**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-Q**

 
| **(Mark One)**                                         |
|--------------------------------------------------------|
| **ý**                                             | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                             | ** ** |
| **For the Quarterly Period Ended June 30,  2005** |
| ** **                                             | ** ** |
| **or**                                                 |
| ** **                                             | ** ** |
| **o**                                                  | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                             | ** ** |
| **For the transition period from to**                  |

 

**Commission file number 0-50514**

 

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**SUPERIOR ESSEX INC.**

(Exact name of registrant as specified in itscharter)

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

 

**770-657-6000**

Registrant’s telephone number, including areacode

 

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Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports) and (2) hasbeen subject to such filing requirements for the past90 days. Yes ý  No o

 

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

 

As of August 2, 2005, the registrant had 17,119,828 shares ofcommon stock, $0.01 par value, outstanding.

 

 

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**PART I. FINANCIAL INFORMATION**

 

In this Quarterly Report on Form 10-Q, the following termshave the meanings indicated below:

 

**•****                 **unlessthe context 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. SuperiorEssex Holding is the sole limited partner of Superior Essex Communications. SECommunications GP Inc., a wholly owned subsidiary of Superior EssexHolding, is the sole general partner of Superior Essex Communications.

 

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

 

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

 

1

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**Forward-Looking Statements**

 

This report 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;

 

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

 

**•****                    **Increasesor decreases in sales due to contract losses or gains as expirations, renewalsand rebidding efforts occur;

 

**•****                    **Rapidproduct and technology development, particularly in the telecommunicationsindustry;

 

**•****                    **Marketacceptance of new products and continuing product demand;

 

**•****                    **Productionand timing of customer orders;

 

**•****                    **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;

 

**•****                    **Ourability to sustain the benefits of our acquisition of assets fromBelden Inc. and Nexans Magnet Wire USA Inc., to integrate theoperations of our European magnet wire joint venture with Nexans and attain theexpected benefits of the transaction, if consummated, and to identify, financeand integrate other acquisitions;

 

•                     Our ability to successfullyconstruct and operate a magnet wire facility in China;

 

**•****                    **Changesin short-term interest rates and foreign exchange rates;

 

**•****                    **Adeterioration in our labor relations;

 

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

 

**•****                    **Otherrisks and uncertainties, including those included under the caption “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2004.

 

Forward-looking statements should be considered in light of variousimportant factors, including those set forth elsewhere in this report and ourother filings with the SEC. Moreover, we caution you not to place unduereliance on these forward-looking statements, which speak only as of the datethey were made. We do not undertake any obligation to publicly release anyrevisions to these forward-looking statements to reflect events orcircumstances after the date of this report or to reflect the occurrence ofunanticipated events. All subsequent forward-looking statements attributable tous or any person acting on our behalf are expressly qualified in their entiretyby the cautionary statements contained or referred to in this report and in ourother SEC filings.

 

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**ITEM 1. FINANCIAL STATEMENTS**

 

**SUPERIOR ESSEX INC. AND SUBSIDIARIES**

 

**CONSOLIDATED BALANCE SHEETS**

 

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

 

