capital Corporation, as  syndication agent, Banc of America Securities LLC and GECC Capital  Markets, Inc. as co-lead arrangers, and Bank of America, N.A. as agent  (incorporated herein by reference to Exhibit 10 to the Current  Report on Form 8-K of Superior Essex dated April 14, 2006). |
| 10.2*      |       | Superior Essex Inc. 2003 Stock Incentive Plan  (incorporated herein by reference to Exhibit 10(e) to the Superior  Essex Form 10).                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.3*      |       | Amended and Restated Employment Agreement, dated  March 10, 2006, between Superior Essex and Stephen M. Carter  (incorporated herein by reference to Exhibit 10.1 to the Current Report  on Form 8-K of Superior Essex Inc. dated March 10, 2006).                                                                                                                                                                                                                                                                                                                |
| 10.4*      |       | Amended and Restated Employment Agreement, dated  March 10, 2006, between Superior Essex and David S. Aldridge  (incorporated herein by reference to Exhibit 10.2 to the Current Report  on Form 8-K of Superior Essex Inc. dated March 10, 2006).                                                                                                                                                                                                                                                                                                                |

 

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| Exhibit    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.5*      |       | Amended and Restated Employment Agreement, dated  March 10, 2006, between Superior Essex and Justin F. Deedy, Jr. (incorporated  herein by reference to Exhibit 10.3 to the Current Report on Form 8-K  of Superior Essex Inc. dated March 10, 2006).                                                                                                                                                                                   |
| 10.6*      |       | Amended and Restated Employment Agreement, dated  March 10, 2006, between Superior Essex and H. Patrick Jack (incorporated  herein by reference to Exhibit 10.4 to the Current Report on Form 8-K  of Superior Essex Inc. dated March 10, 2006).                                                                                                                                                                                             |
| 10.7*      |       | Amended and Restated Employment Agreement, dated  March 10, 2006, between Superior Essex Inc. and Barbara L. Blackford  (incorporated herein by reference to Exhibit 10.5 to the Current Report  on Form 8-K of Superior Essex Inc. dated March 10, 2006).                                                                                                                                                                                   |
| 10.8       |       | Lease Agreement, dated as of December 16, 1993,  by and between ALP (TX) QRS 11-28, Inc. and Superior TeleTec  Transmission Products, Inc. (incorporated herein by reference to  Exhibit (i) to the Quarterly Report on Form 10-Q of The  Alpine Group, Inc. for the quarter ended January 31, 1994).                                                                                                                    |
| 10.9       |       | First Amendment to Lease Agreement, dated as of  May 10, 1995, by and between ALP (TX) QRS 11-28, Inc. and  Superior TeleTec Inc. (incorporated herein by reference to  Exhibit 10(o) to the Annual Report on Form  10-K of The  Alpine Group, Inc. for the year ended April 30, 1995 (the “1995  Alpine 10-K”)).                                                                                                   |
| 10.10      |       | Second Amendment to Lease Agreement, dated as of  July 21, 1995, by and between ALP (TX) QRS 11-28, Inc. and  Superior Telecommunications Inc. (incorporated herein by reference to  Exhibit 10(x) to the 1995 Alpine 10-K).                                                                                                                                                                                                                 |
| 10.11      |       | Third Amendment to Lease Agreement, dated as of  October 2, 1996, by and between ALP (TX) QRS 11-28, Inc. and  Superior Telecommunications Inc. (incorporated herein by reference to  Exhibit 10.8 to the Registration Statement on Form S-1  (Registration No. 333-09933) of Superior TeleCom Inc., as filed  with the Securities and Exchange Commission on August 9, 1996, as  amended (the “Superior TeleCom S-1”)). |
| 10.12      |       | First Amendment to Guaranty and Surety Agreement,  dated as of October 2, 1996, among Superior TeleCom Inc., The Alpine  Group, Inc. and ALP (TX) QRS 11- 28,  Inc. (incorporated  herein by reference to Exhibit 10.12 to the Superior TeleCom S-1).                                                                                                                                                                                        |
| 10.13      |       | Second Amendment to Guaranty and Suretyship  Agreement, dated as of November 27, 1998, among ALP (TX) QRS 11-28, Inc.,  Superior TeleCom Inc. and The Alpine Group, Inc. (incorporated herein by  reference to Exhibit 10(y) to the 1999 Superior TeleCom 10-K).                                                                                                                                                                        |
| 10.14      |       | Fifth Amendment to Lease Agreement and Waiver, dated  as of December 27, 2001, between ALP (TX) QRS 11-28, Inc. and  Superior Telecommunications Inc. (incorporated herein by reference to  Exhibit 10(yy) to the Annual Report on Form 10-K of Superior  TeleCom Inc. for the year ended December 31, 2001).                                                                                                                           |
| 10.15      |       | Consent, Amendment and Waiver to Lease Agreement,  dated as of December 11, 2002, between ST (TX) LP and Superior Telecommunications  Inc. (incorporated herein by reference to Exhibit 10(eee) to the Annual  Report on Form 10- K of Superior TeleCom Inc. for the year ended  December 31, 2002).                                                                                                                                         |
| 10.16      |       | Agreement for the Transfer of Receivables among  Newco, Nexans, Superior Essex, Nexans Winding Wires, Lacroix & Kress  GmbH and Essex International Ltd., on the one hand, and Compagnie Generale  d’Affacturage SA on the other, dated October 27, 2005 (incorporated  herein by reference to Exhibit 10.1 to the Current Report on Form 8-K  of Superior Essex Inc. dated July 11, 2006).                                    |
| 10.17      |       | Amendment No. 1 to the Transfer of Receivable  Agreement between Essex Nexans Europe SAS, Essex Nexans and Essex Nexans  L&K, on the one hand, and Compagnie Generale d’ Affacturage SA, on  the other, dated July 11, 2006 (incorporated herein by reference to  Exhibit 10.2 to the Current Report on Form 8-K of Superior  Essex Inc. dated July 11, 2006).                                                            |
| 10.18      |       | Agreement for the Assignment of Receivables among  Essex Nexans Europe, Essex Nexans, Essex Nexans L&K GmbH, Essex Nexans UK  and Compagnie Generale d’Affacturage, dated July 10, 2007 (incorporated  herein by reference to Exhibit 10.1 to the Current Report on Form 8-K  of Superior Essex Inc. dated July 10, 2007)                                                                                                                |
| 10.19*     |       | Superior Essex Inc. Senior Executive Retirement Plan  (incorporated herein by reference to Exhibit 10.27 to the Quarterly  Report on Form 10-Q of Superior Essex Inc. for the quarter ended  September 30, 2004)                                                                                                                                                                                                                                  |
| 10.20*     |       | Consulting Agreement, dated February 1, 2005,  between DG Network and Superior Essex Inc. (incorporated herein by reference  to Exhibit 99.1 to the Current Report on Form 8-K of Superior  Essex Inc. dated February 18, 2005)                                                                                                                                                                                                              |

