**DRAFT10/21/04**

 

 

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 
| **ý** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

 

**For the Quarterly Period Ended September 30, 2004**

 

**or**

 
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For the transition periodfrom             to             **

 

**Commission file number 0-50514**

 

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**SUPERIORESSEX INC.**

(Exactname of registrant as specified in its charter)

 
| **Delaware**                                            | ** ** | **20-0282396**      |
|---------------------------------------------------------|------------|---------------------|
| (State or other jurisdiction of                         |       | (I.R.S. Employer    |
| incorporation or organization)                          |       | Identification No.) |
|                                                    |       |                |
| **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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Indicate by check markwhether the registrant: (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days. Yes ý  No o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act). Yes o  No ý

 

As of November 5,2004, the registrant had 17,020,307 shares of common stock, $0.01 par value,outstanding.

 

 

 

**PART I.   FINANCIALINFORMATION**

** **

**ITEM1.   FINANCIAL STATEMENTS**

** **

The accompanyingunaudited consolidated financial statements have been prepared in accordancewith the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, as amended, and, therefore, do not include alldisclosures required by generally accepted accounting principles. However, inthe opinion of management, these statements reflect all adjustments (whichconsist only of normal recurring accruals) necessary for a fair presentation ofthe results of operations for the relevant periods. Results for the quarter andnine months ended September 30, 2004 are not necessarily indicative of theresults to be expected for the entire fiscal year. These financial statementsshould be read in conjunction with the audited consolidated financialstatements and notes thereto included in Superior Essex Inc.’s AnnualReport on Form 10-K for the year ended December 31, 2003, as amendedApril 29, 2004.

 

SuperiorTeleCom Inc. and certain of its U.S. subsidiaries filed voluntarypetitions for relief under Chapter 11 of the United States Bankruptcy Code onMarch 3, 2003. Superior TeleCom’s plan of reorganization was confirmed byorder of the Bankruptcy Court on October 22, 2003 and became effective onNovember 10, 2003. In accordance with the plan of reorganization, as ofNovember 10, 2003, the Company acquired the business formerly conducted bySuperior TeleCom and its subsidiaries and began operating its business under anew holding company and capital structure and adopted fresh-start reporting.Because of the emergence from bankruptcy and adoption of fresh-start reporting,the historical financial information for Superior TeleCom, the Company’spredecessor for financial reporting purposes, is not comparable to the Company’sfinancial information for periods after November 10, 2003. The historicalconsolidated statement of operations and statement of cash flows of SuperiorTeleCom are presented herein in accordance with the requirements ofForm 10-Q. Such statements were prepared on a going concern basis, whichassumes continuity of operations and realization of assets and satisfaction ofliabilities in the ordinary course of business, and, for periods subsequent toMarch 3, 2003, in accordance with AICPA Statement of Position 90-7.

 

In this Form 10-Q,the following terms have the meanings indicated below:

 

•       unless thecontext otherwise requires, the terms “we,” “us” and “our,” as well as theterms “Superior Essex,” and the “Company,” refer to Superior Essex Inc.and its subsidiaries on and after November 10, 2003, the effective date ofthe plan of reorganization of Superior TeleCom Inc. and its subsidiaries.

 

•       “SuperiorTeleCom,” unless the context otherwise requires, refers to SuperiorTeleCom Inc. and its subsidiaries and the business carried on by themprior to November 10, 2003.

 

•       “SuperiorEssex Holding” refers to Superior Essex Holding Corp., Superior Essex’s whollyowned subsidiary.

 

•       “SuperiorEssex Communications” refers to Superior Essex Communications LP (formerlySuperior Essex Communications LLC). On June 17, 2004, Superior EssexCommunications LLC converted from a Delaware limited liability company into aDelaware limited partnership. Superior Essex Holding is the sole limitedpartner of Superior Essex Communications and SE Communications GP Inc., awholly owned subsidiary of Superior Essex Holding, is the sole general partnerof Superior Essex Communications.

 

•       “EssexInternational” refers to Essex International Inc., Superior Essex Holding’swholly owned subsidiary.

 

•       “Essex Group”refers to Essex Group, Inc., Essex International’s wholly ownedsubsidiary.

 

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**SUPERIOR ESSEX INC.AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share data) (unaudited)**

 
| ** **                                                                                                                                                         | ** ** | **Superior Essex Inc.** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                                                                                         | ** ** | **September  30,  2004**          | ** ** | **December  31,  2003** | ** ** |
| **ASSETS**                                                                                                                                                         |       |                              |       |   |   |
| Current assets:                                                                                                                                                    |       |                              |       |   |   |
| Cash and cash equivalents                                                                                                                                          |       | $                                 | 4,076      |   | $ | 10,606 |   |
| Accounts receivable (less allowance for  doubtful accounts of $2,061 and $2,140 at September 30, 2004 and  December 31, 2003, respectively)              |       | 178,750                           |       | 100,893 |   |
| Inventories, net                                                                                                                                                   |       | 168,028                           |       | 119,787 |   |
| Other current assets                                                                                                                                               |       | 17,756                            |       | 23,316 |   |
| Total current assets                                                                                                                                               |       | 368,610                           |       | 254,602 |   |
| Property, plant and equipment, net                                                                                                                                 |       | 239,927                           |       | 223,318 |   |
| Intangible and other long-term assets, net                                                                                                                         |       | 44,035                            |       | 9,005 |   |
| Total assets                                                                                                                                                       |       | $                                 | 652,572    |   | $ | 486,925 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                     |       |                              |       |   |   |
| Current liabilities:                                                                                                                                               |       |                              |       |   |   |
| Short-term borrowings                                                                                                                                              |       | $                                 | 58,505     |   | $ | 42,755 |   |
| Accounts payable                                                                                                                                                   |       | 68,182                            |       | 35,866 |   |
| Accrued expenses                                                                                                                                                   |       | 63,009                            |       | 58,199 |   |
| Total current liabilities                                                                                                                                          |       | 189,696                           |       | 136,820 |   |
| Long-term debt                                                                                                                                                     |       | 262,285                           |       | 157,000 |   |
| Other long-term liabilities, primarily  pension obligations                                                                                                        |       | 27,824                            |       | 29,213 |   |
| Total liabilities                                                                                                                                                  |       | 479,805                           |       | 323,033 |   |
| Stockholders’ equity:                                                                                                                                         |       |                              |       |   |   |
| Common stock, $.01 par value; 33,000,000  shares authorized; 17,033,677 and 16,500,000 issued at September 30,  2004 and December 31, 2003, respectively |       | 170                               |       | 165 |   |
| Capital in excess of par value                                                                                                                                     |       | 170,918                           |       | 168,135 |   |
| Accumulated other comprehensive income                                                                                                                             |       | 2,299                             |       | 1,221 |   |
| Retained earnings (accumulated deficit)                                                                                                                            |       | 4,496                             |       | (2,443 | ) |
|                                                                                                                                                               |       | 177,883                           |       | 167,078 |   |
| Equity-based unearned compensation                                                                                                                                 |       | (4,925                            | )          | (3,186 | ) |
| Treasury stock, at cost (13,385 shares at  September 30, 2004)                                                                                                |       | (191                              | )          | — |   |
| Total stockholders’ equity                                                                                                                                    |       | 172,767                           |       | 163,892 |   |
| Total liabilities and stockholders’ equity                                                                                                                    |       | $                                 | 652,572    |   | $ | 486,925 |   |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

2

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**SUPERIOR ESSEX INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

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

**(unaudited)**

 
| ** **                                                                                             | ** ** | **Superior  Essex Inc.**                        | ** ** | **Superior  TeleCom Inc.** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                             | ** ** | **Three Months Ended  September 30,** | ** ** |
| ** **                                                                                             | ** ** | **2004**                                             | ** ** | **2003**                        | ** ** |
| Net sales                                                                                              |       | $                                                    | 382,206    |                            | $          | 247,660 |   |
| Cost of goods sold                                                                                     |       | 345,145                                              |       | 219,650                         |       |
| Gross profit                                                                                           |       | 37,061                                               |       | 28,010                          |       |
| Selling, general and administrative  expenses                                                          |       | 24,038                                               |       | 20,706                          |       |
| Restructuring and other charges                                                                        |       | 47                                                   |       | 2,136                           |       |
| Operating income                                                                                       |       | 12,976                                               |       | 5,168                           |       |
| Interest expense (contractual interest of  $40,806 for the three months ended September 30, 2003) |       | (7,289                                               | )          | (2,151                          | )          |
| Other income (expense), net                                                                            |       | 400                                                  |       | (269                            | )          |
| Income before reorganization items and  income taxes                                                   |       | 6,087                                                |       | 2,748                           |       |
| Reorganization items                                                                                   |       | —                                               |       | (7,338                          | )          |
| Income tax benefit (expense)                                                                           |       | (2,544                                               | )          | 183                             |       |
| Net income (loss)                                                                                      |       | $                                                    | 3,543      |                            | $          | (4,407 | ) |
| Net income (loss) per share of common  stock:                                                          |       |                                                 |       |                            |       |
| Basic                                                                                                  |       | $                                                    | 0.21       |                            | $          | (0.20 | ) |
| Diluted                                                                                                |       | $                                                    | 0.21       |                            | $          | (0.20 | ) |
| Weighted average shares outstanding:                                                                   |       |                                                 |       |                            |       |
| Basic                                                                                                  |       | 16,532                                               |       | 21,845                          |       |
| Diluted                                                                                                |       | 16,645                                               |       | 21,845                          |       |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

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| ** **                                                                                                             | ** ** | **Superior  Essex Inc.**                       | ** ** | **Superior  TeleCom Inc.** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                             | ** ** | **Nine Months Ended  September 30,** | ** ** |
| ** **                                                                                                             | ** ** | **2004**                                            | ** ** | **2003**                        | ** ** |
| Net sales                                                                                                              |       | $                                                   | 1,041,408  |                            | $          | 745,978 |   |
| Cost of goods sold                                                                                                     |       | 941,130                                             |       | 661,867                         |       |
| Gross profit                                                                                                           |       | 100,278                                             |       | 84,111                          |       |
| Selling, general and administrative  expenses                                                                          |       | 67,220                                              |       | 62,407                          |       |
| Restructuring and other charges                                                                                        |       | 1,533                                               |       | 6,971                           |       |
| Operating income                                                                                                       |       | 31,525                                              |       | 14,733                          |       |
| Interest expense (contractual interest of  $108,598 for the nine months ended September 30, 2003)                 |       | (19,269                                             | )          | (25,172                         | )          |
| Loss on early extinguishment of debt                                                                                   |       | (407                                                | )          | —                          |       |
| Other income (expense), net                                                                                            |       | 214                                                 |       | (299                            | )          |
| Income (loss) before reorganization items,  income taxes and distributions on preferred securities of Superior Trust I |       | 12,063                                              |       | (10,738                         | )          |
| Reorganization items                                                                                                   |       | —                                              |       | (40,306                         | )          |
| Income tax (expense) benefit                                                                                           |       | (5,124                                              | )          | 2,243                           |       |
| Income (loss) before distributions on  preferred securities of Superior Trust I                                        |       | 6,939                                               |       | (48,801                         | )          |
| Distributions on preferred securities of  Superior Trust I                                                             |       | —                                              |       | (5,050                          | )          |
| Net income (loss)                                                                                                      |       | $                                                   | 6,939      |                            | $          | (53,851 | ) |
| Net income (loss) per share of common  stock:                                                                          |       |                                                |       |                            |       |
| Basic                                                                                                                  |       | $                                                   | 0.42       |                            | $          | (2.47 | ) |
| Diluted                                                                                                                |       | $                                                   | 0.42       |                            | $          | (2.47 | ) |
| Weighted average shares outstanding:                                                                                   |       |                                                |       |                            |       |
| Basic                                                                                                                  |       | 16,516                                              |       | 21,804                          |       |
| Diluted                                                                                                                |       | 16,620                                              |       | 21,804                          |       |
|                                                                                                                        |            |                                                     |            |                                 |            |  |  |  |  |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

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**SUPERIOR ESSEX INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)**

 
| ** **                                                                                           | ** ** | **Superior  Essex Inc.**                       | ** ** | **Superior  TeleCom Inc.** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                           | ** ** | **Nine Months Ended  September 30,** | ** ** |
| ** **                                                                                           | ** ** | **2004**                                            | ** ** | **2003**                        | ** ** |
| Cash flows from operating activities:                                                                |       |                                                |       |                            |       |
| Net income (loss)                                                                                    |       | $                                                   | 6,939      |                            | $          | (53,851 | ) |
| Adjustments to reconcile net income (loss)  to net cash provided by (used for) operating activities: |       |                                                |       |                            |       |
| Depreciation and amortization                                                                        |       | 15,662                                              |       | 21,959                          |       |
| Deferred distributions on Trust Convertible  Preferred Securities                                    |       | —                                              |       | 5,050                           |       |
| Amortization of deferred financing costs  and discount                                               |       | 1,345                                               |       | 6,191                           |       |
| Write-down of idled and abandoned property,  plant and equipment                                     |       | —                                              |       | 3,083                           |       |
| Reorganization items                                                                                 |       | —                                              |       | 41,769                          |       |
| Change in operating assets and liabilities:                                                          |       |                                                |       |                            |       |
| Accounts receivable, net                                                                             |       | (77,765                                             | )          | (17,722                         | )          |
| Inventories, net                                                                                     |       | (2,536                                              | )          | (10,760                         | )          |
| Other current and non-current assets                                                                 |       | 4,848                                               |       | 46,412                          |       |
| Accounts payable, accrued expenses and  other liabilities                                            |       | 39,469                                              |       | 44,469                          |       |
| Other, net                                                                                           |       | 1,818                                               |       | 1,110                           |       |
| Cash flows provided by (used for) operating  activities before reorganization items                  |       | (10,220                                             | )          | 87,710                          |       |
| Reorganization items paid, net                                                                       |       | (12,319                                             | )          | (9,893                          | )          |
| Cash flows provided by (used for) operating  activities                                              |       | (22,539                                             | )          | 77,817                          |       |
| Cash flows from investing activities:                                                                |       |                                                |       |                            |       |
| Capital expenditures                                                                                 |       | (9,459                                              | )          | (1,987                          | )          |
| Belden and Nexans asset acquisition,  including related fees and expenses (note 6)                   |       | (90,698                                             | )          | —                          |       |
| Proceeds from asset sales                                                                            |       | 126                                                 |       | 5,698                           |       |
| Other                                                                                                |       | —                                              |       | 143                             |       |
| Cash flows provided by (used for) investing  activities                                              |       | (100,031                                            | )          | 3,854                           |       |
| Cash flows from financing activities:                                                                |       |                                                |       |                            |       |
| Short-term borrowings (repayments), net                                                              |       | 15,738                                              |       | (23,489                         | )          |
| Repayment of pre-petition revolving credit  facilities, net                                          |       | —                                              |       | (28,330                         | )          |
| Debt issuance costs                                                                                  |       | (4,583                                              | )          | (3,900                          | )          |
| Long-term borrowings                                                                                 |       | 250,004                                             |       | —                          |       |
| Repayments of long-term borrowings                                                                   |       | (145,000                                            | )          | (19,402                         | )          |
| Cash flows provided by (used for) financing  activities                                              |       | 116,159                                             |       | (75,121                         | )          |
| Effect of exchange rate changes on cash                                                              |       | (119                                                | )          | (536                            | )          |
| Net increase (decrease) in cash and cash  equivalents                                                |       | (6,530                                              | )          | 6,014                           |       |
| Cash and cash equivalents at beginning of  period                                                    |       | 10,606                                              |       | 7,101                           |       |
| Cash and cash equivalents at end of period                                                           |       | $                                                   | 4,076      |                            | $          | 13,115 |   |
| Supplemental disclosures:                                                                            |       |                                                |       |                            |       |
| Cash paid for interest                                                                               |       | $                                                   | 9,376      |                            | $          | 14,098 |   |
| Cash paid (received) for income taxes, net                                                           |       | $                                                   | 1,074      |                            | $          | (58,230 | ) |

 

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

 

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**SUPERIOR ESSEX INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2004(unaudited)**

** **

**1.   General**

** **

***Basisof presentation***

*** ***

SuperiorEssex Inc., a Delaware holding company, and its operating subsidiarieswere formed in 2003 to acquire and conduct the business formerly conducted bySuperior TeleCom Inc., and its subsidiaries, pursuant to a plan ofreorganization confirmed by the United States Bankruptcy Court for the Districtof Delaware (the “Bankruptcy Court”) and implemented by Superior TeleComeffective November 10, 2003 as discussed below. As a result of thereorganization and the Company’s implementation of fresh-start reporting asdescribed below, the consolidated financial statements of the Company (thesuccessor entity for purposes of fresh-start reporting) for periods subsequentto November 10, 2003 reflect a new basis of accounting. Accordingly, thehistorical consolidated financial statements of Superior TeleCom, the Company’spredecessor for financial reporting purposes, are not comparable to theconsolidated financial statements of the Company for periods subsequent to theeffective date of the plan of reorganization.

 

The Company is amanufacturer and supplier of communications wire and cable products totelephone companies, CATV companies, distributors and systems integrators, andmagnet wire and insulation materials to major original equipment manufacturers,or OEMs, and, through its distribution operations, to small OEMs and themotor maintenance, repair and overhaul industry. The Company also convertscopper cathode to copper rod for sale to other wire and cable manufacturers.The Company operates manufacturing and distribution facilities in the UnitedStates, the United Kingdom and Mexico.