**(unaudited)**

 
| ** **                                                                                                                                                           | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                                           |       |                    |       |                        |       |
| Current assets:                                                                                                                                                      |       |                    |       |                        |       |
| Cash and cash equivalents                                                                                                                                            |       | $                       | 11,352     |                        | $          | 18,312 |   |
| Accounts receivable (less allowance for  doubtful accounts of $1,623 and $1,800 at June 30, 2005 and December 31,  2004, respectively)                     |       | 174,686                 |       | 144,954                     |       |
| Inventories, net                                                                                                                                                     |       | 180,638                 |       | 160,869                     |       |
| Other current assets                                                                                                                                                 |       | 21,080                  |       | 25,848                      |       |
| Total current assets                                                                                                                                                 |       | 387,756                 |       | 349,983                     |       |
| Property, plant and equipment, net                                                                                                                                   |       | 234,969                 |       | 239,219                     |       |
| Intangible and other long-term assets, net                                                                                                                           |       | 42,468                  |       | 41,769                      |       |
| Total assets                                                                                                                                                         |       | $                       | 665,193    |                        | $          | 630,971 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                        |       |                    |       |                        |       |
| Current liabilities:                                                                                                                                                 |       |                    |       |                        |       |
| Short-term borrowings                                                                                                                                                |       | $                       | 40,146     |                        | $          | 30,785 |   |
| Accounts payable                                                                                                                                                     |       | 81,733                  |       | 66,155                      |       |
| Accrued expenses                                                                                                                                                     |       | 41,015                  |       | 57,506                      |       |
| Total current liabilities                                                                                                                                            |       | 162,894                 |       | 154,446                     |       |
| Long-term debt                                                                                                                                                       |       | 262,770                 |       | 262,444                     |       |
| Other long-term liabilities                                                                                                                                          |       | 47,951                  |       | 39,883                      |       |
| Total liabilities                                                                                                                                                    |       | 473,615                 |       | 456,773                     |       |
| Stockholders’ equity:                                                                                                                                           |       |                    |       |                        |       |
| Preferred stock, $.01 par value; 7,000,000  shares authorized, none issued or outstanding                                                                            |       | —                  |       | —                      |       |
| Common stock, $.01 par value; 33,000,000  shares authorized; 17,119,828 and 17,048,694 shares issued at June 30,  2005 and December 31, 2004, respectively |       | 172                     |       | 171                         |       |
| Capital in excess of par value                                                                                                                                       |       | 172,921                 |       | 171,187                     |       |
| Accumulated other comprehensive income  (loss)                                                                                                                       |       | (1,139                  | )          | 95                          |       |
| Retained earnings                                                                                                                                                    |       | 25,060                  |       | 8,045                       |       |
| Equity-based unearned compensation                                                                                                                                   |       | (4,766                  | )          | (4,868                      | )          |
| Treasury stock, at cost (40,155 and 26,770  shares at June 30, 2005 and December 31, 2004, respectively)                                                   |       | (670                    | )          | (432                        | )          |
| Total stockholders’ equity                                                                                                                                      |       | 191,578                 |       | 174,198                     |       |
| Total liabilities and stockholders’ equity                                                                                                                      |       | $                       | 665,193    |                        | $          | 630,971 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements

 

3

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**SUPERIOR ESSEX INC. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF OPERATIONS**

 

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

 

**(unaudited)**

 
| ** **                                    | ** ** | **Three Months Ended  June 30,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                    | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Net sales                                     |       | $                                     | 429,946    |   | $ | 357,351 |   |
| Cost of goods sold                            |       | 385,576                               |       | 323,734 |   |
| Gross profit                                  |       | 44,370                                |       | 33,617 |   |
| Selling, general and administrative  expenses |       | (24,690                               | )          | (22,291 | ) |
| Restructuring and other charges               |       | (180                                  | )          | (406 | ) |
| Operating income                              |       | 19,500                                |       | 10,920 |   |
| Interest expense                              |       | (7,409                                | )          | (7,111 | ) |
| Loss on early extinguishment of debt          |       | —                                |       | (407 | ) |
| Other income (expense), net                   |       | 81                                    |       | (110 | ) |
| Income before income taxes                    |       | 12,172                                |       | 3,292 |   |
| Income tax expense                            |       | (5,138                                | )          | (1,250 | ) |
| Net income                                    |       | $                                     | 7,034      |   | $ | 2,042 |   |
| Net income per share of common stock:         |       |                                  |       |   |   |
| Basic                                         |       | $                                     | 0.42       |   | $ | 0.12 |   |
| Diluted                                       |       | $                                     | 0.42       |   | $ | 0.12 |   |
| Weighted average shares outstanding:          |       |                                  |       |   |   |
| Basic                                         |       | 16,646                                |       | 16,516 |   |
| Diluted                                       |       | 16,943                                |       | 16,622 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements

 