 

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| Exhibit    | ** ** | ** **                                                                                                                                                                                                                                                                                                  |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                             |
| 10.21*     |       | Amendment to Consulting Agreement dated as of July 1,  2005, between DG Network and Superior Essex Inc. (incorporated herein by  reference to the Current Report on Form 8-K of Superior Essex  dated August 1, 2005)                                                                        |
| 10.22*     |       | Amended and Restated Agreement dated as of  February 16, 2007 between the Company, Denys Gounot and DG Network  (incorporated herein by reference to Exhibit 10.1 to the Current Report  on Form 8-K of Superior Essex dated February 16, 2007)                                         |
| 10.23*     |       | Superior Essex Inc. Director Compensation Plan  (incorporated herein by reference to Exhibit 99.1 to the Current Report  on Form 8-K of Superior Essex Inc. dated November 10, 2004)                                                                                                         |
| 10.24*     |       | Form of Director Restricted Stock Certificate  (incorporated herein by reference to Exhibit 99.2 to the Current Report  on Form 8-K of Superior Essex Inc. dated November 10, 2004)                                                                                                     |
| 10.25*     |       | Form of Non-qualified Stock Option Certificate  (incorporated herein by reference to Exhibit 99.1 to the Current Report  on Form 8-K of Superior Essex Inc. dated April 1, 2005)                                                                                                        |
| 10.26*     |       | Superior Essex Inc. 2005 Incentive Plan (incorporated  herein by reference to Appendix C of the Company’s Definitive Proxy Statement  on Schedule 14A (File No. 000-50514) filed with the  Securities and Exchange Commission on March 30, 2005)                                        |
| 10.27*     |       | Superior Essex Inc. 2005 Employee Stock Purchase  Plan (incorporated herein by reference to Appendix D of the Company’s  Definitive Proxy Statement on Schedule 14A (File No. 000-50514)  filed with the Securities and Exchange Commission on March 30, 2005)                          |
| 10.28*     |       | Form of Performance Accelerated Restricted  Stock Award Certificate (incorporated herein by reference to  Exhibit 99.1 to the Current Report on Form 8-K of Superior  Essex Inc. dated April 20, 2005)                                                                                  |
| 10.29*     |       | Superior Essex Inc. 2005 Executive Bonus Plan  (incorporated herein by reference to Exhibit 99.3 to the Current Report  on Form 8-K of Superior Essex Inc. dated May 3, 2005)                                                                                                                |
| 10.30*     |       | Superior Essex Inc. 2005 Executive Special  Recognition Bonus Plan (incorporated herein by reference to Exhibit 99.4  to the Current Report on Form 8-K of Superior Essex Inc. dated  May 3, 2005)                                                                                           |
| 10.31*     |       | Amended and Restated Executive Bonus Plan approved  March 29, 2006 (incorporated herein by reference to Exhibit 10.2 to  the Current Report on Form 8-K of Superior Essex dated  March 29, 2006)                                                                                        |
| 10.32*     |       | Amended and Restated Executive Bonus Plan approved  February 15, 2007 (incorporated herein by reference to Exhibit 10.31 to  the 2006 Superior Essex 10-K)                                                                                                                                             |
| 10.33      |       | Shareholders Agreement dated October 21, 2005  by and between Superior Essex Inc., SE Holding, C.V., Nexans, Nexans  Participations and Essex Nexans SAS (incorporated herein by reference to  Exhibit 10.1 to the Current Report on Form 8-K of Superior  Essex dated October 21,2005) |
| 10.34*     |       | Superior Essex Inc. 2005 Amended and Restated  Director Compensation Plan (incorporated herein by reference to  Exhibit 99.1 to the Current Report on Form 8-K of Superior  Essex dated October 27, 2005)                                                                                    |