 

***Chapter11 Filing and Reorganization***

*** ***

On March 3, 2003,Superior TeleCom and certain of its U.S. subsidiaries filed voluntary petitionsfor relief under Chapter 11 of the United States Bankruptcy Code and continuedto manage their properties and operate their businesses as “debtors-in-possession”under the jurisdiction of the Bankruptcy Court and in accordance with theapplicable provisions of the Bankruptcy Code. Under the Bankruptcy Code,actions to collect pre-petition indebtedness, as well as most other pendinglitigation, were stayed and certain contractual provisions could not beenforced against Superior TeleCom. Absent an order of the Bankruptcy Court,substantially all pre-petition liabilities were subject to settlement under aplan of reorganization voted upon by certain classes of Superior TeleCom’screditors and approved by the Bankruptcy Court. A plan of reorganization wasconfirmed by order of the Bankruptcy Court on October 22, 2003 and becameeffective on November 10, 2003.

 

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In accordance with the plan of reorganization, on November 10,2003 the Company acquired the business formerly conducted by Superior TeleComand its subsidiaries, and Superior TeleCom and certain of its dormantsubsidiaries were deemed dissolved and ceased to have continuing corporateexistences, subject only to obligations under the plan of reorganization to satisfyallowed claims. Except as otherwise provided in the plan of reorganization, theCompany’s senior secured revolving credit facility, the Company’s senior notesor any agreement, instrument or indenture relating thereto, on and after theeffective date of the plan, all property of Superior TeleCom and itssubsidiaries vested in the Company, free and clear of all liens, claims,charges or other encumbrances. On and after the effective date of the plan ofreorganization, the Company began operating its business without supervision orapproval by the Bankruptcy Court.

 

***Fresh-StartReporting***

*** ***

Upon implementation ofthe plan of reorganization, fresh-start reporting was adopted in accordancewith AICPA Statement of Position 90-7, or SOP 90-7, *Financial Reporting by Entities in Reorganization under the BankruptcyCode*. Under fresh-start reporting, the reorganization value wasallocated to the Company’s net assets based on their relative fair values in amanner similar to the accounting provisions applied to business combinationsunder Statement of Financial Accounting Standards No. 141, *Business Combinations* (“SFAS No. 141”).The Company’s reorganization value was less than the fair value of the netassets acquired pursuant to the plan of reorganization. In accordance with SFASNo. 141, the excess of the fair value of the net assets over thereorganization value was used to reduce the value of property, plant andequipment. Liabilities existing at the effective date of the plan ofreorganization were stated at the present value of amounts to be paiddiscounted at appropriate current rates. Debt issued in connection with theplan of reorganization was recorded at the stated value, which approximatedfair value.

 

7

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***Stock-BasedCompensation Plans***

*** ***

The Company and SuperiorTeleCom applied the intrinsic-value based method of accounting prescribed byAccounting Principles Board (APB) Opinion No. 25, *Accounting for Stock Issued to Employees*,and related interpretations including FASB Interpretation No. 44, *Accounting for Certain Transactions involving StockCompensation, an interpretation of APB Opinion No. 25*, issuedin March 2000, to account for stock-based compensation plans. Under thismethod, compensation expense is recorded on the date of grant only if thecurrent market price of the underlying stock exceeded the exercise price.Compensation expense attributable to fixed awards is recognized on astraight-line basis over the related vesting period. SFAS No. 123, *Accounting for Stock-Based Compensation*,established accounting and disclosure requirements using a fair-value basedmethod of accounting for stock-based employee compensation plans. As allowed bySFAS No. 123, the Company and Superior TeleCom elected to continue to applythe intrinsic-value based method of accounting described above, and adoptedonly the disclosure requirements of SFAS No. 123. The following tableillustrates the effect on net income (loss) if the fair-value based method hadbeen applied to all outstanding and unvested awards in each period.

 
| ** **                                                                                                                   | ** ** | **Superior  Essex Inc.**                        | ** ** | **Superior  TeleCom Inc.** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                   | ** ** | **Three Months Ended  September 30,** | ** ** |
| ** **                                                                                                                   | ** ** | **2004**                                             | ** ** | **2003**                        | ** ** |
| Net income (loss), as reported                                                                                               |       | $                                                    | 3,543      |                            | $          | (4,407 | ) |
| Add stock-based employee compensation  expense included in reported net income (loss), net of tax                            |       | 469                                                  |       | 138                             |       |
| Deduct total stock-based employee  compensation expense determined under fair-value based method for all  awards, net of tax |       | (584                                                 | )          | (315                            | )          |
| Pro forma net income (loss)                                                                                                  |       | $                                                    | 3,428      |                            | $          | (4,584 | ) |
| Net income (loss) per share:                                                                                                 |       |                                                 |       |                            |       |
| As reported:                                                                                                                 |       |                                                 |       |                            |       |
| Basic                                                                                                                        |       | $                                                    | 0.21       |                            | $          | (0.20 | ) |
| Diluted                                                                                                                      |       | 0.21                                                 |       | (0.20                           | )          |
| Pro forma:                                                                                                                   |       |                                                 |       |                            |       |
| Basic                                                                                                                        |       | 0.21                                                 |       | (0.21                           | )          |
| Diluted                                                                                                                      |       | 0.21                                                 |       | (0.21                           | )          |
|                                                                                                                              |            |                                                      |            |                                 |            |  |  |  |  |

 

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| ** **                                                                                                                   | ** ** | **Superior  Essex Inc.**                       | ** ** | **Superior  TeleCom Inc.** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                   | ** ** | **Nine Months Ended  September 30,** | ** ** |
| ** **                                                                                                                   | ** ** | **2004**                                            | ** ** | **2003**                        | ** ** |
| Net income (loss), as reported                                                                                               |       | $                                                   | 6,939      |                            | $          | (53,851 | ) |
| Add stock-based employee compensation  expense included in reported net income (loss), net of tax                            |       | 1,015                                               |       | 850                             |       |
| Deduct total stock-based employee  compensation expense determined under fair-value based method for all  awards, net of tax |       | (1,264                                              | )          | (1,407                          | )          |
| Pro forma net income (loss)                                                                                                  |       | $                                                   | 6,690      |                            | $          | (54,408 | ) |
| Net income (loss) per share:                                                                                                 |       |                                                |       |                            |       |
| As reported:                                                                                                                 |       |                                                |       |                            |       |
| Basic                                                                                                                        |       | $                                                   | 0.42       |                            | $          | (2.47 | ) |
| Diluted                                                                                                                      |       | 0.42                                                |       | (2.50                           | )          |
| Pro forma:                                                                                                                   |       |                                                |       |                            |       |
| Basic                                                                                                                        |       | 0.41                                                |       | (2.47                           | )          |
| Diluted                                                                                                                      |       | 0.40                                                |       | (2.50                           | )          |
|                                                                                                                              |            |                                                     |            |                                 |            |  |  |  |  |  |

 

The effects of applyingSFAS No. 123 in the pro forma disclosure are not necessarily indicative offuture amounts, since the estimated fair value of stock options is amortized toexpense over the vesting period and additional options may be granted in futureyears. Options to purchase 750,500 shares of common stock with a weightedaverage fair value per option of $6.21 were granted during the nine monthsended September 30, 2004 at an exercise price below the fair value of theunderlying common stock at the date of grant in accordance with the terms ofthe 2003 Stock Incentive Plan. The 2003 Stock Incentive Plan provides that theexercise price would be the initial value of the Company’s stock on theeffective date of the plan of reorganization ($10 per share) for optionsgranted prior to May 10, 2004 to individuals who were members ofmanagement as of the effective date of the plan of reorganization. Options topurchase 115,000 shares of common stock with a weighted average fair value peroption of $3.82 were granted during the nine months ended September 30,2004 at an exercise price equal to the fair value of the underlying commonstock at the date of grant. The fair value for these options was estimated atthe date of grant using the Black-Scholes option-pricing model with thefollowing weighted-average assumptions: dividend yield of 0%; expectedvolatility of 41%, risk-free interest rate of 2.5%, and expected life of threeyears. No options were granted during the nine months ended September 30,2003.

 

During the first quarterof 2004, the Company awarded 150,000 shares of restricted stock with a weightedaverage per share value at the date of award of $13.25 to certain members ofsenior management. These restricted stock awards vest after 7 years withearlier vesting after 3 years if the Company’s stock price exceeds certainspecified levels for a period of 20 consecutive trading days. An additional40,000 shares of restricted stock with a weighted average per share value atthe date of award of $15.25 were granted during the first quarter of 2004 toother members of management. These shares vest 50% after three years and 50%after five years. A total of 13,677 shares of restricted stock with a weightedaverage per share value of $13.75 were awarded to certain employees on August9, 2004.  These shares were fully vestedas of  September 30, 2004.

 

9

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**2.  Inventories, net**

 

At September 30,2004 and December 31, 2003, the components of inventories were as follows:

 
| ** **      | ** ** | **Superior Essex Inc.** | ** ** |
|-----------------|------------|-----------------------------------|------------|
| ** **      | ** ** | **September  30,  2004**          | ** ** | **December  31,  2003** | ** ** |
| ** **      | ** ** | **(in thousands)**           | ** ** |
| Raw materials   |       | $                                 | 21,803     |   | $ | 10,407 |   |
| Work in process |       | 25,825                            |       | 18,977 |   |
| Finished goods  |       | 135,766                           |       | 92,944 |   |
|            |       | 183,394                           |       | 122,328 |   |
| LIFO reserve    |       | (15,366                           | )          | (2,541 | ) |
|            |       | $                                 | 168,028    |   | $ | 119,787 |   |
|                 |            |                                   |            |  |  |  |  |  |  |

 

Inventories valued usingthe LIFO method amounted to $88 million and $69 million atSeptember 30, 2004 and December 31, 2003, respectively.

 

**3.   Comprehensiveincome (loss)**

 

The components ofcomprehensive income (loss) for the three and nine months endedSeptember 30, 2004 and 2003 were as follows:

 
| ** **                                                                                                          | ** ** | **Superior  Essex Inc.**                        | ** ** | **Superior  TeleCom Inc.** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                          | ** ** | **Three Months Ended  September 30,** | ** ** |
| ** **                                                                                                          | ** ** | **2004**                                             | ** ** | **2003**                        | ** ** |
| ** **                                                                                                          | ** ** | **(in thousands)**                              | ** ** |
| Net income (loss)                                                                                                   |       | $                                                    | 3,543      |                            | $          | (4,407 | ) |
| Foreign currency translation adjustment                                                                             |       | 169                                                  |       | (2,242                          | )          |
| Change in unrealized gains on derivatives,  net of income tax of $575 for the three months ended September 30, 2004 |       | 899                                                  |       | 1,067                           |       |
| Additional minimum pension liability                                                                                |       | —                                               |       | 2,003                           |       |
| Other                                                                                                               |       | 5                                                    |       | (35                             | )          |
| Comprehensive income (loss)                                                                                         |       | $                                                    | 4,616      |                            | $          | (3,614 | ) |
|                                                                                                                     |            |                                                      |            |                                 |            |  |  |  |  |

 
| ** **                                                                                                         | ** ** | **Superior  Essex Inc.**                       | ** ** | **Superior  TeleCom Inc.** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** |
| ** **                                                                                                         | ** ** | **2004**                                            | ** ** | **2003**                        | ** ** |
| ** **                                                                                                         | ** ** | **(in thousands)**                             | ** ** |
| Net income (loss)                                                                                                  |       | $                                                   | 6,939      |                            | $          | (53,851 | ) |
| Foreign currency translation adjustment                                                                            |       | 116                                                 |       | (530                            | )          |
| Change in unrealized gains on derivatives,  net of income tax of $565 for the nine months ended September 30, 2004 |       | 892                                                 |       | 2,250                           |       |
| Additional minimum pension liability                                                                               |       | —                                              |       | 1,712                           |       |
| Other                                                                                                              |       | 70                                                  |       | (24                             | )          |
| Comprehensive income (loss)                                                                                        |       | $                                                   | 8,017      |                            | $          | (50,443 | ) |
|                                                                                                                    |            |                                                     |            |                                 |            |  |  |  |  |

 

10

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The components ofaccumulated other comprehensive income at September 30, 2004 andDecember 31, 2003 were as follows:

 
| ** **                                                                                                                                 | ** ** | **Superior Essex Inc.** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                                                                 | ** ** | **September  30, 2004**           | ** ** | **December  31, 2003** | ** ** |
| ** **                                                                                                                                 | ** ** | **(in thousands)**           | ** ** |
| Foreign currency translation adjustment                                                                                                    |       | $                                 | 992        |   | $ | 876 |   |
| Unrealized gain on derivatives, net of  deferred tax of $815 and $250 at September 30, 2004 and  December 31, 2003, respectively |       | 1,272                             |       | 380 |   |
| Other                                                                                                                                      |       | 35                                |       | (35 | ) |
|                                                                                                                                       |       | $                                 | 2,299      |   | $ | 1,221 |   |

 

**4.   Reorganizationitems**

** **

Reorganization itemsrepresent amounts incurred by Superior TeleCom as a result of its Chapter 11filings and are summarized as follows for the three and nine months endedSeptember 30, 2003:

 
| ** **                              | ** ** | **Three Months Ended  September 30, 2003** | ** ** | **Nine Months Ended  September 30, 2003** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                              | ** ** | **(in thousands)**                                        | ** ** |
| Professional fees                       |       | $                                                              | 4,410      |                                                          | $          | 11,200 |   |
| Adjustments to pre-petition liabilities |       | —                                                         |       | 27,006                                                        |       |
| Deferred debt issue costs               |       | —                                                         |       | 3,452                                                         |       |
| Settlement of pre-petition liabilities  |       | (177                                                           | )          | (5,187                                                        | )          |
| Employee retention and severance        |       | 3,105                                                          |       | 3,835                                                         |       |
|                                    |       | $                                                              | 7,338      |                                                          | $          | 40,306 |   |

 

Adjustments topre-petition liabilities represent amounts to adjust the carrying value ofSuperior TeleCom’s Trust Convertible Preferred Securities (which were exchangedfor Convertible Debentures as a result of the liquidation of the Trust on orabout April 30, 2003) to the estimated amount of the allowed claimincluding accrued and unpaid distributions.

 

**5.   Restructuringand other charges**

** **

During the nine monthsended September 30, 2003, Superior TeleCom recorded restructuring andother charges of $1.8 million primarily related to ongoing closureactivities and subsequent sale of the communication cable segment’s facilitiesin Elizabethtown, Kentucky and Winnipeg, Manitoba which were closed in 2002.Restructuring and other charges for the nine months ended September 30,2003 also included pre-petition professional fees of $3.6 million incurredin connection with preparation for Superior TeleCom’s Chapter 11 filings,$2.3 million of asset impairments from the closure of one of Superior TeleCom’scontinuous casting facilities and $0.8 million of asset impairments resultingfrom the write-off of abandoned equipment offset by foreign currencytransaction gains of $1.5 million related to Superior TeleCom’s Canadiansubsidiary. Restructuring and other charges for the nine months endedSeptember 30, 2004 were $1.5 million consisting primarily of ongoingprofessional fees related to implementation of the plan of reorganization andemployee retention and severance payments under plans established by SuperiorTeleCom in connection with its bankruptcy proceedings.

 

11

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**6.   Assetacquisitions**

** **

***BeldenAsset Acquisition***

 

On June 1, 2004,Superior Essex Communications acquired certain assets from operatingsubsidiaries of Belden Inc. (“Belden”) related to their North American copperOSP communications wire and cable business (the “Belden Asset Acquisition”).Under the terms of the asset purchase agreement, Superior Essex Communicationsacquired certain inventories, selected machinery and equipment and certaincustomer contracts related to a portion of Belden’s communications business fortotal consideration not to exceed $95 million (including a contingent paymentof up to $10 million to be made nine months after closing based on businessrelationships successfully transitioned to Superior Essex Communications).Superior Essex Communications intends to use the equipment acquired from Beldenin its communications wire and cable business. Belden retained itsmanufacturing facilities and employees together with all of the associatedliabilities, including, among others, accounts payable, any employee-relatedobligations, plant shutdown costs and environmental obligations. The Companypaid an initial cash price of $82.2 million on June 1, 2004. Based onpreliminary inventory adjustments, $5.2 million of the initial purchase pricewas refunded to the Company in August 2004. The final purchase price is subjectto further adjustment based on a final accounting of the inventories acquired.Additionally, the Company has accrued the full contingent payment of $10million as of September 30, 2004 as the Company believes the payment ofthis amount is probable based on customers transitioned to date. The allocationof the purchase price has not been finalized and is subject to adjustmentpending a final accounting for the inventories acquired. The preliminaryallocation of the purchase price is summarized as follows (in thousands):

 
| Initial purchase price, as adjusted   |   | $      | 76,977 |   |
|---------------------------------------|--------|--------|--------|--------|
| Acquisition costs                     |   | 2,100  |   |
| Contingent payment                    |   | 10,000 |   |
|                                  |   | $      | 89,077 |   |
| Allocated to:                         |   |   |   |
| Inventory and amounts due from seller |   | 38,462 |   |
| Machinery and equipment               |   | 22,209 |   |
| Intangible asset-customer base        |   | 28,406 |   |
|                                  |   | $      | 89,077 |   |

 

The customer baseintangible asset is being amortized on a straight-line basis over 17 1⁄2 years.The Company intends to install the machinery and equipment acquired in theBelden Asset Acquisition in certain of its manufacturing plants to replacecertain existing machinery and equipment. As a result, machinery and equipmentwith a net book value of approximately $2.2 million at June 1, 2004 isexpected to be taken out of service through the second quarter of 2005.Accordingly, the Company has revised the estimated depreciable lives of themachinery and equipment to be replaced resulting in additional depreciationcharges included in cost of goods sold of $0.9 million and $1.2 million,respectively, during the three and nine months ended September 30, 2004.Additionally, the Company incurred approximately $1.0 million and $1.6 million,respectively, of plant employee training costs for acquisition-relatedproduction capacity expansion which have been included in cost of goods sold inthe accompanying statement of operations for the three and nine months endedSeptember 30, 2004.