4

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| ** **                                    | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------|------------|
| ** **                                    | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| Net sales                                     |       | $                                   | 833,234    |   | $ | 659,202 |   |
| Cost of goods sold                            |       | 746,943                             |       | 595,985 |   |
| Gross profit                                  |       | 86,291                              |       | 63,217 |   |
| Selling, general and administrative  expenses |       | (50,163                             | )          | (43,182 | ) |
| Restructuring and other charges               |       | (632                                | )          | (1,486 | ) |
| Asset impairment charge (note 4)              |       | (2,306                              | )          | — |   |
| Gain on sale of product line (note 5)         |       | 10,355                              |       | — |   |
| Operating income                              |       | 43,545                              |       | 18,549 |   |
| Interest expense                              |       | (14,482                             | )          | (11,980 | ) |
| Loss on early extinguishment of debt          |       | —                              |       | (407 | ) |
| Other income (expense), net                   |       | 196                                 |       | (186 | ) |
| Income before income taxes                    |       | 29,259                              |       | 5,976 |   |
| Income tax expense                            |       | (12,244                             | )          | (2,580 | ) |
| Net income                                    |       | $                                   | 17,015     |   | $ | 3,396 |   |
| Net income per share of common stock:         |       |                                |       |   |   |
| Basic                                         |       | $                                   | 1.02       |   | $ | 0.21 |   |
| Diluted                                       |       | $                                   | 1.01       |   | $ | 0.20 |   |
| Weighted average shares outstanding:          |       |                                |       |   |   |
| Basic                                         |       | 16,615                              |       | 16,508 |   |
| Diluted                                       |       | 16,916                              |       | 16,607 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements

 

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**SUPERIOR ESSEX INC. AND SUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

 

**(in thousands)**

 

**(unaudited)**

 
| ** **                                                                      | ** ** | **Six Months  Ended June 30,** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                      | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| Cash flows from operating activities:                                           |       |                                |       |   |   |
| Net income                                                                      |       | $                                   | 17,015     |   | $ | 3,396 |   |
| Adjustments to reconcile net income to net  cash used for operating activities: |       |                                |       |   |   |
| Depreciation and amortization                                                   |       | 11,402                              |       | 9,889 |   |
| Amortization of deferred financing costs  and discount                          |       | 979                                 |       | 772 |   |
| Asset impairment charges (note 4)                                               |       | 2,306                               |       | — |   |
| Gain on sale of product line (note 5)                                           |       | (10,355                             | )          | — |   |
| Change in operating assets and liabilities:                                     |       |                                |       |   |   |
| Accounts receivable, net                                                        |       | (30,699                             | )          | (50,622 | ) |
| Inventories, net                                                                |       | (20,730                             | )          | (4,661 | ) |
| Other current and non-current assets                                            |       | 2,718                               |       | 5,083 |   |
| Accounts payable, accrued expenses and  other liabilities                       |       | 15,846                              |       | 29,124 |   |
| Other, net                                                                      |       | 676                                 |       | 654 |   |
| Cash flows used for operating activities  before reorganization items           |       | (10,842                             | )          | (6,365 | ) |
| Reorganization items paid, net                                                  |       | —                              |       | (12,253 | ) |
| Cash flows used for operating activities                                        |       | (10,842                             | )          | (18,618 | ) |
| Cash flows from investing activities:                                           |       |                                |       |   |   |
| Capital expenditures                                                            |       | (7,472                              | )          | (3,910 | ) |
| Belden asset acquisition (note 5)                                               |       | (10,000                             | )          | (83,010 | ) |
| Proceeds from sale of product line (note 5)                                     |       | 11,563                              |       | — |   |
| Other                                                                           |       | —                              |       | 25 |   |
| Cash flows used for investing activities                                        |       | (5,909                              | )          | (86,895 | ) |
| Cash flows from financing activities:                                           |       |                                |       |   |   |
| Short-term borrowings, net                                                      |       | 9,390                               |       | 6,977 |   |
| Debt issuance costs                                                             |       | —                              |       | (4,507 | ) |
| Long-term borrowings                                                            |       | —                              |       | 250,004 |   |
| Repayments of long-term borrowings                                              |       | —                              |       | (145,000 | ) |
| Proceeds from exercise of stock options                                         |       | 705                                 |       | — |   |
| Cash flows provided by financing activities                                     |       | 10,095                              |       | 107,474 |   |
| Effect of exchange rate changes on cash                                         |       | (304                                | )          | (55 | ) |
| Net increase (decrease) in cash and cash  equivalents                           |       | (6,960                              | )          | 1,906 |   |
| Cash and cash equivalents at beginning of  period                               |       | 18,312                              |       | 10,606 |   |
| Cash and cash equivalents at end of period                                      |       | $                                   | 11,352     |   | $ | 12,512 |   |
| Supplemental disclosures:                                                       |       |                                |       |   |   |
| Cash paid for interest                                                          |       | $                                   | 13,651     |   | $ | 10,898 |   |
| Cash paid for income taxes, net                                                 |       | $                                   | 5,317      |   | $ | 851 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements

 

6

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**SUPERIOR ESSEX INC. AND SUBSIDIARIES**

 

**NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

 

**June 30, 2005**

 

**(unaudited)**

 

**1.****                 General**

 

***Basis ofpresentation***

 

The accompanying unaudited consolidated financial statements have beenprepared in accordance with the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, as amended, and, therefore, do not includeall disclosures required by accounting principles generally accepted in theUnited States for complete financial statements. However, in the opinion ofmanagement, these statements reflect all adjustments (which consist only ofnormal recurring accruals) necessary for a fair presentation of the results ofoperations for the relevant periods. Results for the three months and six monthsended June 30, 2005 are not necessarily indicative of the results to beexpected for the entire fiscal year. These financial statements should be readin conjunction with the audited consolidated financial statements and notesthereto included in Superior Essex Inc.’s Annual Report on Form 10-Kfor the year ended December 31, 2004.

 

The Company is a manufacturer and supplier of communications wire andcable products to telephone companies, CATV companies, distributors and systemsintegrators, and magnet wire and insulation materials to major originalequipment manufacturers, or OEMs, and, through its distribution operations, tosmall OEMs and the motor maintenance, repair and overhaul industry. TheCompany also converts copper cathode to copper rod for sale to other wire andcable manufacturers. The Company operates manufacturing and distributionfacilities in the United States, the United Kingdom and Mexico.

 

***Stock-BasedCompensation Plans***

 

The Company applies the intrinsic-value based method of accountingprescribed by Accounting 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 only if the current market price ofthe underlying stock on the date of grant exceeded the exercise price. Compensationexpense attributable to fixed awards is recognized on a straight-line basisover the related vesting period. SFAS No. 123, *Accounting for Stock-Based Compensation*, establishedaccounting and disclosure requirements using a fair-value based method ofaccounting for stock-based employee compensation plans. As allowed by SFAS No. 123,the Company elected to continue to apply the intrinsic-value based method ofaccounting described above, and adopted only the disclosure requirements ofSFAS No. 123. The following tables illustrate the effect on net income ifthe fair-value based method had been applied to all outstanding awards in eachperiod.

 
| ** **                                                                                                                   | ** ** | **Three Months  Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                   | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| Net income, as reported                                                                                                      |       | $                                     | 7,034      |   | $ | 2,042 |   |
| Add stock-based employee compensation  expense included in reported net income, net of tax                                   |       | 382                                   |       | 350 |   |
| Deduct total stock-based employee  compensation expense determined under fair-value based method for all awards,  net of tax |       | (568                                  | )          | (454 | ) |
| Pro forma net income                                                                                                         |       | $                                     | 6,848      |   | $ | 1,938 |   |
| Net income per share:                                                                                                        |       |                                  |       |   |   |
| As reported:                                                                                                                 |       |                                  |       |   |   |
| Basic                                                                                                                        |       | $                                     | 0.42       |   | $ | 0.12 |   |
| Diluted                                                                                                                      |       | 0.42                                  |       | 0.12 |   |
| Pro forma:                                                                                                                   |       |                                  |       |   |   |
| Basic                                                                                                                        |       | 0.41                                  |       | 0.12 |   |
| Diluted                                                                                                                      |       | 0.40                                  |       | 0.12 |   |

 

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| ** **                                                                                                                   | ** ** | **Six Months  Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                                                   | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| Net income, as reported                                                                                                      |       | $                                   | 17,015     |   | $ | 3,396 |   |
| Add stock-based employee compensation  expense included in reported net income, net of tax                                   |       | 761                                 |       | 545 |   |
| Deduct total stock-based employee  compensation expense determined under fair-value based method for all awards,  net of tax |       | (1,060                              | )          | (680 | ) |
| Pro forma net income                                                                                                         |       | $                                   | 16,716     |   | $ | 3,261 |   |
| Net income per share:                                                                                                        |       |                                |       |   |   |
| As reported:                                                                                                                 |       |                                |       |   |   |
| Basic                                                                                                                        |       | $                                   | 1.02       |   | $ | 0.21 |   |
| Diluted                                                                                                                      |       | 1.01                                |       | 0.20 |   |
| Pro forma:                                                                                                                   |       |                                |       |   |   |
| Basic                                                                                                                        |       | 1.01                                |       | 0.20 |   |
| Diluted                                                                                                                      |       | 0.99                                |       | 0.20 |   |