| 10.35*     |       | Form of Director Restricted Stock Unit  Certificate (incorporated herein by reference to Exhibit 99.2 to the  Current Report on Form 8-K of Superior Essex dated  October 27, 2005)                                                                                                     |
| 10.36*     |       | Form of Director Option Certificate  (incorporated herein by reference to Exhibit 99.3 to the Current Report  on Form 8-K of Superior Essex dated October 27, 2005)                                                                                                                     |
| 10.37*     |       | Form of Stock Option Certificate (incorporated herein  by reference to Exhibit 10.1 to the Current Report on Form 8-K  of Superior Essex dated November 9, 2005)                                                                                                                        |
| 10.38*     |       | Form of Restricted Stock Award Certificate  (incorporated herein by reference to Exhibit 10.2 to the Current Report  on Form 8-K of Superior Essex dated November 9, 2005)                                                                                                              |
| 10.39*     |       | Form of Performance Contingent Share Award  Certificate (incorporated herein by reference to Exhibit 10.2 to the  Current Report on Form 8-K of Superior Essex dated March 29,  2006)                                                                                                   |
| 10.40      |       | Form of Indemnification Agreement (incorporated  herein by reference to Exhibit 10.1 to the Current Report on Form 8-K  of Superior Essex dated October 27, 2006)                                                                                                                       |
| 10.41      |       | Amended and Restated Sublease Agreement dated  January 15, 1985, between Stemp Leasing Corp., as lessor, and Essex Group,  Inc., as lessee. (incorporated herein by reference to Exhibit 10.40 to the  2006 Superior Essex 10-K)                                                                       |

 

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| Exhibit    | ** ** | ** **                                                                                                                                                                                        |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Number** | ** ** | **Description**                                                                                                                                                                                   |
| 10.42*     |       | Senior Vice President Amended and Restated Change of  Control Employment Agreement, adopted October 26, 2006 (incorporated herein  by reference to Exhibit 10.41 to the 2006 Superior Essex 10-K) |
| 10.43*     |       | Superior Essex Inc. Director Compensation Plan,  approved December 5, 2006 (incorporated herein by reference to Exhibit 10.42  to the 2006 Superior Essex 10-K)                                   |
| 10.44*     |       | Form of 2007 Performance Contingent Share Award  Certificate (incorporated herein by reference to Exhibit 10.1 to the Current  Report on Form 8-K of Superior Essex dated March 1, 2007)     |
| 31.1       |       | Rule 13a-14(a) certification of the  Chief Executive Officer.                                                                                                                           |
| 31.2       |       | Rule 13a-14(a) certification of the  Chief Financial Officer.                                                                                                                           |
| 32.1       |       | Certification of the Chief Executive Officer  pursuant to 18 U.S.C. Section 1350.                                                                                                            |
| 32.2       |       | Certification of the Chief Financial Officer  pursuant to 18 U.S.C. Section 1350.                                                                                                            |

 

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*            Management contract or compensatory plan or arrangement.

**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                      | Superior Essex Inc. |
|----------------------|---------------------|
|                 |                |   |
|                 | By:                 | /s/ DAVID S. ALDRIDGE |
| Date: August 7, 2007 | * *            | David S. Aldridge *Executive Vice President,  Chief Financial Officer   and Treasurer*(duly authorized officer and principal financial   officer) |

 

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