 

12

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***NexansAsset Acquisition***

 

On September 7, 2004,Essex Group acquired certain assets from Nexans Magnet Wire USA Inc., awholly-owned subsidiary of Nexans S.A. Company. Under the terms of the purchase agreement, Essex Group acquiredsubstantially all inventory associated with Nexans’ U.S. magnet wire operationsand assumed certain U.S. customer contractual arrangements.  The Company intends to use the assetsacquired in its magnet wire and distribution business.  The total purchase price for the acquisitionwas $11.6 million and is subject to adjustment based on a final accounting ofthe inventories acquired. The allocation of the purchase price, including themethod and period of amortization for acquired intangibles, based on therelative fair values of the assets acquired, has not been finalized and issubject to adjustment. The preliminary allocation of the purchase price issummarized as follows (in thousands):

 
| Initial purchase price |   | $      | 11,568 |   |
|------------------------|--------|--------|--------|--------|
| Acquisition costs      |   | 763    |   |
|                   |   | $      | 12,331 |   |
| Allocated to:          |   |   |   |
| Inventory              |   | 10,504 |   |
| Intangible asset       |   | 1,827  |   |
|                   |   | $      | 12,331 |   |

 

**7.   Debt**

 

At September 30,2004 and December 31, 2003, short-term borrowings and long-term debtconsisted of the following:

 
| ** **                                  | ** ** | **Superior Essex Inc.** | ** ** |
|---------------------------------------------|------------|-----------------------------------|------------|
| ** **                                  | ** ** | **September  30, 2004**           | ** ** | **December  31, 2003** | ** ** |
| ** **                                  | ** ** | **(in thousands)**           | ** ** |
| Short-term borrowings:                      |       |                              |       |   |   |
| Senior secured revolving credit facility    |       | $                                 | 57,536     |   | $ | 41,910 |   |
| Other                                       |       | 969                               |       | 845 |   |
|                                        |       | $                                 | 58,505     |   | $ | 42,755 |   |
| Long-term debt:                             |       |                              |       |   |   |
| 9% senior notes (net of discount of $6,815) |       | $                                 | 250,285    |   | $ | — |   |
| 91/2 % senior notes                         |       | —                            |       | 145,000 |   |
| Series A redeemable preferred stock    |       | 5,000                             |       | 5,000 |   |
| Other                                       |       | 7,000                             |       | 7,000 |   |
| Total long-term debt                        |       | $                                 | 262,285    |   | $ | 157,000 |   |
|                                             |            |                                   |            |  |  |  |  |  |  |

 

In 2004 the seniorsecured revolving credit facility was amended to (i) increase the totalfacility by $55 million to $175 million, (ii) increase themaximum amount of eligible inventory for purposes of computing availabilityfrom $60 million to $70 million, and (iii) increase the minimumavailability threshold requiring the maintenance of a specified EBITDA ratiofrom $10 million to $15 million. Undrawn availability under thesenior secured revolving credit facility (after considering outstanding lettersof credit) on September 30, 2004 amounted to $112.8 million.

 

13

----

 

On April 14, 2004,the Company completed a Rule 144A private placement offering of$257.1 million of 9% unsecured senior notes due April 2012. Intereston the 9% senior notes is payable April 15 and October 15 of eachyear beginning on October 15, 2004. The 9% senior notes were issued at anoriginal issue discount of $7.1 million. The proceeds from the offeringwere primarily used to redeem the existing $145 million of 91¤2% seniornotes and fund the Belden Asset Acquisition.

 

The 9% senior notes wereissued by Superior Essex Communications and Essex Group and are fully andunconditionally guaranteed by the Company and each of the Company’s existingand future domestic restricted subsidiaries. The Company may redeem some or allof the 9% senior notes at any time on or after April 15, 2008 at thefollowing redemption prices (expressed as percentages of the principal amountthereof) if redeemed during the twelve-month period commencing on April 15of the year set forth below:

 
| **Year:**      | ** ** | **Percentage** | ** ** |
|----------------|------------|----------------|------------|
| 2008           |       | 104.50         | %          |
| 2009           |       | 102.25         | %          |
| 2010 and after |       | 100.00         | %          |

 

The Company may alsoredeem up to 40% of the aggregate principal amount of the 9% senior notes at aredemption price of 109% of the principal amount thereof using the proceeds ofone or more equity offerings completed before April 15, 2007.Additionally, upon the occurrence of specific kinds of changes in control ofthe Company, as specified in the indenture governing the 9% senior notes,holders of the 9% senior notes will have the right to require the Company topurchase all or a portion of the outstanding 9% senior notes at a purchaseprice equal to 101% of the principal amount thereof plus accrued interest.

 

The Company entered intoa registration rights agreement with the initial purchasers of the 9% seniornotes requiring the Company to use its reasonable best efforts to file with theSecurities and Exchange Commission (the “SEC”) and cause to become effective aregistration statement relating to an offer to exchange the 9% senior notes foran issue of notes registered under the Securities Act of 1933, as amended, withterms substantially identical to the 9% senior notes. On October 5, 2004, theexchange offer was completed and the entire $257.1 million principal amount ofthe 9% senior notes was exchanged for an equal amount of registered notes withsubstantially identical terms.

 

The indenture governing the9% senior notes contains covenants which restrict the ability of the Companyand certain of its subsidiaries to, among other things: incur additional debtand issue preferred stock; make certain distributions, investments and otherrestricted payments; create certain liens; enter into transactions withaffiliates; and merge, consolidate or sell substantially all of the Company’sassets.

 

14

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**8.   Income(loss) per share**

 

The computation of basicand diluted income (loss) per share for the three and nine months endedSeptember 30, 2004 and 2003 is as follows:

 
| ** **                           | ** ** | **Superior Essex Inc.**                                     | ** ** | **Superior TeleCom Inc.** | ** ** |
|--------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                           | ** ** | **Three Months Ended September 30,**                                  | ** ** |
| ** **                           | ** ** | **2004**                                                              | ** ** | **2003**                            | ** ** |
| ** **                           | ** ** | **Net  Income**                                                       | ** ** | **Shares**                          | ** ** | **Per Share  Amount** | ** ** | **Net  Loss** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| ** **                           | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Basic income (loss) per common share |       | $                                                                     | 3,543      |                                | 16,532     |   | $ | 0.21 |   | $ | (4,407 | ) | 21,845 |   | $ | (0.20 | ) |
| Effect of dilutive securities:       |       |                                                                  |       |                                |       |   |   |   |   |   |   |   |   |
| Restricted stock awards              |       | —                                                                |       | 78                                  |       |   |   | — |   | — |   |   |   |
| Stock options                        |       | —                                                                |       | 35                                  |       |   |   | — |   | — |   |   |   |
| Diluted income per common share      |       | $                                                                     | 3,543      |                                | 16,645     |   | $ | 0.21 |   | $ | (4,407 | ) | 21,845 |   | $ | (0.20 | ) |

 
| ** **                             | ** ** | **Superior Essex Inc.**                                     | ** ** | **Superior TeleCom Inc.** | ** ** |
|----------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                             | ** ** | **Nine Months Ended September 30,**                                   | ** ** |
| ** **                             | ** ** | **2004**                                                              | ** ** | **2003**                            | ** ** |
| ** **                             | ** ** | **Net  Income**                                                       | ** ** | **Shares**                          | ** ** | **Per Share  Amount** | ** ** | **Net Loss** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| ** **                             | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Basic income (loss) per common share   |       | $                                                                     | 6,939      |                                | 16,516     |   | $ | 0.42 |   | $ | (53,851 | ) | 21,804 |   | $ | (2.47 | ) |
| Effect of dilutive securities:         |       |                                                                  |       |                                |       |   |   |   |   |   |   |   |   |
| Restricted stock awards                |       | —                                                                |       | 81                                  |       |   |   | — |   | — |   |   |   |
| Stock options                          |       | —                                                                |       | 23                                  |       |   |   | — |   | — |   |   |   |
| Diluted income (loss) per common share |       | $                                                                     | 6,939      |                                | 16,620     |   | $ | 0.42 |   | $ | (53,851 | ) | 21,804 |   | $ | (2.47 | ) |

 

The assumed conversionof Superior TeleCom’s Trust Convertible Preferred Securities has been excludedfrom the loss per share calculation for the three and nine months endedSeptember 30, 2003 as the impact would be anti-dilutive. Stock optionsoutstanding at September 30, 2003 with respect to 4.2 million sharesof Superior TeleCom common stock have not been included in the computation ofdiluted loss per share for the three and nine months ended September 30,2003 because to do so would be anti-dilutive. A total of 386,098 and 301,184anti-dilutive weighted average shares with respect to outstanding stock optionsand restricted stock awards have been excluded from the computation of dilutedincome per share for the three and nine months ended September 30, 2004,respectively.

 

**9.   Employeebenefits**

** **

Superior TeleComsponsored several defined benefit pension plans which were assumed by theCompany pursuant to the plan of reorganization. In July 2004, the Company’sboard of directors approved the adoption of an unfunded supplemental executiveretirement plan (the “SERP”). The SERP is designed to provide benefits tocertain specified members of management commencing at retirement (between theages of 55 and 65) based on the employee’s length of service and compensation.

 

15

----

 

The components of netperiodic benefit cost of the defined benefit pension plans for the three andnine months ended September 30, 2004 and 2003 are presented below. 

 
| ** **                                   | ** ** | **Superior  Essex Inc.**                            | ** ** | **Superior  TeleCom Inc.** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **Three Months Ended September 30,** | ** ** |
| ** **                                   | ** ** | **2004**                                            | ** ** | **2003**                        | ** ** |
| ** **                                   | ** ** | **(in thousands)**                             | ** ** |
| **Components of net periodic benefit cost:** |       |                                                |       |                            |       |
| Service cost                                 |       | $                                                   | 310        |                            | $          | 800 |   |
| Interest cost                                |       | 1,577                                               |       | 1,592                           |       |
| Expected return on plan assets               |       | (1,527                                              | )          | (1,330                          | )          |
| Actuarial loss                               |       | —                                              |       | (202                            | )          |
|                                         |       | $                                                   | 360        |                            | $          | 860 |   |

 
| ** **                                   | ** ** | **Superior  Essex Inc.**                      | ** ** | **Superior  TeleCom Inc.** | ** ** |
|----------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **Nine Months Ended September 30,** | ** ** |
| ** **                                   | ** ** | **2004**                                           | ** ** | **2003**                        | ** ** |
| ** **                                   | ** ** | **(in thousands)**                            | ** ** |
| **Components of net periodic benefit cost:** |       |                                               |       |                            |       |
| Service cost                                 |       | $                                                  | 522        |                            | $          | 2,400 |   |
| Interest cost                                |       | 4,713                                              |       | 4,776                           |       |
| Expected return on plan assets               |       | (4,605                                             | )          | (3,990                          | )          |
| Actuarial loss                               |       | —                                             |       | 53                              |       |
|                                         |       | $                                                  | 630        |                            | $          | 3,239 |   |

 

The Company’s cashcontributions to the defined benefit plans amounted to $11.2 million during thenine months ended September 30, 2004. The Company expects to makeadditional cash contributions of $0.7 million for the remainder of 2004.

 

**10.   Derivativefinancial instruments**

 

The Company, to alimited extent, uses forward fixed price contracts and derivative financialinstruments to manage commodity price, foreign currency exchange and interestrate risks. The Company does not hold or issue financial instruments forinvestment or trading purposes. The Company is exposed to credit risk in theevent of nonperformance by counterparties for foreign exchange forwardcontracts, metal forward price contracts and metals futures contracts, but theCompany does not anticipate nonperformance by any of these counterparties. Theamount of such exposure is generally limited to any unrealized gains within theunderlying contracts.

 

***Commodityprice risk management***

 

The cost of copper, theCompany’s most significant raw material, and aluminum have historically beensubject to considerable volatility. To manage the risk associated with suchvolatility, the Company enters into futures contracts to match the metalcomponent of customer product pricing with the cost component of the inventoryshipped. At September 30, 2004, the Company had futures purchase contractsfor 13.2 million pounds of copper expiring through March 2006 and 1.3 millionpounds of aluminum expiring through December 2004 related to certain future customerfirm sales commitments. These futures contracts have been designated as cashflow hedges with unrealized gains and losses recorded in other comprehensiveincome until the hedged sales transactions are reflected in the incomestatement which are generally expected to occur in the next twenty-four months.Hedge ineffectiveness, which is not significant, is immediately recognized inearnings. At September 30, 2004, the Company had an unrealized gain of$2.1 million on these futures contracts which is recorded in accumulated othercomprehensive income net of deferred income taxes of $0.8 million.

 

16

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***Foreigncurrency exchange risk management***

 

The Company engages, toa limited extent, in the sale of products which result in accounts receivabledenominated in foreign currencies.  TheCompany enters into foreign currency forward exchange contracts to hedgeagainst fluctuations in the value of these receivables. Changes in the fairvalue of these contracts are reflected in current earnings.  At September 30, 2004, the Company hadoutstanding forward contracts with a notional amount of $6.3 million expiringin October 2004. The fair value of the forward exchange contracts wasinsignificant at September 30, 2004.

 

***Interestrate risk management***

 

In order to limit itsexposure to rising interest rates with respect to borrowings under its variablerate senior secured revolving credit facility, the Company has entered intointerest rate cap agreements. The following interest rate cap agreements wereoutstanding as of September 30, 2004:

 
| **Type**          | ** ** | **Notional  Amount**    | ** ** | **Interest  Rate** | ** **   | **Cap  Rate** | ** ** | **Expiration Date** | ** **         | **Fair Value**     | ** ** |
|-------------------|------------|-------------------------|------------|--------------------|--------------|---------------|------------|--------------------------|--------------------|-------------------------|------------|
| ** **        | ** ** | **(in thousands)** | ** ** | ** **         | ** **   | ** **    | ** ** | ** **               | ** **         | **(in thousands)** | ** ** |
| Interest rate cap |       | $                       | 30,000     |               | 30-day LIBOR |          | 1.75       | %                        | December 2005 |                    | $          | 278 |   |
| Interest rate cap |       | 30,000                  |       | 30-day LIBOR       |         | 5.0           | %          | December 2004       |               | —                  |       |
| Interest rate cap |       | 15,000                  |       | 30-day LIBOR       |         | 5.0           | %          | April 2005          |               | —                  |       |
| Interest rate cap |       | 12,500                  |       | 3-month LIBOR      |         | 7.0           | %          | May 2005            |               | —                  |       |
|                   |            |                         |            |                    |              |               |            |                          |                    |                         |            |  |  |

 

**11.   Commitmentsand contingencies**

 

The Company’s operationsare subject to environmental laws and regulations in each of the jurisdictionsin which it owns or operates facilities governing, among other things,emissions into the air, discharges to water, the use, handling and disposal ofhazardous substances and the investigation and remediation of soil andgroundwater contamination both on-site at past and current facilities and atoff-site disposal locations. On-site contamination at certain of the Company’sfacilities is the result of historic activities, including certain activitiesattributable to Superior TeleCom’s and the Company’s operations and thoseoccurring prior to the use of a facility by Superior TeleCom or the Company.Off-site liability includes clean-up responsibilities and response costsincurred by others at various sites, under federal or state statutes, for whichSuperior TeleCom has been identified by the United States EnvironmentalProtection Agency, or state environmental agency, as a Potentially ResponsibleParty, or “PRP,” or the equivalent. At the effective date of the plan ofreorganization, Superior TeleCom or one of its subsidiaries was named as a PRPwith respect to seven sites. Certain PRP representatives filed claims inconnection with Superior TeleCom’s Chapter 11 proceedings. These claims arebeing negotiated, and allowed claims will receive a portion of the$3.0 million amount that the plan of reorganization allocated to holdersof general unsecured claims.