 

The effects of applying SFAS No. 123 in the pro forma disclosureare not necessarily indicative of future amounts, since the estimated fairvalue of stock options is amortized to expense over the vesting period andadditional options may be granted in future years. Options to purchase 222,650shares of common stock with a weighted average fair value per option of $8.62were granted during the six months ended June 30, 2005 at an exerciseprice equal to the fair value of the underlying common stock at the date ofgrant. The fair value for these options was estimated at the date of grantusing the Black-Scholes option-pricing model with the followingweighted-average assumptions: dividend yield of 0%; expected volatility of 43%,risk-free interest rate of 4.1%, and expected life of 6.25 years. Additionally,42,000 shares of restricted stock with a weighted average per share value of$16.36 were granted during the three months ended June 30, 2005. Optionsto purchase 750,500 shares of common stock with a weighted average fair valueper option of $6.21 were granted during the six months ended June 30, 2004at an exercise price below the fair value of the underlying common stock at thedate of grant in accordance with the terms of the 2003 Stock Incentive Plan.The 2003 Stock Incentive Plan provided that the exercise price would be theinitial value of the Company’s stock on the effective date of the plan ofreorganization ($10 per share) for options granted prior to May 10, 2004to individuals who were members of management as of the effective date of theplan of reorganization. Options to purchase 100,000 shares of common stock witha weighted average fair value per option of $3.87 were granted during the sixmonths ended June 30, 2004 at an exercise price equal to the fair value ofthe underlying common stock at the date of grant. The fair value for theoptions granted during the six months ended June 30, 2004 was estimated atthe date of grant using the Black-Scholes option-pricing model with the followingweighted-average assumptions: dividend yield of 0%; expected volatility of 41%,risk-free interest rate of 2.5%, and expected life of three years.

 

The following table summarizes stock option activity for the six monthsended June 30, 2005:

 
| ** **                            | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise Price** | ** ** |
|---------------------------------------|------------|------------|------------|---------------------------------------|------------|
| Outstanding at December 31, 2004 |       | 888,750    |       | $                                     | 10.52      |   |
| Granted                               |       | 222,650    |       | 17.84                                 |       |
| Exercised                             |       | (69,300    | )          | 10.17                                 |       |
| Outstanding at June 30, 2005     |       | 1,042,100  |       | 12.11                                 |       |
|                                       |            |            |            |                                       |            |  |

 

***Recent AccountingPronouncements***

 

In December 2004, the FASB issued Statement 123 (revised 2004), *“Share-Based Payment”,* a revision ofStatement 123, *“Accounting for Stock BasedCompensation.”* Statement 123(R) supercedes APB Opinion No. 25and requires all entities to recognize compensation expense in an amount equalto the fair value of share-based payments (e.g. stock options and restrictedstock awards) granted to employees. Statement 123(R) is effective for fiscalyears beginning after June 15, 2005. The Company intends to apply thestandard on a modified prospective method. Under this method, all awardsgranted after the date of adoption must be accounted for under the provisionsof Statement 123(R). In addition, compensation expense must be recognized forthe unvested portion of previously granted awards and options that remainoutstanding at the date of adoption. The Company will adopt Statement 123(R)effective January 1, 2006 and expects to recognize incremental non-cashcompensation expense related

 

8

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to currently outstanding options and awards of approximately $1.2million, $0.6 million and $0.5 million in 2006, 2007 and 2008, respectively.

 

**2.****                 Inventories**

 

At June 30, 2005 and December 31, 2004, the components ofinventories were as follows:

 
| ** **      | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **      | ** ** | **(in thousands)**      | ** ** |
| Raw materials   |       | $                       | 15,172     |                        | $          | 16,034 |   |
| Work in process |       | 38,009                  |       | 31,509                      |       |
| Finished goods  |       | 159,027                 |       | 135,489                     |       |
|            |       | 212,208                 |       | 183,032                     |       |
| LIFO reserve    |       | (31,570                 | )          | (22,163                     | )          |
|            |       | $                       | 180,638    |                        | $          | 160,869 |   |

 

Inventories valued using the LIFO method amounted to $80.1 million and$78.8 million at June 30, 2005 and December 31, 2004,respectively.