 

17

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Essex International(including subsidiaries thereof), which Superior TeleCom acquired in 1998 and1999, has been named as a PRP at a number of sites. Many of the sites for whichEssex International is currently named as a PRP are covered by an indemnityfrom United Technologies Corporation provided in connection with theFebruary 1988 sale of Essex Group by United Technologies to EssexInternational. Pursuant to the indemnity, United Technologies agreed toindemnify Essex International against losses incurred under any environmentalprotection and pollution control laws or resulting from, or in connection with,damage or pollution to the environment arising from events, operations oractivities of Essex Group prior to February 29, 1988, or from conditionsor circumstances existing at or prior to February 29, 1988. In order to becovered by the indemnity, the condition, event or circumstance must have beenknown to United Technologies prior to, and United Technologies must havereceived notice of the indemnity claim during the five-year period commencingon, February 29, 1988. The sites covered by this indemnity historicallyhave been handled directly by United Technologies and required paymentsgenerally have been made directly by United Technologies. Most of these sitesare mature sites where allocations of liability have been settled andremediation is well underway or has been completed.

 

United Technologies alsoprovided an additional environmental indemnity, referred to as the “basketindemnity.” This indemnity relates to liabilities arising from environmentalevents, conditions or circumstances existing at or prior to February 29,1988 of which United Technologies received notice during the five-year periodcommencing on February 29, 1988. As to such liabilities, EssexInternational is responsible for the first $4.0 million incurred.Thereafter, United Technologies has agreed to indemnify Essex Internationalfully for any liabilities in excess of $4.0 million. Essex Internationalhas not incurred any liabilities covered by this indemnity.

 

Apart from theindemnified sites, Essex International has been named as a PRP or a defendantin a civil lawsuit at, or has received inquiries from regulatory agenciesinvolving, a number of off-site or formerly owned sites. Operations of SuperiorTelecommunications Inc. and DNE, which were subsidiaries of SuperiorTeleCom, have resulted in releases of hazardous substances or wastes at sitescurrently or formerly owned or operated by such companies.

 

Except for the airquality matters involving two Indiana facilities, none of the sites or mattersmentioned above involves the imposition of sanctions, fines or administrativepenalties on the Company. The Company believes that any of the environmentalproceedings in which it is involved have been or will be addressed in SuperiorTeleCom’s bankruptcy claims resolution process or will not have a materialadverse effect either individually, or in the aggregate, upon its business,financial condition, liquidity or results of operations. There can be noassurance that future developments will not alter this conclusion.

 

Since approximately1990, Essex International has been named as a defendant in a number of productliability lawsuits brought by electricians and other skilled tradesmen claiminginjury from exposure to asbestos found in electrical wire products producedmany years ago. Litigation against various past insurers of Essex Internationalwho had previously refused to defend and indemnify Essex International againstthese lawsuits was settled during 1999. Under the settlement, EssexInternational was reimbursed for substantially all of its costs and expensesincurred in the defense of these lawsuits, and the insurers have undertaken todefend, are currently directly defending and, if it should become necessary,will indemnify Essex International against those asbestos lawsuits, subject tothe terms and limits of the respective policies. Under the plan ofreorganization, certain of the claimants in these actions will be able toassert claims under applicable insurance coverage and other similararrangements. The Company believes that Essex International’s liability, ifany, in these matters will not have a material adverse effect eitherindividually, or in the aggregate, upon its business, financial condition,liquidity or results of operations. There can be no assurance, however, thatfuture developments will not alter this conclusion.

 

18

----

 

On January 18,2002, United Technologies brought a third party claim against EssexInternational in a civil action in Massachusetts. United Technologies had beensued by an insurer for, among other things, approximately $3.1 million incompensatory damages for retrospective premiums for 1999, 2000 and 2001relating to certain events that allegedly occurred while Essex Group was asubsidiary of United Technologies. United Technologies’ third partycomplaint against Essex International contended, among other things, that EssexInternational had agreed, in the stock purchase agreement datedJanuary 15, 1998, to pay such premiums and sought a declaratory judgment,contribution and indemnification for any such retrospective premiums thatUnited Technologies might have to pay the insurer. On January 13, 2003,the court granted the insurer’s motion for summary judgment against UnitedTechnologies and Essex International’s motion to dismiss with prejudice UnitedTechnologies’ claim against it. United Technologies thereafter indicated anintention to appeal the ruling dismissing the action against EssexInternational. However, before Essex International’s time to respond, thoseproceedings were stayed by the filing of Superior TeleCom’s bankruptcyproceedings. United Technologies and the insurer filed proofs of claim inconnection with Superior TeleCom’s bankruptcy. The Company believes that theseclaims will be addressed in Superior TeleCom’s bankruptcy claims resolutionprocess or will not have a material adverse effect either individually, or inthe aggregate, upon its business, financial condition, liquidity or results ofoperations. There can be no assurance that future developments will not alterthis conclusion.

 

The Company’s collectivebargaining agreement covering approximately 225 workers at its Vincennes,Indiana magnet wire facility expired on October 1, 2004. The Company has signedan extension which provides that the collective bargaining agreement willremain in effect unless either party gives ten days prior notice of its intentto terminate the agreement. The Company and union representatives have beennegotiating to reach a new collective bargaining agreement.  The initial proposal was not accepted by theunion membership. The parties are continuing to negotiate to reach a mutuallyacceptable agreement.

 

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 purchase fixed price commitments for copper to properlymatch its cost to the value of the copper to be billed to the customers. AtSeptember 30, 2004, the Company had forward fixed price copper purchasecommitments for $45.1 million.

 

**12.   Businesssegments**

** **

Reportable segments arestrategic businesses that offer different products and services to differentcustomers. These segments are communications cable, magnet wire anddistribution and copper rod. The communications cable segment manufacturescommunications wire and cable products sold to telephone companies, CATVcompanies, distributors and systems integrators, principally in North America.The magnet wire and distribution segment manufactures and supplies magnet wire,fabricated insulation and accessory products for motors, transformers andelectrical controls sold primarily to original equipment manufacturers. Thecopper rod segment includes sales of copper rod produced by the Company’scontinuous casting units to external customers. Copper rod produced forinternal processing is recorded by the consuming segment at cost as a componentof cost of goods sold.

 

The Company evaluatessegment performance based on a number of factors, with operating income,excluding restructuring and other charges, being the most critical.

 

19

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Financial informationwith respect to reportable segments is presented below. Corporate and otheritems shown below are provided to reconcile to the accompanying consolidatedstatements of operations. 

 
| ** **                      | ** ** | **Superior  Essex Inc.**                       | ** ** | **Superior  TeleCom Inc.**                     | ** ** | **Superior  Essex Inc.** | ** ** | **Superior  TeleCom Inc.** | ** ** |
|---------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| ** **                      | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30,** | ** ** |
| ** **                      | ** ** | **2004**                                            | ** ** | **2003**                                            | ** ** | **2004**                      | ** ** | **2003**                        | ** ** |
| ** **                      | ** ** | ** **                                          | ** ** | **(in thousands)**                             | ** ** | ** **                    | ** ** |
| Net sales:                      |       |                                                |       |                                                |       |                          |       |                            |       |
| Communications cable            |       | $                                                   | 157,793    |                                                | $          | 90,785                        |       | $                               | 379,419    |   | $ | 258,909 |   |
| Magnet wire and distribution    |       | 153,507                                             |       | 116,806                                             |       | 453,023                       |       | 360,885                         |       |
| Copper rod                      |       | 70,906                                              |       | 40,069                                              |       | 208,966                       |       | 126,184                         |       |
|                            |       | $                                                   | 382,206    |                                                | $          | 247,660                       |       | $                               | 1,041,408  |   | $ | 745,978 |   |
| Operating income (loss):        |       |                                                |       |                                                |       |                          |       |                            |       |
| Communications cable            |       | $                                                   | 9,688      |                                                | $          | 5,483                         |       | $                               | 19,629     |   | $ | 14,595 |   |
| Magnet wire and distribution    |       | 7,223                                               |       | 5,555                                               |       | 23,194                        |       | 20,334                          |       |
| Copper rod                      |       | 34                                                  |       | (897                                                | )          | 853                           |       | (3,642                          | )          |
| Corporate and other             |       | (3,922                                              | )          | (2,837                                              | )          | (10,618                       | )          | (9,583                          | )          |
| Restructuring and other charges |       | (47                                                 | )          | (2,136                                              | )          | (1,533                        | )          | (6,971                          | )          |
|                            |       | $                                                   | 12,976     |                                                | $          | 5,168                         |       | $                               | 31,525     |   | $ | 14,733 |   |

 
| ** **                   | ** ** | **Superior Essex Inc.** | ** ** |
|------------------------------|------------|-----------------------------------|------------|
| ** **                   | ** ** | **September 30,  2004**      | ** ** | **December 31,  2003** | ** ** |
| ** **                   | ** ** | **(in thousands)**           | ** ** |
| Total assets:                |       |                              |       |   |   |
| Communications Cable         |       | $                                 | 302,509    |   | $ | 180,262 |   |
| Magnet Wire and Distribution |       | 280,617                           |       | 239,468 |   |
| Copper Rod                   |       | 48,300                            |       | 46,625 |   |
| Corporate and other          |       | 21,146                            |       | 20,570 |   |
|                         |       | $                                 | 652,572    |   | $ | 486,925 |   |

 

20

----

 

**13.          Supplementalguarantor information**

 

The9% senior unsecured notes were issued by Superior Essex Communications andEssex Group as joint and several obligors. The notes are fully andunconditionally guaranteed by the Company and each of its existing and futuredomestic restricted subsidiaries (as defined in the indenture governing thenotes).  All of the Company’s currentdomestic subsidiaries, other than IP Licensing LLP, are restrictedsubsidiaries.  The followingconsolidating information presents information about the Company (the“Parent”), the issuers, guarantor subsidiaries and non-guarantor subsidiaries.As a result of the plan of reorganization and the Company’s implementation offresh-start reporting, the consolidating financial information for periodssubsequent to November 10, 2003 reflects a new organizational structure andbasis of accounting and is not comparable to the historical consolidatingfinancial information of Superior TeleCom for periods prior to the effectivedate of the plan of reorganization.  Forpurposes of this presentation for the three and nine months ended September 30,2003 the parent is Superior TeleCom, Inc., the issuers are SuperiorTelecommunications Inc. and Essex Group Inc., the guarantor subsidiaries areall direct and indirect domestic subsidiaries of Superior TeleCom, and thenon-guarantor subsidiaries are all direct and indirect non-domesticsubsidiaries of Superior TeleCom together with Superior Trust I.  Investments in subsidiaries are presented onthe equity method.  Intercompanytransactions are eliminated in consolidation.

 

**Superior Essex Inc.**

**September 30, 2004**

**(in thousands)**

 
| ** **                                      | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                            |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| **ASSETS**                                      |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Current assets:                                 |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Cash and cash equivalents                       |       | $          | (61        | )           | $          | 3,543                       |       | $                                 | 109        |             | $          | 485       |       | — |   | $ | 4,076 |   |
| Accounts receivable, net                        |       | —     |       | 169,315     |       | 1,889                       |       | 7,546                             |       | —           |       | 178,750   |       |
| Inventories, net                                |       | —     |       | 154,630     |       | 10,798                      |       | 2,600                             |       | —           |       | 168,028   |       |
| Other current assets                            |       | 1,366      |       | 13,829      |       | 73                          |       | 2,488                             |       | —           |       | 17,756    |       |
| Total current assets                            |       | 1,305      |       | 341,317     |       | 12,869                      |       | 13,119                            |       | —           |       | 368,610   |       |
| Property, plant and equipment, net              |       | 170        |       | 208,848     |       | 16,638                      |       | 14,271                            |       | —           |       | 239,927   |       |
| Intangible and other long-term assets, net      |       | 3,478      |       | 40,556      |       | 1                           |       | —                            |       | —           |       | 44,035    |       |
| Investment in subsidiaries                      |       | 184,478    |       | 36,337      |       | 321,979                     |       | —                            |       | (542,794         | )          | —    |       |
| Intercompany accounts                           |       | 1,776      |       | 15,174      |       | —                      |       | —                            |       | (16,950          | )          | —    |       |
| Total assets                                    |       | 191,207    |       | $           | 642,232    |                        | $          | 351,487                           |       | $                | 27,390     |      | $          | (559,744 | ) | $ | 652,572 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Current liabilities:                            |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Short-term borrowings                           |       | —     |       | 57,536      |       | —                      |       | 969                               |       | —           |       | 58,505    |       |
| Accounts payable                                |       | 3,000      |       | 62,605      |       | 781                         |       | 1,796                             |       | —           |       | 68,182    |       |
| Accrued expenses                                |       | 14,637     |       | 48,057      |       | 233                         |       | 82                                |       | —           |       | 63,009    |       |
| Total current liabilities                       |       | 17,637     |       | 168,198     |       | 1,014                       |       | 2,847                             |       | —           |       | 189,696   |       |
| Long term-debt, less current portion            |       | —     |       | 257,285     |       | 5,000                       |       | —                            |       | —           |       | 262,285   |       |
| Other long-term liabilities                     |       | 803        |       | 26,992      |       | —                      |       | 29                                |       | —           |       | 27,824    |       |
| Intercompany accounts                           |       | —     |       | —      |       | 2,452                       |       | 14,498                            |       | (16,950          | )          | —    |       |
| Total liabilities                               |       | 18,440     |       | 452,475     |       | 8,466                       |       | 17,374                            |       | (16,950          | )          | 479,805   |       |
| Stockholders’ equity                       |       | 172,767    |       | 189,757     |       | 343,021                     |       | 10,016                            |       | (542,794         | )          | 172,767   |       |
| Total liabilities and stockholders’ equity |       | $          | 191,207    |        | $          | 642,232                     |       | $                                 | 351,487    |             | $          | 27,390    |       | $ | (559,744 | ) | $ | 652,572 |   |
|                                                 |            |            |            |             |            |                             |            |                                   |            |                  |            |           |            |  |  |  |  |  |  |  |  |  |  |

 

21

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**Superior Essex Inc.**

**December 31, 2003**

**(in thousands)**

 
| ** **                                      | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|---------------------------------|------------|------------------|------------|------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                  | ** ** | ** **                      | ** ** | ** **       | ** ** | ** ** | ** ** |
| **ASSETS**                                      |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Current assets:                                 |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Cash and cash equivalents                       |       | $          | —     |        | $          | 6,544                       |       | 300                             |       | $                | 3,762      |       |       |   | $ | 10,606 |   |
| Accounts receivable, net                        |       | —     |       | 92,717      |       | 1,632                       |       | 6,544                           |       |             |       | 100,893    |       |
| Inventories, net                                |       | —     |       | 111,228     |       | 5,427                       |       | 3,132                           |       |             |       | 119,787    |       |
| Other current assets                            |       | 4,345      |       | 16,337      |       | 237                         |       | 2,397                           |       |             |       | 23,316     |       |
|                                            |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Total current assets                            |       | 4,345      |       | 226,826     |       | 7,596                       |       | 15,835                          |       |             |       | 254,602    |       |
| Property, plant and equipment, net              |       | 502        |       | 187,319     |       | 16,714                      |       | 18,783                          |       |             |       | 223,318    |       |
| Other assets                                    |       | 3,457      |       | 5,547       |       | 1                           |       | —                          |       |             |       | 9,005      |       |
| Investment in subsidiaries                      |       | 176,134    |       | 40,760      |       | 308,382                     |       | —                          |       | (525,276         | )          | —     |       |
| Intercompany accounts                           |       | 2,068      |       | 10,619      |       | 888                         |       | —                          |       | (13,575          | )          | —     |       |
| Total assets                                    |       | $          | 186,506    |        | $          | 471,071                     |       | $                               | 333,581    |             | $          | 34,618     |       | $ | (538,851 | ) | $ | 486,925 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Current liabilities:                            |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Short-term borrowins                            |       | —     |       | 41,910      |       | —                      |       | 845                             |       |             |       | 42,755     |       |
| Accounts payable                                |       | 4,298      |       | 28,975      |       | 610                         |       | 1,983                           |       |             |       | 35,866     |       |
| Accrued expenses                                |       | 18,100     |       | 40,254      |       | 585                         |       | (740                            | )          |             |       | 58,199     |       |
|                                            |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Total current liabilities                       |       | 22,398     |       | 111,139     |       | 1,195                       |       | 2,088                           |       |             |       | 136,820    |       |
|                                            |       |       |       |        |       |                        |       |                            |       |             |       |       |       |
| Long term-debt, less current portion            |       | —     |       | 152,000     |       | 5,000                       |       | —                          |       |             |       | 157,000    |       |
| Other long-term liabilities                     |       | 216        |       | 27,066      |       | —                      |       | 1,931                           |       |             |       | 29,213     |       |
| Intercompany accounts                           |       | —     |       | —      |       | —                      |       | 13,575                          |       | (13,575          | )          | —     |       |
| Total liabilities                               |       | 22,614     |       | 290,205     |       | 6,195                       |       | 17,594                          |       | (13,575          | )          | 323,033    |       |
| Stockholders’ equity                       |       | 163,892    |       | 180,866     |       | 327,386                     |       | 17,024                          |       | (525,276         | )          | 163,892    |       |
| Total liabilities and stockholders’ equity |       | $          | 186,506    |        | $          | 471,071                     |       | $                               | 333,581    |             | $          | 34,618     |       | $ | (538,851 | ) | $ | 486,925 |   |

 