 

**3.****                 Comprehensiveincome**

 

The components of comprehensive income for the three and six monthsended June 30, 2005 and 2004 were as follows:

 
| ** **                                                                                                                                           | ** ** | **Three Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                                           | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                                                                                                                                           | ** ** | **(in thousands)**                    | ** ** |
| Net income                                                                                                                                           |       | $                                     | 7,034      |   | $ | 2,042 |   |
| Foreign currency translation adjustment                                                                                                              |       | (410                                  | )          | (542 | ) |
| Change in unrealized gains on derivatives,  net of income tax of $436 and $960 for the three months ended June 30,  2005 and 2004, respectively |       | (682                                  | )          | (1,499 | ) |
| Other                                                                                                                                                |       | (64                                   | )          | 3 |   |
| Comprehensive income                                                                                                                                 |       | $                                     | 5,878      |   | $ | 4 |   |

 
| ** **                                                                                                                                        | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                                                                        | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| ** **                                                                                                                                        | ** ** | **(in thousands)**                  | ** ** |
| Net income                                                                                                                                        |       | $                                   | 17,015     |   | $ | 3,396 |   |
| Foreign currency translation adjustment                                                                                                           |       | (684                                | )          | (53 | ) |
| Change in unrealized gains on derivatives,  net of income tax of $347 and $10 for the six months ended June 30, 2005  and 2004, respectively |       | (533                                | )          | (7 | ) |
| Other                                                                                                                                             |       | (17                                 | )          | 65 |   |
| Comprehensive income                                                                                                                              |       | $                                   | 15,781     |   | $ | 3,401 |   |

 

The components of accumulated other comprehensive income at June 30,2005 and December 31, 2004 were as follows:

 
| ** **                                                                                                                            | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                            | ** ** | **(in thousands)**      | ** ** |
| Foreign currency translation adjustment                                                                                               |       | $                       | 1,644      |                        | $          | 2,328 |   |
| Unrealized gain on derivatives, net of  income tax of $897 and $1,244 at June 30, 2005 and December 31,  2004, respectively |       | 1,408                   |       | 1,941                       |       |
| Additional minimum pension liability, net  of income tax of $2,679 at June 30, 2005 and December 31, 2004                   |       | (4,190                  | )          | (4,190                      | )          |
| Other                                                                                                                                 |       | (1                      | )          | 16                          |       |
|                                                                                                                                  |       | $                       | (1,139     | )                           | $          | 95 |   |

 

9

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**4.****                 Restructuring andother charges and asset impairments**

 

In the first quarter of 2005, the Company recorded an impairment chargeof $2.3 million related to property, plant and equipment of the Company’sU.K. subsidiary. The Company evaluated the long-lived assets of its U.K.subsidiary for impairment as of March 31, 2005 after consideration of thecontinued deterioration in the European magnet wire market in the first quarterof 2005, the loss of a major customer in 2005 and negotiated reductions in thevalue ascribed to the U.K. net assets in connection with the proposed Nexanstransaction (see note 13). The impairment test was based on probabilityweighted estimated cash flows associated with such assets. The fair value ofthe assets was based on appraised value determined primarily by comparison toprices for similar assets. The U.K. operation is included in the magnet wireand distribution segment.

 

Restructuring and other charges for the six months ended June 30,2005 consisted of $0.4 million of facility exit costs related to closureof an insulation manufacturing facility in Athens, Georgia and $0.2 millionof professional fees related to the implementation of Superior TeleCom’s planof reorganization. The facility exit costs primarily consisted of future leasepayments net of estimated sublease rentals. Restructuring and other charges forthe six months ended June 30, 2004 were $1.5 million consisting primarilyof professional fees related to implementation of the plan of reorganizationand employee retention and severance payments under plans established bySuperior TeleCom in connection with its bankruptcy proceedings.

 

**5.****                 Assetacquisitions and dispositions**

 

***Belden AssetAcquisition***

 

On June 1, 2004, Superior Essex Communications acquired certainassets from operating subsidiaries of Belden Inc. (“Belden”) related totheir North American copper outside plant (“OSP”) communications wire and cablebusiness (the “Belden Asset Acquisition”). Under the terms of the assetpurchase agreement, Superior Essex Communications acquired certain inventories,selected machinery and equipment and certain customer contracts related to aportion of Belden’s communications business for total consideration of $83.1 millionincluding a payment of $10 million which was made in March 2005. Theequipment acquired from Belden is being deployed in the communications cablesegment. Belden retained its manufacturing facilities and employees togetherwith all of the associated liabilities, including, among others, accountspayable, any employee-related obligations, plant shutdown costs andenvironmental obligations.