22

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**Superior Essex Inc.**

**Three Months Ended September 30,2004**

**(in thousands)**

 
| ** **                                                                       | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                                                             |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Net sales                                                                        |       | $          | 4,289      |        | $          | 372,888                     |       | $                                 | 22,658     |             | $          | 12,873    |       | $ | (30,502 | ) | $ | 382,206 |   |
| Cost of goods sold                                                               |       | —     |       | 336,170     |       | 22,341                      |       | 12,847                            |       | (26,213          | )          | 345,145   |       |
| Gross profit                                                                     |       | 4,289      |       | 36,718      |       | 317                         |       | 26                                |       | (4,289           | )          | 37,061    |       |
| Selling, general and administrative  expenses                                    |       | 3,911      |       | 23,842      |       | 72                          |       | 502                               |       | (4,289           | )          | 24,038    |       |
| Restructuring and other charges                                                  |       | —     |       | 47          |       | —                      |       | —                            |       | —           |       | 47        |       |
| Operating income (loss)                                                          |       | 378        |       | 12,829      |       | 245                         |       | (476                              | )          | —           |       | 12,976    |       |
| Interest expense                                                                 |       | (394       | )          | (6,771      | )          | (118                        | )          | (6                                | )          | —           |       | (7,289    | )          |
| Other income (expense), net                                                      |       | 16         |       | 313         |       | 20                          |       | 51                                |       | —           |       | 400       |       |
| Income (loss) before income taxes and  equity in earnings (loss) of subsidiaries |       | —     |       | 6,371       |       | 147                         |       | (431                              | )          | —           |       | 6,087     |       |
| Income tax expense                                                               |       | —     |       | (2,471      | )          | (57                         | )          | (16                               | )          | —           |       | (2,544    | )          |
| Equity in earnings (loss) of subsidiaries                                        |       | 3,543      |       | (277        | )          | 6,379                       |       | —                            |       | (9,645           | )          | —    |       |
| Net income (loss)                                                                |       | $          | 3,543      |        | $          | 3,623                       |       | $                                 | 6,469      |             | $          | (447      | )          | $ | (9,645 | ) | $ | 3,543 |   |

 

23

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**Superior Essex Inc.**

**Nine Months Ended September 30,2004**

**(in thousands)**

 
| ** **                                                                       | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                                                             |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Net sales                                                                        |       | $          | 12,877     |        | $          | 1,013,003                   |       | $                                 | 66,552     |             | $          | 40,302    |       | $ | (91,326 | ) | $ | 1,041,408 |   |
| Cost of goods sold                                                               |       | —     |       | 914,460     |       | 65,581                      |       | 39,538                            |       | (78,449          | )          | 941,130   |       |
| Gross profit                                                                     |       | 12,877     |       | 98,543      |       | 971                         |       | 764                               |       | (12,877          | )          | 100,278   |       |
| Selling, general and administrative  expenses                                    |       | 10,586     |       | 67,771      |       | 254                         |       | 1,486                             |       | (12,877          | )          | 67,220    |       |
| Restructuring and other charges                                                  |       | 1,057      |       | 476         |       | —                      |       | —                            |       | —           |       | 1,533     |       |
| Operating income (loss)                                                          |       | 1,234      |       | 30,296      |       | 717                         |       | (722                              | )          | —           |       | 31,525    |       |
| Interest expense                                                                 |       | (847       | )          | (18,038     | )          | (357                        | )          | (27                               | )          | —           |       | (19,269   | )          |
| Other income (expense), net                                                      |       | (387       | )          | 247         |       | 15                          |       | (68                               | )          | —           |       | (193      | )          |
| Income (loss) before income taxes and  equity in earnings (loss) of subsidiaries |       | —     |       | 12,505      |       | 375                         |       | (817                              | )          | —           |       | 12,063    |       |
| Income tax expense                                                               |       | —     |       | (4,932      | )          | (145                        | )          | (47                               | )          | —           |       | (5,124    | )          |
| Equity in earnings (loss) of subsidiaries                                        |       | 6,939      |       | (393        | )          | 16,997                      |       | —                            |       | (23,543          | )          | —    |       |
| Net income (loss)                                                                |       | $          | 6,939      |        | $          | 7,180                       |       | $                                 | 17,227     |             | $          | (864      | )          | $ | (23,543 | ) | $ | 6,939 |   |

 

24

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**Superior TeleCom Inc.**

**Three Months Ended September 30,2003**

**(in thousands)**

 
| ** **                                                                                                                                              | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                                                                                                                                    |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Net sales                                                                                                                                               |       | $          | —     |        | $          | 240,592                     |       | $                                 | 23,280     |             | $          | 10,601    |       | $ | (26,813 | ) | $ | 247,660 |   |
| Cost of goods sold                                                                                                                                      |       | —     |       | 213,549     |       | 22,170                      |       | 10,744                            |       | (26,813          | )          | 219,650   |       |
| Gross profit                                                                                                                                            |       | —     |       | 27,043      |       | 1,110                       |       | (143                              | )          | —           |       | 28,010    |       |
| Selling, general and administrative  expenses                                                                                                           |       | 574        |       | 15,588      |       | 4,129                       |       | 415                               |       | —           |       | 20,706    |       |
| Restructuring and other charges                                                                                                                         |       | —     |       | 2,745       |       | —                      |       | (609                              | )          | —           |       | 2,136     |       |
| Operating income (loss)                                                                                                                                 |       | (574       | )          | 8,710       |       | (3,019                      | )          | 51                                |       | —           |       | 5,168     |       |
| Interest income (expense)                                                                                                                               |       | 4,630      |       | (6,777      | )          | —                      |       | (4                                | )          | —           |       | (2,151    | )          |
| Other income (expense), net                                                                                                                             |       | —     |       | (3,468      | )          | 3,198                       |       | 1                                 |       | —           |       | (269      | )          |
| Income (loss) before reorganization items,  income taxes, distributions on preferred securities of Superior Trust I and  equity in loss of subsidiaries |       | 4,056      |       | (1,535      | )          | 179                         |       | 48                                |       | —           |       | 2,748     |       |
| Reorganization items                                                                                                                                    |       | —     |       | (7,338      | )          | —                      |       | —                            |       | —           |       | (7,338    | )          |
| Benefit (provision) for income taxes                                                                                                                    |       | —     |       | 209         |       | (21                         | )          | (5                                | )          | —           |       | 183       |       |
| Income (loss) before distributions on  preferred securities of Superior Trust I and equity in loss of subsidiaries                                      |       | 4,056      |       | (8,664      | )          | 158                         |       | 43                                |       | —           |       | (4,407    | )          |
| Equity in loss of subsidiaries                                                                                                                          |       | (8,463     | )          | (2,967      | )          | (761                        | )          | —                            |       | 12,191           |       | —    |       |
| Net income (loss)                                                                                                                                       |       | $          | (4,407     | )           | $          | (11,631                     | )          | $                                 | (603       | )                | $          | 43        |       | $ | 12,191 |   | $ | (4,407 | ) |

 

25

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**Superior TeleCom Inc.**

**Nine Months Ended September 30,2003**

**(in thousands)**

 
| ** **                                                                                                                                              | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                                                                                                                                    |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Net sales                                                                                                                                               |       | $          | —     |        | $          | 706,837                     |       | $                                 | 68,625     |             | $          | 33,531    |       | $ | (63,015 | ) | $ | 745,978 |   |
| Cost of goods sold                                                                                                                                      |       | —     |       | 625,580     |       | 65,519                      |       | 33,783                            |       | (63,015          | )          | 661,867   |       |
| Gross profit                                                                                                                                            |       | —     |       | 81,257      |       | 3,106                       |       | (252                              | )          | —           |       | 84,111    |       |
| Selling, general and administrative  expenses                                                                                                           |       | 2,080      |       | 53,471      |       | 5,561                       |       | 1,295                             |       | —           |       | 62,407    |       |
| Restructuring and other charges                                                                                                                         |       | —     |       | 7,434       |       | —                      |       | (463                              | )          | —           |       | 6,971     |       |
| Operating income (loss)                                                                                                                                 |       | (2,080     | )          | 20,352      |       | (2,455                      | )          | (1,084                            | )          | —           |       | 14,733    |       |
| Interest income (expense)                                                                                                                               |       | 11,137     |       | (38,947     | )          | (1                          | )          | 2,639                             |       | —           |       | (25,172   | )          |
| Other income (expense), net                                                                                                                             |       | —     |       | (2,840      | )          | 2,590                       |       | (49                               | )          | —           |       | (299      | )          |
| Income (loss) before reorganization items,  income taxes, distributions on preferred securities of Superior Trust I and  equity in loss of subsidiaries |       | 9,057      |       | (21,435     | )          | 134                         |       | 1,506                             |       | —           |       | (10,738   | )          |
| Reorganization items                                                                                                                                    |       | (27,005    | )          | (13,659     | )          | 358                         |       | —                            |       | —           |       | (40,306   | )          |
| Benefit (provision) for income taxes                                                                                                                    |       | 74         |       | 2,294       |       | (40                         | )          | (85                               | )          | —           |       | 2,243     |       |
| Income (loss) before distributions on  preferred securities of Superior Trust I and equity in earnings (loss) of  subsidiaries                          |       | (17,874    | )          | (32,800     | )          | 452                         |       | 1,421                             |       | —           |       | (48,801   | )          |
| Distributions on preferred securities of  Superior Trust I                                                                                              |       | —     |       | —      |       | —                      |       | (5,050                            | )          | —           |       | (5,050    | )          |
| Equity in earnings (loss) of subsidiaries                                                                                                               |       | (35,977    | )          | (783        | )          | 2,921                       |       | —                            |       | 33,839           |       | —    |       |
| Net income (loss)                                                                                                                                       |       | $          | (53,851    | )           | $          | (33,583                     | )          | $                                 | 3,373      |             | $          | (3,629    | )          | $ | 33,839 |   | $ | (53,851 | ) |

 

26

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**Superior Essex Inc.**

**Nine Months Ended September 30,2004**

**(in thousands)**

 
| ** **                                              | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                                    |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Cash flows used for operating activities                |       | $          | (216       | )           | $          | (16,967                     | )          | $                                 | (3,635     | )                | $          | (1,721    | )          | — |   | $ | (22,539 | ) |
| Cash flows from investing activities:                   |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Capital expenditures                                    |       | (140       | )          | (8,809      | )          | (495                        | )          | (15                               | )          | —           |       | (9,459    | )          |
| Belden and Nexans asset acquisitions                    |       | —     |       | (90,698     | )          | —                      |       | —                            |       | —           |       | (90,698   | )          |
| Proceeds from asset sales                               |       | 3          |       | 123         |       | —                      |       | —                            |       | —           |       | 126       |       |
| Other                                                   |       | —     |       | 2,341       |       | —                      |       | —                            |       | (2,341           | )          | —    |       |
| Cash flows used for investing activities                |       | (137       | )          | (97,043     | )          | (495                        | )          | (15                               | )          | (2,341           | )          | (100,031  | )          |
| Cash flows from financing activities:                   |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Short-term borrowings, net                              |       | —     |       | 15,626      |       | —                      |       | 112                               |       | —           |       | 15,738    |       |
| Debt issuance costs                                     |       | —     |       | (4,583      | )          | —                      |       | —                            |       | —           |       | (4,583    | )          |
| Long-term borrowings                                    |       | —     |       | 250,004     |       | —                      |       | —                            |       | —           |       | 250,004   |       |
| Repayments of long-term borrowings                      |       | —     |       | (145,000    | )          | —                      |       | —                            |       | —           |       | (145,000  | )          |
| Intercompany accounts                                   |       | 292        |       | (5,154      | )          | 3,939                       |       | 923                               |       | —           |       | —    |       |
| Other                                                   |       | —     |       | —      |       | —                      |       | (2,341                            | )          | 2,341            |       | —    |       |
| Cash flows provided by (used for) financing  activities |       | 292        |       | 110,893     |       | 3,939                       |       | (1,306                            | )          | 2,341            |       | 116,159   |       |
| Effect of exchange rate changes on cash                 |       | —     |       | 116         |       | —                      |       | (235                              | )          | —           |       | (119      | )          |
| Net decrease in cash and cash equivalents               |       | (61        | )          | (3,001      | )          | (191                        | )          | (3,277                            | )          | —           |       | (6,530    | )          |
| Cash and cash equivalents at beginning of  period       |       | —     |       | 6,544       |       | 300                         |       | 3,762                             |       | —           |       | 10,606    |       |
| Cash and cash equivalents at end of period              |       | $          | (61        | )           | $          | 3,543                       |       | $                                 | 109        |             | $          | 485       |       | — |   | $ | 4,076 |   |

 

27

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**Superior TeleCom Inc.**

**Nine Months Ended September 30,2003**

**(in thousands)**

 
| ** **                                              | ** ** | **Parent** | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|------------|------------|-------------|------------|-----------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
|                                                    |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Cash flows provided by (used for) operating  activities |       | $          | (848       | )           | $          | 78,694                      |       | $                                 | (6         | )                | $          | (23       | )          | — |   | $ | 77,817 |   |
| Cash flows from investing activities:                   |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Capital expenditures                                    |       | —     |       | (2,049      | )          | 66                          |       | (4                                | )          | —           |       | (1,987    | )          |
| Proceeds from asset sales                               |       | —     |       | 3,750       |       | 7                           |       | 1,941                             |       | —           |       | 5,698     |       |
| Other                                                   |       | —     |       | 135         |       | —                      |       | —                            |       | 8                |       | 143       |       |
| Cash flows provided by investing activities             |       | —     |       | 1,836       |       | 73                          |       | 1,937                             |       | 8                |       | 3,854     |       |
| Cash flows from financing activities:                   |       |       |       |        |       |                        |       |                              |       |             |       |      |       |
| Short-term borrowings (repayments), net                 |       | —     |       | (23,641     | )          | —                      |       | 152                               |       | —           |       | (23,489   | )          |
| Repayments of revolving credit facilities,  net         |       | —     |       | (28,330     | )          | —                      |       | —                            |       | —           |       | (28,330   | )          |
| Debt issuance costs                                     |       | —     |       | (3,900      | )          | —                      |       | —                            |       | —           |       | (3,900    | )          |
| Repayments of long-term borrowings                      |       | —     |       | (19,394     | )          | (8                          | )          | —                            |       | —           |       | (19,402   | )          |
| Intercompany accounts                                   |       | 848        |       | (14         | )          | (8                          | )          | (826                              | )          | —           |       | —    |       |
| Other                                                   |       | —     |       | —      |       | —                      |       | 8                                 |       | (8               | )          | —    |       |
| Cash flows provided by (used for) financing  activities |       | 848        |       | (75,279     | )          | (16                         | )          | (666                              | )          | (8               | )          | (75,121   | )          |
| Effect of exchange rate changes on cash                 |       | —     |       | 199         |       | —                      |       | (735                              | )          | —           |       | (536      | )          |
| Net increase in cash and cash equivalents               |       | —     |       | 5,450       |       | 51                          |       | 513                               |       | —           |       | 6,014     |       |
| Cash and cash equivalents at beginning of  period       |       | —     |       | 4,957       |       | 203                         |       | 1,941                             |       | —           |       | 7,101     |       |
| Cash and cash equivalents at end of period              |       | $          | —     |        | $          | 10,407                      |       | $                                 | 254        |             | $          | 2,454     |       | — |   | $ | 13,115 |   |

 

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**ITEM2.**              MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Thisreport contains “forward-looking statements” within the meaning ofSection 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934. These forward-looking statements are based oncurrent expectations, estimates and forecasts about us, our future performance,the industries in which we operate and our liquidity. In addition, otherwritten and oral statements that constitute forward-looking statements may bemade by us or on our behalf. Such forward-looking statements include statementsregarding expected financial results and other planned events, including, butnot limited to, anticipated liquidity and capital expenditures. Words such as “anticipate,”“assume,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” “target,” “goal,”variations of such words and similar expressions are intended to identify suchforward-looking statements. These statements are not guarantees of futureperformance and involve certain risks, uncertainties and assumptions that aredifficult to predict. Therefore, actual future events or results may differmaterially from these statements. These risks and uncertainties include theimpact of the following:

 

•                  Generaleconomic, business and industry conditions;

 

•                  Spendingreductions by the telephone industry;

 

•                  Competition,including from other wire and cable manufacturers and other alternative sourcesand technologies;

 

•                  Increases ordecreases in sales due to contract losses or gains as expirations, renewals andrebidding efforts occur;

 

•                  Rapidproduct and technology development;

 

•                  Marketacceptance of new products and continuing product demand;

 

•                  Productionand timing of customer orders;

 

•                  Themigration of magnet wire demand to China and other countries;

 

•                  Fluctuationsin the supply and pricing of copper and other principal raw materials;

 

•                  Oursignificant level of indebtedness and debt covenant requirements;

 

•                  Thepotential need for and availability of additional sources of capital andliquidity;

 

•                  Our abilityto successfully realize the benefits of our acquisition of assets fromBelden Inc. and Nexans Magnet Wire USA Inc. and to identify, finance andintegrate other acquisitions;

 

•                  Changes inshort-term interest rates and foreign exchange rates;

 

•                  Asignificant deterioration in our labor relations;

 

•                  Thevolatility of the market price of our common stock; and

 

•                  Other risksand uncertainties, including those included under the caption “Risk Factors” inour Annual Report on Form 10-K, as amended, for the year endedDecember 31, 2003.