 

***Nexans AssetAcquisition***

 

On September 7, 2004, Essex Group acquired certain assets fromNexans Magnet Wire USA Inc., a wholly-owned subsidiary of Nexans. Underthe terms of the purchase agreement, Essex Group acquired substantially allinventory associated with Nexans’ U.S. magnet wire operations and assumedcertain U.S. customer contractual arrangements. The Company used the assetsacquired in its magnet wire and distribution business. The total purchase pricefor the acquisition was $11.6 million.

 

***US Seal Disposition***

 

On March 4, 2005, the Company sold accounts receivable andinventory totaling approximately $1.2 million together with relatedtrademarks and service names constituting the business conducted by the Companyunder the US Seal trade name for a net total purchase price of$11.6 million. A gain of $10.4 million was recognized on the sale.Total sales with respect to the US Seal product line were approximately$5.2 million in 2004. In connection with the sale, the Company also signeda non-exclusive distribution agreement to act as a distributor for certain ofthe US Seal products for a period of five years. The Company believes theexpected revenues under the distribution agreement represent a significantcontinuation of the direct cash flows of the disposed US Seal product line andaccordingly, the disposition is not reported as a discontinued operation inaccordance with SFAS No. 144, *Accountingfor the Impairment and Disposal of Long-Lived Assets* and EITF Issue No. 03-13.The US Seal product line is included in the magnet wire and distributionsegment.

 

10

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**6.****                 Debt**

 

At June 30, 2005 and December 31, 2004, short-term borrowingsand long-term debt consist of the following:

 
| ** **                                                                                                             | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                             | ** ** | **(in thousands)**      | ** ** |
| Short-term borrowings:                                                                                                 |       |                    |       |                        |       |
| Senior secured revolving credit facility                                                                               |       | $                       | 40,000     |                        | $          | 30,000 |   |
| Other                                                                                                                  |       | 146                     |       | 785                         |       |
|                                                                                                                   |       | $                       | 40,146     |                        | $          | 30,785 |   |
| Long-term debt:                                                                                                        |       |                    |       |                        |       |
| 9% senior notes (net of discount of $6,330  and $6,656 at June 30, 2005 and December 31, 2004, respectively) |       | $                       | 250,770    |                        | $          | 250,444 |   |
| Series A redeemable preferred stock                                                                               |       | 5,000                   |       | 5,000                       |       |
| Other                                                                                                                  |       | 7,000                   |       | 7,000                       |       |
| Total long-term debt                                                                                                   |       | $                       | 262,770    |                        | $          | 262,444 |   |

 

On July 15, 2005, the senior secured revolving credit facility wasamended. The amendment, among other things, increased the amount of permittedconsigned inventory from $30 million to $50 million and limited the locationsat which consigned inventory may be included in the determination of theborrowing base for revolving loans to the United States or Canada (other thanin the Province of Quebec, Canada). The amendment exempts up to $25 millionof the total $50 million of permitted consigned inventory from therequirement for filing a financing statement under the Personal PropertySecurity Act (as in effect in any Province of Canada other than the Province ofQuebec) or the UCC. The amendment also recognizes the creation of variousentities to facilitate Essex Group’s investment in a China magnet wire facilityand related operations in an amount up to $30 million as a Foreign VentureInvestment (as defined in the credit agreement). Undrawn availability (afterconsidering outstanding letters of credit of $4.4 million) at June 30,2005 amounted to $130.6 million.

 

Under the terms of the senior secured revolving credit facility,Superior Essex Communications and Essex Group Inc. may not declare or makeany distributions to the Company except for the payment of certain corporateexpenses, income taxes and certain other specified costs. The indenturegoverning the 9% senior notes contains covenants which restrict the ability ofthe Company and certain of its subsidiaries to, among other things: incuradditional debt and issue preferred stock; make certain distributions,investments and other restricted payments; create certain liens; enter intotransactions with affiliates; and merge, consolidate or sell substantially allof the Company’s assets.