 

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Forward-looking statementsshould be considered in light of various important factors, including those setforth elsewhere in this report and our other filings with the SEC. Moreover, wecaution you not to place undue reliance on these forward-looking statements,which speak only as of the date they were made. We do not undertake anyobligation to publicly release any revisions to these forward-lookingstatements to reflect events or circumstances after the date of this report orto reflect the occurrence of unanticipated events. All subsequent forward-lookingstatements attributable to us or any person acting on our behalf are expresslyqualified in their entirety by the cautionary statements contained or referredto in this report and in our other SEC filings.

 

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**General**

 

SuperiorEssex Inc., a Delaware holding company, and its operating subsidiarieswere formed in 2003 to acquire and conduct the business formerly conducted bySuperior TeleCom Inc. and its subsidiaries.

 

We manufacture aportfolio of wire and cable products grouped into the following primaryindustry segments: (i) our communications cable segment; (ii) ourmagnet wire and distribution segment; and (iii) our copper rod operations.Our communications cable segment manufactures communications wire and cableproducts sold to telephone companies, CATV companies, distributors and systemsintegrators, principally in North America. Our magnet wire and distributionsegment manufactures and supplies magnet wire, fabricated insulation andaccessory products for motors, transformers and electrical controls soldprimarily to original equipment manufacturers, or OEMs, and through itsdistribution operation, to small OEM’S and the motor maintenance, repair and overhaulindustry. Our copper rod operations include sales of copper rod producedby our continuous casting units to external customers.

 

Industry segmentfinancial data (including sales and operating income by industry segment) forthe three and nine month periods ended September 30, 2004 and 2003 isincluded in Note 12 to the accompanying consolidated financial statements.

 

***Chapter11 Filing and Reorganization***

*** ***

On March 3, 2003,Superior TeleCom and certain of its U.S. subsidiaries filed voluntary petitionsfor relief under Chapter 11 of the United States Bankruptcy Code and continuedto manage their properties and operate their businesses as “debtors-in-possession”under the jurisdiction of the Bankruptcy Court and in accordance with theapplicable provisions of the Bankruptcy Code. Under the Bankruptcy Code,actions to collect pre-petition indebtedness, as well as most other pendinglitigation, were stayed and certain contractual provisions could not beenforced against Superior TeleCom. Absent an order of the Bankruptcy Court,substantially all pre-petition liabilities were subject to settlement under aplan of reorganization voted upon by certain classes of Superior TeleCom’screditors and approved by the Bankruptcy Court. A plan of reorganization wasconfirmed by order of the Bankruptcy Court on October 22, 2003 and becameeffective on November 10, 2003.

 

In accordance with theplan of reorganization, on November 10, 2003, the effective date of theplan, we acquired the business formerly conducted by Superior TeleCom and itssubsidiaries, and Superior TeleCom and certain of its dormant subsidiaries weredeemed dissolved and ceased to have continuing corporate existences, subjectonly to obligations under the plan of reorganization to satisfy allowed claims.Except as otherwise provided in the plan of reorganization, our senior securedrevolving credit facility, our senior notes or any agreement, instrument orindenture relating thereto, on and after the effective date of the plan, allproperty of Superior TeleCom and its subsidiaries vested in the Company, freeand clear of all liens, claims, charges or other encumbrances. On and after theeffective date of the plan of reorganization, we began operating our businesswithout supervision or approval by the Bankruptcy Court.

 

***Fresh-StartReporting***

 

Upon implementation ofthe plan of reorganization, we adopted fresh-start reporting in accordance withAICPA Statement of Position 90-7, or SOP 90-7, “*Financial Reporting by Entities in Reorganization under the BankruptcyCode*.” Under fresh-start reporting, the reorganization value wasallocated to our net assets based on their relative fair values in a mannersimilar to the accounting provisions applied to business combinations underStatement of Financial Accounting Standards No. 141, “*Business Combinations*” (“SFAS No. 141”).Our reorganization value was less than the fair value of the net assetsacquired pursuant to the plan of reorganization. In accordance with SFASNo. 141, the excess of the fair value of the net assets over thereorganization value was used to reduce the value of property, plant andequipment. Liabilities existing at the effective date of the plan ofreorganization were stated at the present value of amounts to be paiddiscounted at appropriate current rates. Debt issued in connection with the planof reorganization was recorded at the stated value, which approximated fairvalue.

 

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As a result of thereorganization and our implementation of fresh-start reporting, ourconsolidated financial statements for periods subsequent to November 10,2003 reflect a new basis of accounting. Accordingly, the historical financialstatements of Superior TeleCom, our predecessor for financial reportingpurposes, are not comparable to our consolidated financial statements forperiods subsequent to the effective date of the plan of reorganization.

 

***AssetAcquisitions***

*** ***

**Belden Asset Acquisition**

 

On June 1, 2004,Superior Essex Communications acquired certain assets from operatingsubsidiaries of Belden Inc. (“Belden”) related to their North American copperOSP communications wire and cable business (the “Belden Asset Acquisition”).Under the terms of the asset purchase agreement, Superior Essex Communicationsacquired certain inventories, selected machinery and equipment and certaincustomer contracts related to a portion of Belden’s communications business fortotal consideration not to exceed $95 million (including a contingent paymentof up to $10 million to be made nine months after closing based on businessrelationships successfully transitioned to Superior Essex Communications).Superior Essex Communications intends to use the equipment acquired from Beldenin its communications wire and cable business. Belden retained itsmanufacturing facilities and employees together with all of the associatedliabilities, including, among others, accounts payable, any employee-relatedobligations, plant shutdown costs and environmental obligations. We paid aninitial cash purchase price of $77.0 million. The initial purchase price issubject to adjustment based on a final accounting of the inventories acquired.

 

For the year endDecember 31, 2003, Belden reported revenues of $202.4 million fromits North American copper OSP communications wire and cable operations. Webelieve the Belden Asset Acquisition represents an attractive opportunity forus to develop new customer relationships and increase our level of businesswith existing customers in the copper OSP communications business. We alsobelieve we will be able to generate meaningful cost benefits from manufacturingefficiencies and greater capacity. In the short term, we expect the incrementalrevenues will yield lower profit contributions while we deplete purchasedinventory and incur transitional expenses and charges.

 

**NexansAsset Acquisition**

 

On September 7, 2004,Essex Group acquired certain assets from Nexans Magnet Wire USA Inc., awholly-owned subsidiary of Nexans S.A. Company (the “Nexans Asset Acquisition”).  Under the terms of the purchase agreement,Essex Group acquired substantially all inventory associated with Nexans S.A.Company’s U.S. magnet wire operations and assumed certain U.S. customercontractual arrangements.  The totalpurchase price for the acquisition was $11.6 million and is subject toadjustment based on a final accounting of the inventories acquired. We intendto use the assets acquired in our magnet wire and distribution business.

 

32

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***Impactof Copper Price Fluctuations on Operating Results***

 

Copper is one of theprincipal raw materials used in our wire and cable product manufacturing.Fluctuations in the price of copper affect per unit product pricing and relatedrevenues. Historically the cost of copper has not had a material impact onprofitability, as, in certain cases, we have the ability to adjust pricesbilled for our products to properly match the copper cost component ofinventory shipped. In our communications cable segment these adjustmentsinclude, among others, certain contractual arrangements under which productprices are adjusted quarterly based on an average of previous periods’ copperindices. Beginning in the fourth quarter of 2003 and continuing through thefirst nine months of 2004, copper prices have escalated rapidly, increasingfrom an average of $0.88 per pound for the month of October 2003 to anaverage of $1.25 per pound for the first nine months of 2004. The rapidincrease in copper prices can impact profitability in the short term based uponthe timing of product price adjustments to match the increased copper costs.While we did not experience a material negative impact from this situation inthe first and third quarters of 2004, our results in the second quarter of 2004were negatively impacted due to accelerated orders by some communications cablecustomers in the first quarter of 2004 in anticipation of future contractualprice adjustments related to increased copper costs. Increases in copper pricescan also impact our working capital. See “Liquidity and Capital Resources” below.

 

**Resultsof Operations—Three Month Period Ended September 30, 2004 Compared to theThree Month Period Ended September 30, 2003**

** **

The discussion belowcompares the results of our operations for the three months endedSeptember 30, 2004 to those of Superior TeleCom for the three months endedSeptember 30, 2003.

 

Average copper pricesfor the three months ended September 30, 2004 increased 61% as compared tothe three months ended September 30, 2003. Due to the impact of thisincrease on reported sales, the following table provides supplemental salesinformation adjusted to a constant $0.80/lb COMEX cost of copper to aid in acomparison of period-to-period revenues by segment.

 
| ** **                         | ** ** | **Superior  Essex Inc.**                        | ** ** | **Superior TeleCom Inc.**                       | ** ** | **Superior Essex Inc.** | ** ** | **Superior TeleCom Inc.** | ** ** |
|------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------|------------|--------------------------------|------------|
| ** **                         | ** ** | **Actual**                                           | ** ** | **Copper-adjusted**                                  | ** ** |
| ** **                         | ** ** | **Three months ended  September 30,** | ** ** | **Three months ended  September 30,** | ** ** |
| ** **                         | ** ** | **2004**                                             | ** ** | **2003**                                             | ** ** | **2004**                     | ** ** | **2003**                       | ** ** |
| ** **                         | ** ** | **(in millions)**                               | ** ** |
| ** **                         | ** ** | ** **                                           | ** ** |
| Net sales:                         |       |                                                 |       |                                                 |       |                         |       |                           |       |
| Communications cable               |       | $                                                    | 157.8      |                                                 | $          | 90.8                         |       | $                              | 140.0      |   | $ | 91.9 |   |
| Magnet wire and distribution       |       | 153.5                                                |       | 116.8                                                |       | 131.3                        |       | 118.4                          |       |
| Copper rod                         |       | 70.9                                                 |       | 40.1                                                 |       | 45.8                         |       | 40.1                           |       |
|                               |       | 382.2                                                |       | 247.7                                                |       | 317.1                        |       | 250.4                          |       |
| Constant cost of copper adjustment |       | —                                               |       | —                                               |       | 65.1                         |       | (2.7                           | )          |
| Total                              |       | $                                                    | 382.2      |                                                 | $          | 247.7                        |       | $                              | 382.2      |   | $ | 247.7 |   |

 

Consolidated sales forthe three months ended September 30, 2004 were $382.2 million, an increaseof 54% as compared to consolidated sales of $247.7 million for the quarterended September 30, 2003. Sales for the 2004 quarter were significantlyimpacted by the increase in copper prices. Sales adjusted for a constant costof copper increased $66.7 million, or 27%, for the quarter endedSeptember 30, 2004 compared to the prior year period. Sales in ourcommunications cable segment for the three months ended September 30, 2004also included approximately $51.7 million ($45.0 million on a copper-adjustedbasis) attributable to customer contracts acquired in the Belden AssetAcquisition. Sales in our magnet wire and distribution segment for the threemonths ended September 30, 2004 included approximately $2.5 million on acopper-adjusted basis attributable to customer contracts acquired in the NexansAsset Acquisition. Excluding the impact of the Belden Asset Acquisition and theNexans Asset Acquisition, consolidated sales adjusted for a constant cost ofcopper increased 8% reflecting volume increases in all of our businesssegments.

 

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Sales for ourcommunications cable segment for the September 30, 2004 quarter were$157.8 million, an increase of 74%, as compared to sales of $90.8 million forthe quarter ended September 30, 2003. Sales adjusted for a constant costof copper increased 52%. Excluding the impact of the Belden Asset Acquisition,sales for our communications cable segment adjusted for a constant cost ofcopper increased $3.1 million, or 3%. The sales increase in 2004, excluding theeffects of the Belden Asset Acquisition, reflects strong growth in our premiseand fiber optic cable products partially offset by a decrease in copper OSPproduct sales. We believe the increase in demand for our copper and fiber opticpremise products is supported by growing investment in information technology,including new and upgraded computer systems and associated wiring and anincrease in our market share. The decrease in copper OSP sales, we believe,reflects quarterly volume reductions by one of our major customers in responseto higher spending levels in the first half of 2004 and increased use of fiberoptic cable products by another major customer. These decreases were partiallyoffset by increased demand for copper OSP products as a result of damage causedby the hurricanes in Florida and the Gulf coast region.

 

Sales for our magnetwire and distribution segment were $153.5 million for the quarter endedSeptember 30, 2004, an increase of 31% as compared to the prior year. On acopper-adjusted basis, sales for the quarter increased 11% from the samequarter in the prior year. The increase reflects volume increases in both ourEssex Brownell distribution business and to a lesser degree our major OEMcustomer base particularly related to the power and energy sector.

 

Copper rod sales for thethree months ended September 30, 2004 were $70.9 million compared to $40.1million for the comparable 2003 period, an increase of $30.8 million. On acopper- adjusted basis, sales for our copper rod segment increased by $5.7million, or 14%, for the three months ended September 30, 2004 compared tothe prior year period. Pricing for copper rod is generally based on monthlyaverage COMEX spot prices and thus sales are directly impacted by changes incopper prices.

 

For the quarter endedSeptember 30, 2004, gross profit was $37.1 million, an increase of 32% ascompared to the prior year quarter primarily attributable to increased volumein our communications cable and magnet wire and distribution segments and lowerdepreciation charges in 2004 resulting from the application of fresh-startreporting. The gross profit margin in the 2004 quarter was 9.7% compared to11.3% for the same quarter in 2003. The comparative decline in gross profitmargin reflects the effects of increased copper prices on sales. Gross profitmargin on a copper-adjusted basis was 11.7% for the three months endedSeptember 30, 2004 compared to 11.2% for the three months endedSeptember 30, 2003. Copper-adjusted gross profit margins in ourcommunications cable business decreased by 0.3% for the 2004 quarter comparedto the prior year quarter due to integration costs incurred in connection withthe Belden Asset Acquisition offset by favorable product mix and improvedcapacity utilization. Copper-adjusted gross profit margin for our magnet wireand distribution business for the three months ended September 30, 2004increased 1.1% compared to the prior year quarter. This increase reflects lowerdepreciation charges resulting from the application of fresh-start reportingand increased volume through our higher margin Essex Brownell distributionchannel, partially offset by unfavorable manufacturing variances resulting fromplant maintenance shutdowns in the 2004 quarter and certain inflationary costincreases including higher natural gas prices, freight costs and copperproducer premiums.

 

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Selling, general and administrative expenses (“SG&A expense”) forthe three month period ended September 30, 2004 were $24.0 million, anincrease of 16% as compared to SG&A expense of $20.7 million for the threemonths ended September 30, 2003. The increase is attributable to a numberof factors including corporate stock-based compensation charges, professionalfees and costs related to compliance with Section 404 of the Sarbanes-OxleyAct, amortization charges related to intangible assets acquired in the Belden AssetAcquisition and Nexans Asset Acquisition and the impact of increased salesvolume and related sales costs and commissions in our communications cablesegment.

 

During the three monthsended September 30, 2003, Superior TeleCom recorded restructuring andother charges of $0.5 million primarily related to ongoing closureactivities and subsequent sale of the communication cable segment’s facilitiesin Elizabethtown, Kentucky and Winnipeg, Manitoba which were closed in 2002.Restructuring and other charges for the three months ended September 30,2003 also included $2.3 million of asset impairments from the closure of one ofSuperior TeleCom’s continuous casting facilities and $0.8 million of assetimpairments resulting from the write-off of abandoned equipment offset byforeign currency transaction gains of $1.5 million related to Superior TeleCom’sCanadian subsidiary. Restructuring and other charges for the three months endedSeptember 30, 2004 were insignificant.

 

We had operating incomeof $13.0 million for the quarter ended September 30, 2004, compared to$5.2 million for the same period in 2003. The comparative improvement inoperating income for the current year was principally attributable to increasedsales volumes and related gross profit and reduced restructuring and othercharges.

 

Superior TeleComrecorded reorganization items related to its Chapter 11 filing of $7.3 millionin the quarter ended September 30, 2003. These costs primarily consistedof $4.4 million of post-petition professional fees related to thereorganization and $3.1 million of employee retention and severance payments.

 

Interest expense for thequarter ended September 30, 2004 was $7.3 million compared to interestexpense of $2.2 million for the quarter ended September 30, 2003. Interestexpense for the 2003 quarter consisted of interest on Superior TeleCom’sdebtor-in-possession financing only as Superior TeleCom ceased accruinginterest on all pre-petition indebtedness as of March 3, 2003. Theincrease in interest expense in 2004 reflects our new capital structure underthe plan of reorganization as well as increased borrowings to finance increasedworking capital and the Belden Asset Acquisition and Nexans Asset Acquisition.

 

Superior TeleComrecorded a full valuation allowance on its net deferred tax assets for thethree months ended September 30, 2003 because the realization of suchassets in future periods was uncertain as a result of the bankruptcy filing.The tax benefit recorded for the 2003 quarter primarily represents theelimination of the net deferred tax liabilities existing at December 31,2002. Our effective tax rate for the three months ended September 30, 2004was 42%. The effective tax rate exceeds the U.S. statutory tax rate due to theimpact of state taxes and a valuation allowance established with respect tooperating losses incurred by our U.K. subsidiary.

 

**Resultsof Operations—Nine-Month Period Ended September 30, 2004 Compared to theNine-Month Period Ended September 30, 2003**

 

The discussion belowcompares the results of our operations for the nine months endedSeptember 30, 2004 to those of Superior TeleCom for the nine months endedSeptember 30, 2003.

 

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Average copper pricesfor the nine months ended September 30, 2004 increased 63% as compared tothe nine months ended September 30, 2003. Due to the impact of thisincrease on reported sales, the following table provides supplemental salesinformation adjusted to a constant $0.80/lb COMEX cost of copper to aid in acomparison of period-to-period revenues by segment.

 
| ** **                         | ** ** | **Superior  Essex Inc.**                       | ** ** | **Superior  TeleCom Inc.**                     | ** ** | **Superior  Essex Inc.** | ** ** | **Superior  TeleCom Inc.** | ** ** |
|------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------|------------|---------------------------------|------------|
| ** **                         | ** ** | **Actual**                                          | ** ** | **Copper-adjusted**                                 | ** ** |
| ** **                         | ** ** | **Nine months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
| ** **                         | ** ** | **2004**                                            | ** ** | **2003**                                            | ** ** | **2004**                      | ** ** | **2003**                        | ** ** |
| ** **                         | ** ** | ** **                                          | ** ** | **(in millions)**                                   | ** ** | ** **                    | ** ** |
| Net sales:                         |       |                                                |       |                                                |       |                          |       |                            |       |
| Communications cable               |       | $                                                   | 379.4      |                                                | $          | 258.9                         |       | $                               | 347.1      |   | $ | 263.5 |   |
| Magnet wire and distribution       |       | 453.0                                               |       | 360.9                                               |       | 390.9                         |       | 369.3                           |       |
| Copper rod                         |       | 209.0                                               |       | 126.2                                               |       | 137.9                         |       | 130.8                           |       |
|                               |       | 1,041.4                                             |       | 746.0                                               |       | 875.9                         |       | 763.6                           |       |
| Constant cost of copper adjustment |       | —                                              |       | —                                              |       | 165.5                         |       | (17.6                           | )          |
| Total                              |       | $                                                   | 1,041.4    |                                                | $          | 746.0                         |       | $                               | 1,041.4    |   | $ | 746.0 |   |

 

Consolidated sales forthe nine months ended September 30, 2004 were $1,041.4 million, anincrease of 40% as compared to consolidated sales of $746.0 million for thenine months ended September 30, 2003. Sales for the 2004 period weresignificantly impacted by the increase in copper prices. Sales adjusted for aconstant cost of copper increased 15% for the nine months ended September 30,2004 compared to the prior year period. Sales in our communications cablesegment for the nine months ended September 30, 2004 also includedapproximately $66.8 million ($58.5 million on a copper-adjusted basis)attributable to customer contracts acquired in the Belden AssetAcquisition.  Sales in our magnet wireand distribution segment for the nine months ended September 30, 2004included approximately $2.5 million on a copper-adjusted basis attributable tocustomer contracts acquired in the Nexans Asset Acquisition. Excluding theimpact of the Belden Asset Acquisition and the Nexans Asset Acquisition,consolidated sales adjusted for a constant cost of copper increased 7%primarily as a result of increased volumes in our communications cable and magnetwire and distribution segments.

 

Sales for ourcommunications cable segment for the nine months ended September 30, 2004were $379.4 million, an increase of 47%, as compared to sales of $258.9 millionfor the nine months ended September 30, 2003. Sales adjusted for aconstant cost of copper increased 32%. Excluding the impact of the Belden AssetAcquisition, sales for our communications cable segment adjusted for a constantcost of copper increased 10%. The sales increase in 2004, excluding the effectsof the Belden Asset Acquisition, reflects a broad-based increase in demand forour OSP cable product lines, which we believe is due in part to higher spendinglevels to support deferred maintenance by some of the major telephone companies(the largest customer group of the communications cable segment) as well asincreased demand for our copper and fiber premise products supported by growinginvestment in information technology, including new and upgraded computersystems and associated wiring. We also believe the increase in sales reflectsan increase in our copper and fiber premise product market share.

 

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Sales for our magnet wire and distribution segment were $453.0 millionfor the nine months ended September 30, 2004, an increase of 26% ascompared to the prior year. On a copper-adjusted basis, sales for the ninemonths ended September 30, 2004 increased 6% over the same period in theprior year. For the past three fiscal years (2001-2003), copper adjusted salesfor our magnet wire and distribution segment have declined on a comparativeyear-over-year basis, principally as a result of weak economic conditions inthe industrial sector, including substantial reductions during this period indurable goods consumption, factory production and commercial construction. To alesser extent, migration to foreign markets of production of certain customermanufacturing impacted sales from 2001 through 2003. We believe thestabilization and increase in copper adjusted sales in the nine months endedSeptember 30, 2004 reflects the recovery in the general economy, as wellas in our basic end markets, particularly related to industrial production andthe power and energy sector.

 

Copper rod sales for thenine months ended September 30, 2004 were $209.0 million compared to$126.2 million for the comparable 2003 period, an increase of $82.8 million. Ona copper- adjusted basis, sales for our copper rod segment increased by $7.1million, or 5%. Pricing for copper rod is generally based on monthly averageCOMEX spot prices and thus sales are directly impacted by changes in copperprices.

 

For the nine monthsended September 30, 2004, gross profit was $100.3 million, an increase of19% as compared to the same period in the prior year primarily attributable toincreased volume in our communications cable and magnet wire and distributionsegments, including the impact of the Belden Asset Acquisition, and lowerdepreciation charges in 2004 resulting from the application of fresh-startreporting. The gross profit margin for the nine months ended September 30,2004 was 9.6% compared to 11.3% for the same period in 2003. The comparativedecline in gross profit margin primarily reflects the effects of increasedcopper prices on sales. Gross profit margin on a copper-adjusted basis was11.4% for the nine months ended September 30, 2004 compared to 11.0% for thenine months ended September 30, 2003. Copper-adjusted gross profit marginsin our communications cable business decreased by 0.7% for the 2004 periodcompared to the prior year due to integration costs incurred in connection withthe Belden Asset Acquisition and a shortfall in recovering second quarter 2004increases in copper costs through contractual product price adjustments. Thiswas principally the result of first quarter 2004 accelerated orders by somecustomers in anticipation of copper-based contractual price adjustments.Additionally, gross profit margins in our communications cable segment reflectlower product pricing resulting from the effects of competitive pressures oncontracts renegotiated in the last half of 2003 and continuing in 2004.Copper-adjusted gross profit margin for our magnet wire and distributionbusiness for the nine months ended September 30, 2004 increased 0.8%compared to the prior year quarter. This increase reflects lower depreciationcharges resulting from the application of fresh-start reporting and increasedvolume in our higher margin Essex Brownell distribution channel, partiallyoffset by certain inflationary cost increases including higher natural gasprices, freight costs and copper producer premiums.

 

Selling, general andadministrative expenses (“SG&A expense”) for the nine-month period endedSeptember 30, 2004 were $67.2 million, an increase of 8% as compared toSG&A expense of $62.4 million for the nine months ended September 30,2003. The increase is attributable to a number of factors including corporatestock-based compensation charges, professional fees and costs related to compliancewith Section 404 of the Sarbanes-Oxley Act, amortization charges related tointangible assets acquired in the Belden Asset Acquisition and Nexans AssetAcquisition and the impact of increased sales volume and related salescommissions in our communications cable segment.

 

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Superior TeleCom incurred $1.8 million of restructuring and othercharges in the first nine months of 2003 primarily related to ongoing closureand sale activities at its communication cable segment’s Elizabethtown,Kentucky and Winnipeg, Manitoba facilities which were closed in 2002, offset byforeign currency transaction gains of $1.5 million related to SuperiorTeleCom’s Canadian subsidiary. Restructuring and other charges for the nine monthsended September 30, 2003 also included pre-petition professional fees of$3.6 million incurred in connection with Superior TeleCom’s Chapter 11filings, $2.3 million of asset impairments resulting from closure of one ofSuperior TeleCom’s continuous casting lines and $0.8 million of assetimpairments resulting from the write-off of abandoned equipment. Restructuringand other charges for the nine months ended September 30, 2004 were $1.5million and consisted primarily of ongoing professional fees related toimplementation of the plan of reorganization and employee retention andseverance payments under plans established by Superior TeleCom in connectionwith its bankruptcy proceedings.

 

We had operating incomeof $31.5 million for the nine months ended September 30, 2004, compared to$14.7 million for the same period in 2003. Operating income in the nine monthsended September 30, 2003 included restructuring and other charges of $7.0million as compared to $1.5 million of such charges for the nine months endedSeptember 30, 2004. The comparative improvement in operating income forthe current year was principally attributable to increased sales volume andrelated gross profit together with the decrease in restructuring and othercharges.

 

Superior TeleComrecorded charges for reorganization items related to its Chapter 11 filing of$40.3 million in the nine months ended September 30, 2003. These costsprimarily consisted of $11.2 million of post-petition professional fees relatedto the reorganization, $27.0 million to adjust the carrying value of SuperiorTeleCom’s Trust Convertible Preferred Securities and related unpaiddistributions to the amount of the allowed claim in respect of theseliabilities, $3.5 million to write-off deferred debt issue costs associatedwith Superior TeleCom’s refinanced accounts receivable securitization, $3.8million of employee retention and severance payments and a benefit of $5.0million from the settlement of pre-petition claims.

 

Interest expense for thenine months ended September 30, 2004 was $19.3 million, compared tointerest expense of $25.2 million for the nine months ended September 30,2003. Interest expense for the 2003 period consisted of interest on SuperiorTeleCom’s debtor-in-possession financing and interest on Superior TeleCom’spre-petition indebtedness through March 3, 2003. At the time of theChapter 11 bankruptcy filing, Superior TeleCom had approximately $890 millionof senior debt and $222 million of senior subordinated notes outstanding. Thedecrease in interest expense in 2004 reflects our new capital structure underthe plan of reorganization as well as borrowings to finance increased workingcapital and the Belden Asset Acquisition and Nexans Asset Acquisition. Duringthe quarter ended June 30, 2004 we also recognized a loss on earlyextinguishment of debt of $0.4 million resulting from the write-off of deferreddebt issue costs associated with our 9 1¤2 % seniornotes which were redeemed with the proceeds of our 9% senior note offering inApril 2004.

 

Superior TeleComrecorded $5.1 million of distributions on the preferred securities of SuperiorTrust I for the nine months ended September 30, 2003. Superior TeleCom’sChapter 11 filing constituted an early dissolution event under the terms of theinstruments governing the Trust and as a result the Trust was liquidated on orabout April 30, 2003 by distribution to holders of the Trust ConvertiblePreferred Securities of an aggregate principal amount of 8 1¤2%Convertible Debentures equal to the aggregate liquidation amount of their TrustConvertible Preferred Securities. All outstanding 8 1¤2%Convertible Debentures were cancelled on November 10, 2003 in accordancewith the terms of the plan of reorganization.

 

Superior TeleComrecorded a full valuation allowance on its net deferred tax assets for the ninemonths ended September 30, 2003 because the realization of such assets infuture periods was uncertain as a result of the bankruptcy filing. The taxbenefit recorded for 2003 period primarily represents the elimination of thenet deferred tax liabilities existing at December 31, 2002. Our effectivetax rate for the nine months ended September 30, 2004 was 42%. Theeffective tax rate exceeds the U.S. statutory tax rate due to the impact ofstate taxes and a valuation allowance established with respect to net operatinglosses incurred by our U.K. subsidiary.

 

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**Liquidityand Capital Resources**

 

We reported cash used byoperating activities of $22.5 million for the nine months endedSeptember 30, 2004 compared to cash provided by operating activities of$77.8 million for the nine months ended September 30, 2003. Cash fromoperations for the 2003 period was positively impacted by Superior TeleCom’sChapter 11 filing as payment of interest on pre-petition indebtedness wassuspended and actions to collect pre-petition liabilities were stayed pendingsettlement under a plan of reorganization. In addition, cash from operationsfor the nine months ended September 30, 2003 included approximately $58.1million of tax refunds related to Superior TeleCom’s fiscal 2002. The taxrefund was used to repay pre-petition indebtedness. Cash used by operatingactivities for the nine months ended September 30, 2004 includes a networking capital increase of $36.0 million, which reflects incremental accountsreceivable attributable to sales under customer contracts acquired in theBelden Asset Acquisition and the Nexans Asset Acquisition, the impact ofsubstantially higher copper costs and an estimated $5 million to $7 millionimpact from bank-related delays in processing customer collections into ourlockbox accounts. Additionally, during the 2004 period, we paid approximately$11.2 million to fund our defined benefit pension plans and $12.3 million ofpreviously accrued reorganization costs consisting primarily of professionalfees related to implementation of the plan of reorganization and employeeretention and severance payments under plans established by Superior TeleCom inconnection with its bankruptcy proceedings. We expect future reorganizationrelated costs will be insignificant and expect our future pension fundingrequirements will be significantly reduced as a result of improvements in thefunded status of our defined benefit plans and the cessation of benefitaccruals for salaried employees and for eligible non-union hourly employeeseffective January 22, 2004. Investing activities for the nine months endedSeptember 30, 2004 included net payments of $90.7 million for the Belden AssetAcquisition and the Nexans Asset Acquisition financed primarily with theproceeds from our 9% senior note offering. These purchase prices are subject toadjustment based on a final accounting of the inventories acquired.Additionally, under the terms of the Belden Asset Acquisition purchaseagreement, a contingent payment of up to $10 million is payable nine monthsafter the closing based on business relationships successfully transitioned tous. We have accrued the full $10 million contingent payment as we believepayment of this amount is probable based on customers transitioned to date.

 

As of the effective dateof the plan of reorganization, $145 million principal amount of seniornotes of Superior Essex Communications and Essex Group, 5 million sharesof series A preferred stock, par value $1 per share, of Superior EssexHolding and 16,500,000 shares of our common stock were issued to creditors ofSuperior TeleCom in accordance with the plan of reorganization. The plan ofreorganization also provides for the payment of $3 million in cash toholders of general unsecured claims against Superior TeleCom.

 

The senior notes wereissued jointly by Superior Essex Communications and Essex Group in an aggregateprincipal amount of $145 million due in November 2008, with interestpayable semi-annually in cash at a rate of 91¤2%. OnApril 29, 2004 we redeemed the senior notes with the proceeds from aRule 144A private placement offering, completed on April 14, 2004, of$257.1 million of 9% unsecured senior notes due April 2012, which werefer to as the “9% senior notes”. Interest on the 9% senior notes is payableApril 15 and October 15 of each year beginning on October 15,2004. The 9% senior notes were issued at an original issue discount of$7.1 million. The proceeds from the offering were also used to pay feesand expenses of the offering and fund the Belden Asset Acquisition

 

The 9% senior notesissued by Superior Essex Communications and Essex Group are fully andunconditionally guaranteed by the Company and each of our existing and futuredomestic restricted subsidiaries. We may redeem some or all of the 9% seniornotes at any time on or after April 15, 2008 at the following redemptionprices (expressed as percentages of the principal amount thereof) if redeemedduring the twelve-month period commencing on April 15 of the year setforth below: 

 

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| **Year:**      | ** ** | **Percentage** | ** ** |
|----------------|------------|----------------|------------|
| 2008           |       | 104.50         | %          |
| 2009           |       | 102.25         | %          |
| 2010 and after |       | 100.00         | %          |

 

We may also redeem up to40% of the aggregate principal amount of the 9% senior notes at a redemptionprice of 109% of the principal amount thereof using the proceeds of one or moreequity offerings completed before April 15, 2007. Additionally, upon theoccurrence of specific kinds of changes in control of the Company, as specifiedin the indenture governing the 9% senior notes, holders of the 9% senior noteswill have the right to require the Company to purchase all or a portion of theoutstanding 9% senior notes at a purchase price equal to 101% of the principalamount thereof plus accrued interest.

 

Simultaneously with thesale of the 9% senior notes on April 14, 2004, we entered into a registrationrights agreement with the initial purchasers of the 9% senior notes requiringus to use our reasonable best efforts to file with the Securities and ExchangeCommission (the “SEC”) and cause to become effective a registration statementrelating to an offer to exchange the 9% senior notes for registered notes withsubstantially identical terms. We filed an initial registration statement withrespect to this exchange offer with the SEC on August 2, 2004 which, asamended, was declared effective on September 1, 2004. The exchange offerexpired on October 5, 2004. The entire $257.1 million principal amount of the9% senior notes was tendered prior to the expiration of the exchange offer andexchanged for an equal amount of registered notes with substantially identicalterms.

 

The indenture governingthe 9% senior notes contains covenants which restrict our ability and theability of certain of our subsidiaries to, among other things: incur additionaldebt and issue preferred stock; make certain distributions, investments andother restricted payments; create certain liens; enter into transactions withaffiliates; and merge, consolidate or sell substantially all of our assets.

 

Holders of theseries A preferred stock issued by Superior Essex Holding are entitled toreceive cumulative cash dividends at a rate of 91¤2% per annumper share, payable semi-annually. The series A preferred stock ranksjunior to all other classes of preferred stock of Superior Essex Holding. Theseries A preferred stock is mandatorily redeemable in November 2013at $1 per share plus accrued and unpaid dividends. The series A preferredstock contains certain other mandatory and optional redemption provisions. Eachshare of series A preferred stock shall have one vote with respect to allmatters submitted to stockholders for a vote, provided however, that holders ofthe series A preferred stock shall not be entitled to vote generally fordirectors.

 

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On the effective date of the plan of reorganization, we entered into anew $120 million senior secured revolving credit facility with a$25 million sublimit for letters of credit. The senior secured revolvingcredit facility was subsequently amended to (i) increase the totalfacility amount by $55 million to $175 million, (ii) increasethe maximum amount of eligible inventory for purposes of computing availabilityfrom $60 million to $70 million, and (iii) increase the minimumavailability threshold requiring the maintenance of a specified EBITDA ratio asdiscussed below from $10 million to $15 million. Superior Essex,Superior Essex Holding and our domestic subsidiaries have fully guaranteed thesenior secured revolving credit facility. Interest accrues on outstandingborrowings at an annual rate equal to, at our option, LIBOR or a base rate,plus, in each case, an applicable margin, determined quarterly based on averageborrowing availability, ranging from 1.75% to 2.75% for LIBOR loans and 0.25%to 1.25% for base rate loans. The applicable margin in effect for the third andfourth quarters of 2004 is 1.75% for LIBOR loans and 0.25% for base rate.Obligations under the senior secured revolving credit facility are secured bysubstantially all of our tangible and intangible assets. Availability under thesenior secured revolving credit facility is subject to a borrowing base equalto the lesser of (1) $175 million less outstanding letters of creditand (2) a specified percentage of eligible accounts receivable andinventory less specified reserves. The specified percentages of eligibleaccounts receivable and eligible inventory are each subject to decrease in thereasonable credit judgment of the administrative agent. Currently, theapplicable percentages are (i) 85% of eligible receivables and(ii) with respect to eligible inventory the lesser of(a) $70 million or (b) the lesser of (x) 65% of the valueof the eligible inventory and (y) 85% multiplied by the net orderlyliquidation value percentage then applicable to our inventory multiplied by thevalue of the eligible inventory. The specified reserves that reduceavailability are not fixed and may be imposed by the administrative agent ofthe revolving credit facility in its reasonable credit judgment. Currentspecified reserves consist of (a) rent reserves related to property onwhich collateral is located, (b) amounts in respect of liabilities orobligations secured by liens on the collateral senior to liens held by theadministrative agent and (c) certain outstanding personal property taxes.Under the revolving credit facility, if availability under the revolving creditline falls below $15 million for any period of two consecutive days, theborrowers will be required to maintain a ratio of 1.1 to 1 of (a) the sumof the consolidated EBITDA of the borrowers minus specified distributions ofthe borrowers relating to capital expenditures, foreign investments, taxdistributions and pension contributions of the borrowers to (b) allprincipal and cash interest payments on specified debt of the borrowers. Thesenior secured revolving credit facility also contains covenants that limit ourand our subsidiaries’ ability to (i) pay dividends, redeem capital stockor make other restricted payments, (ii) sell or dispose of assets,(iii) incur additional indebtedness or permit liens to exist on ourproperty, (iv) engage in transactions with affiliates and (v) makeadditional investments or acquisitions. We are currently obligated to pay anunused commitment fee of 0.375% per annum on the unused amount of the maximumcommitted amount and a fee of 0.125% per annum on the outstanding face amountof outstanding letters of credit. A total of $57.5 million was drawn under thisfacility as of September 30, 2004. Undrawn availability (after consideringoutstanding letters of credit) on such date amounted to $112.8 million. Thesenior secured revolving credit facility matures in November 2007, howeverin accordance with Emerging Issues Task Force Issue 95-22, *Balance Sheet Classification of BorrowingsOutstanding under Revolving Credit Agreements That Include Both a SubjectiveAcceleration Clause and a Lock-Box Arrangement*, borrowings under oursenior secured revolving credit facility have been classified as a currentliability.

 

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Our principal cash requirements include interest payments on our seniorsecured revolving credit facility and 9% senior notes, dividend payments on ourseries A preferred stock, capital expenditures currently estimated atapproximately $10 to $15 million annually and funding the Belden AssetAcquisition $10 million contingent payment. We are also actively pursuing astrategic entry into the Chinese magnet wire market. We have previously engagedin advanced discussions with a leading Chinese magnet wire producer to form astrategic partnership to enter the Chinese magnet wire market; however we havereached a standstill in these negotiations and are currently pursuing otheralternatives. In addition, the price of copper, our principal raw material, hasincreased approximately 34% as of September 30, 2004 compared toDecember 31, 2003. Significant increases in the price of copper and theresultant increase in accounts receivable and, to a lesser degree, inventoryimpacts our working capital funding requirements. We have experienced anincrease in net working capital (excluding short-term borrowings) at September 30,2004 of approximately $36.0 million compared to December 31, 2003reflecting the increase in copper prices, incremental accounts receivableattributable to sales under customer contracts acquired in the Belden AssetAcquisition and normal seasonal increases. We believe that cash provided byoperations together with borrowing availability under our senior securedrevolving credit facility ($112.8 million at September 30, 2004) will besufficient to meet our obligations and fund our working capital requirementsfor the foreseeable future.

 

**ITEM3.**   QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company, to alimited extent, uses forward fixed price contracts and derivative financialinstruments to manage commodity price, foreign currency exchange and interestrate risks. We do not hold or issue financial instruments for investment ortrading purposes. We are exposed to credit risk in the event of nonperformanceby counter parties for foreign exchange forward contracts, metal forward pricecontracts and metals futures contracts but we do not anticipate nonperformanceby any of these counter parties. The amount of such exposure is generallylimited to any unrealized gains within the underlying contracts.

 

***Commodityprice risk management***

 

The costs of copper, ourmost significant raw material, and aluminum, have historically been subject toconsiderable volatility. To manage the risk associated with such volatility, weenter into futures contracts to match the metal component of customer productpricing with the cost component of the inventory shipped. At September 30,2004, we had futures purchase contracts for 13.2 million pounds of copperexpiring through March 2006 and 1.3 million pounds of aluminum expiringthrough December 2004 related to certain future customer firm salescommitments. These futures contracts have been designated as cash flow hedgeswith unrealized gains and losses recorded in other comprehensive income untilthe hedged sales transactions are reflected in the income statement which aregenerally expected to occur in the next twenty-four months. Hedgeineffectiveness, which is not significant, is immediately recognized inearnings. At September 30, 2004, we had an unrealized gain of $2.1 millionon these futures contracts which is recorded in accumulated other comprehensiveincome net of deferred income taxes of $0.8 million.

 

***Foreigncurrency exchange risk management***

 

The Company engages, toa limited extent, in the sale of products which result in accounts receivabledenominated in foreign currencies.  TheCompany enters into foreign currency forward exchange contracts to hedgeagainst fluctuations in the value of these receivables. Changes in the fairvalue of these contracts are reflected in current earnings.  At September 30, 2004, the Company hadoutstanding forward contracts with a notional amount of $6.3 million expiringin October 2004. The fair value of the forward exchange contracts wasinsignificant at September 30, 2004.

 

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***Interestrate risk management***

 

In order to limit ourexposure to rising interest rates with respect to borrowings under our variablerate senior secured revolving credit facility, we have entered into interestrate cap agreements. The following interest rate cap agreements wereoutstanding as of September 30, 2004:

 
| **Type**          | ** ** | **Notional Amount** | ** ** | **Interest Rate** | ** **   | **Cap Rate** | ** ** | **Expiration Date** | ** **         | **Fair Value**     | ** ** |
|-------------------|------------|--------------------------|------------|------------------------|--------------|-------------------|------------|--------------------------|--------------------|-------------------------|------------|
| ** **        | ** ** | **(in thousands)**  | ** ** | ** **             | ** **   | ** **        | ** ** | ** **               | ** **         | **(in thousands)** | ** ** |
| Interest rate cap |       | $                        | 30,000     |                   | 30-day LIBOR |              | 1.75       | %                        | December 2005 |                    | $          | 278 |   |
| Interest rate cap |       | 30,000                   |       | 30-day LIBOR           |         | 5.0               | %          | December 2004       |               | —                  |       |
| Interest rate cap |       | 15,000                   |       | 30-day LIBOR           |         | 5.0               | %          | April 2005          |               | —                  |       |
| Interest rate cap |       | 12,500                   |       | 3-month LIBOR          |         | 7.0               | %          | May 2005            |               | —                  |       |
|                   |            |                          |            |                        |              |                   |            |                          |                    |                         |            |  |  |

 

As previously discussed,on April 14, 2004 we completed a private placement of $257.1 millionof 9% unsecured senior notes due April 2012. Interest on the 9% seniornotes is payable April 15 and October 15 of each year beginning onOctober 15, 2004. The 9% senior notes were issued at an initial discountof $7.1 million.

 

**ITEM4.   CONTROLS AND PROCEDURES**

 

*Evaluationof Controls and Procedures*

* *

As of the end of theperiod covered by this Quarterly Report on Form 10-Q, we carried out anevaluation of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures under the supervision and with theparticipation of the Company’s management, including our Chief ExecutiveOfficer and Chief Financial Officer. Based on that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective at a reasonable level ofassurance. 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 can provide absolute assurance that allcontrol issues and instances of fraud, if any, within a company have beendetected.

 

*Changesin Internal Controls Over Financial Reporting*

* *

There have been nochanges in the Company’s 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.   OTHERINFORMATION**

** **

**ITEM6.   EXHIBITS AND REPORTS ON FORM 8-K**

 

**Exhibits**

 
| 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”)).                               |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1  |   | Amended and Restated Certificate of  Incorporation of Superior Essex Inc. (incorporated herein by reference to  Exhibit 3(a) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 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  |   | Escrow Agreement dated April 14, 2004,  between Superior Essex Communications LLC and Essex Group Inc. as the issuers  and The Bank of New York Trust Company, N.A. as escrow agent (incorporated  herein by reference to Exhibit 10.4 to the Q1 2004 Form 10-Q).                                                                                                                                                                                                                                                                                                                                    |
| 4.4  |   | Registration Rights Agreement dated April  14, 2004 by and among Superior Essex Communications LLC, Essex Group, Inc.,  the Guarantors named therein, J.P. Morgan Securities Inc., Lehman Brothers  Inc., UBS Securities LLC, Wachovia Capital Markets, LLC and Fleet Securities,  Inc. (incorporated herein by reference to Exhibit 10.5 to the Q1 2004 Form  10-Q).                                                                                                                                                                                                                                |
| 4.5  |   | 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).                                                                                                                                                                                              |
| 10.1 |   | Credit Agreement, dated November 10,  2003, by and among Superior Essex Communications LLC, as a borrower, Essex  Group, Inc., as a borrower, the financial institutions party thereto, as  lenders, Fleet Capital Corporation, as collateral and administrative agent  for the lenders, General Electric Capital Corporation, as syndication agent,  Fleet Securities, Inc. and GECC Capital Markets Group, Inc., as  co-lead arrangers (incorporated herein by reference to Exhibit 10(a) to  the Superior Essex Form 10).                                           |
| 10.2 |   | First Amendment to Credit Agreement, dated  February 20, 2004, by and among Superior Essex Communications LLC, as a  borrower, Essex Group Inc., as a borrower, the financial institutions party  thereto, as lenders, Fleet Capital Corporation, as collateral and  administrative agent for the lenders, General Electric Capital Corporation,  as syndication agent, Fleet Securities, Inc. and GECC Capital Markets Group,  Inc., as co-lead arrangers (incorporated herein by reference to Exhibit 10(b)  to the Annual Report on Form 10-K of Superior Essex Inc. for the year ended  December |

 

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|   |   | 31, 2003 (the “2003 Form 10-K”)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3   |   | Second Amendment to Credit Agreement, dated  March 18, 2004, by and among Superior Essex Communications LLC, as a  borrower, Essex Group Inc., as a borrower, the financial institutions party  thereto, as lenders, Fleet Capital Corporation, as collateral and  administrative agent for the lenders, General Electric Capital Corporation,  as syndication agent, Fleet Securities, Inc. and GECC Capital Markets Group,  Inc., as co-lead arrangers (incorporated herein by reference to Exhibit 10(c)  to the 2003 Form 10-K).     |
| 10.4   |   | Third Amendment to Credit Agreement, dated  April 2, 2004, by and among Superior Essex Communications LLC, as a borrower,  Essex Group Inc., as a borrower, the financial institutions party thereto, as  lenders, Fleet Capital Corporation, a collateral and administrative agent for  the lenders, General Electric Capital Corporation, as syndication agent for  the lenders (incorporated herein by reference to Exhibit 10.1 to the Q1 2004  Form 10-Q).                                                                          |
| 10.5   |   | Fourth Amendment to Credit Agreement, dated  April 30, 2004, by and among Superior Essex Communications LLC, as a  borrower, Essex Group Inc., as a borrower, the financial institutions party  thereto, as lenders, Fleet Capital Corporation, as collateral and  administrative agent for the lenders, General Electric Capital Corporation,  as syndication agent for the lenders (incorporated herein by reference to  Exhibit 10.2 to the Q1 2004 Form 10-Q).                                                        |
| 10.6   |   | Fifth Amendment to Credit Agreement, dated  June 16, 2004, by and among Superior Essex Communications LLC, as a borrower,  Essex Group Inc., as a borrower, the financial institutions party thereto, as  lenders, Fleet Capital Corporation, as collateral and administrative agent  for the lenders, General Electric Capital Corporation, as syndication agent  for the lenders (incorporated herein by reference to Exhibit 10.1 to the  Quarterly Report on Form 10-Q of Superior Essex Inc. for the quarter ended  June 30, 2004). |
| 10.7   |   | Warrant Agreement, dated as of November 10,  2003, between Superior Essex Inc. and American Stock Transfer & Trust  Company, as warrant agent (incorporated herein by reference to Exhibit 10(d)  to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                    |
| 10.8   |   | Superior Essex Inc. 2003 Stock Incentive  Plan (incorporated herein by reference to Exhibit 10(e) to the Superior  Essex Form 10).                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.9   |   | Employment Agreement, dated November 10,  2003, between Superior Essex and Stephen M. Carter (incorporated herein by  reference to Exhibit 10(f) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                         |
| 10.10  |   | Employment Agreement, dated March 15, 2004,  between SEI and David S. Aldridge (incorporated herein by reference to  Exhibit 10(i) to the 2003 Form 10- K).                                                                                                                                                                                                                                                                                                                                                                              |
| 10.11  |   | Employment Agreement, dated March 15, 2004,  between SEI and Justin F. Deedy, Jr. (incorporated herein by reference to  Exhibit 10(j) to the 2003 Form 10- K).                                                                                                                                                                                                                                                                                                                                                                           |
| 10.12  |   | Employment Agreement, dated March 5, 2004,  between SEI and H. Patrick Jack (incorporated herein by reference to Exhibit  10(k) to the 2003 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.13  |   | Letter Agreement, dated February 26, 2004,  between Superior Essex Inc. and Barbara L. Blackford (incorporated herein by  reference to Exhibit 10.6 to the Q1 2004 Form 10-Q).                                                                                                                                                                                                                                                                                                                                                           |
| 10.14  |   | Separation Agreement, dated November 5,  2003, between Superior Essex Inc. and Stephen C. Knup (incorporated herein by  reference to Exhibit 10(j) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                       |
| 10.15  |   | Severance Pay Plan (incorporated herein by  reference to Exhibit 10(k) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.16  |   | Change in Control Severance Pay Plan  (incorporated herein by reference to Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

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|   |   | 10(l) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.17  |   | Key Employee Retention Plan (incorporated  herein by reference to Exhibit 10(m) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                  |
| 10.18  |   | 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).                                                                                                                    |
| 10.19  |   | 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”)).                                                                                                          |
| 10.20  |   | 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).                                                                                                                                                                                                                                     |
| 10.21  |   | 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”)). |
| 10.22  |   | 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).                                                                                                                                                                                                             |
| 10.23  |   | Fourth Amendment to Lease Agreement, dated  as of November 27, 1998, between ALP (TX) QRS 11-28, Inc. and Superior  Telecommunications Inc. (incorporated herein by reference to Exhibit 10(x) to  the Annual Report on Form 10-K of Superior TeleCom Inc. for the year ended  December 31, 1999 (the “1999 Superior TeleCom 10-K”)).                                                                                                                  |
| 10.24  |   | 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).                                                                                                                                                                                                 |
| 10.25  |   | 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).                                                                                                                                                    |
| 10.26  |   | 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).                                                                                                                                                              |
| 10.27* |   | Superior Essex Inc. Senior Executive  Retirement Plan                                                                                                                                                                                                                                                                                                                                                                                                            |
| 31.1*  |   | Certification of the Company’s Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                |
| 31.2*  |   | Certification of the Company’s Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                |
| 32.1*  |   | Certification of the Company’s Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                |
| 32.2*  |   | Certification of the Company’s Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                |

----

*                    Filedherewith

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                     | SUPERIOR  ESSEX INC. |
|--------------------------|----------------------|
|                     |                 |   |
|                     |                 |   |
| Date:  November 15, 2004 | By:                  | /s/ DAVID S. ALDRIDGE |
|                     |                 | David S. Aldridge |
|                     |                 | *Executive Vice President, Chief Financial* |
|                     |                 | *Officer* |
|                     |                 | *and Treasurer* |
|                     |                 | (duly authorized officer and principal |
|                     |                 | financial |
|                     |                 | and accounting officer) |

 

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