 

**7.****                 Income per share**

 

The computation of basic and diluted net income per share for the threeand six months ended June 30, 2005 and 2004 is as follows:

 
| ** **                          | ** ** | **Three Months Ended June 30,**         | ** ** |
|-------------------------------------|------------|----------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                     | ** ** | **2004** | ** ** |
| ** **                          | ** ** | **Net  Income**                              | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** | **Net  Income** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| ** **                          | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Basic net income per common share   |       | $                                            | 7,034      |   | 16,646 |   | $ | 0.42 |   | $ | 2,042 |   | 16,516 |   | $ | 0.12 |   |
| Effect of dilutive securities       |       |                                         |       |   |   |   |   |   |   |   |   |   |   |
| Restricted stock awards             |       | —                                       |       | 141 |   |   |   | — |   | 85 |   |   |   |
| Stock options                       |       | —                                       |       | 156 |   |   |   | — |   | 21 |   |   |   |
| Diluted net income per common share |       | $                                            | 7,034      |   | 16,943 |   | $ | 0.42 |   | $ | 2,042 |   | 16,622 |   | $ | 0.12 |   |

 

A total of 1,091,071 and 1,234,580 anti-dilutive weighted averageshares with respect to outstanding stock options, restricted stock awards andSuperior Essex’s warrant have been excluded from the computation of dilutedincome per share for the three months ended June 30, 2005 and 2004,respectively.

 

11

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| ** **                          | ** ** | **Six Months Ended June 30,**           | ** ** |
|-------------------------------------|------------|----------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                     | ** ** | **2004** | ** ** |
| ** **                          | ** ** | **Net  Income**                              | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** | **Net  Income** | ** ** | **Shares** | ** ** | **Per Share  Amount** | ** ** |
| ** **                          | ** ** | **(in thousands, except per share amounts)** | ** ** |
| Basic net income per common share   |       | $                                            | 17,015     |   | 16,615 |   | $ | 1.02 |   | $ | 3,396 |   | 16,508 |   | $ | 0.21 |   |
| Effect of dilutive securities       |       |                                         |       |   |   |   |   |   |   |   |   |   |   |
| Restricted stock awards             |       | —                                       |       | 135 |   |   |   | — |   | 82 |   |   |   |
| Stock options                       |       | —                                       |       | 166 |   |   |   | — |   | 17 |   |   |   |
| Diluted net income per common share |       | $                                            | 17,015     |   | 16,916 |   | $ | 1.01 |   | $ | 3,396 |   | 16,607 |   | $ | 0.20 |   |

 

A total of 979,746 and 1,127,149 anti-dilutive weighted average shareswith respect to outstanding stock options, restricted stock awards and SuperiorEssex’s warrant have been excluded from the computation of diluted income pershare for the six months ended June 30, 2005 and 2004, respectively.

 

**8.****                 Employee benefits**

 

The components of net periodic benefit cost of the Company’s definedbenefit pension plans for the three and six months ended June 30, 2005 and2004 are presented below.

 
| ** **                                    | ** ** | **Three Months Ended  June 30,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                    | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                                    | ** ** | **(in thousands)**                    | ** ** |
| **Components  of net periodic benefit cost:** |       |                                  |       |   |   |
| Service cost                                  |       | $                                     | 661        |   | $ | 106 |   |
| Interest cost                                 |       | 2,015                                 |       | 1,568 |   |
| Expected return on plan assets                |       | (2,262                                | )          | (1,539 | ) |
| Amortization of prior service costs           |       | 19                                    |       | — |   |
|                                          |       | $                                     | 433        |   | $ | 135 |   |
|                                          |       |                                  |       |   |   |
| ** **                                    | ** ** | **Six Months Ended  June 30,**   | ** ** |
| ** **                                    | ** ** | **2005**                              | ** ** | **2004** | ** ** |
| ** **                                    | ** ** | **(in thousands)**                    | ** ** |
| **Components  of net periodic benefit cost:** |       |                                  |       |   |   |
| Service cost                                  |       | $                                     | 1,067      |   | $ | 212 |   |
| Interest cost                                 |       | 3,642                                 |       | 3,136 |   |
| Expected return on plan assets                |       | (3,853                                | )          | (3,078 | ) |
| Amortization of prior service costs           |       | 38                                    |       | — |   |
|                                          |       | $                                     | 894        |   | $ | 270 |   |

 

The Company’s cash contributions to the defined benefit plans amountedto $1.7 and $3.1 million during the six months ended June 30, 2005 and 2004,respectively. The Company expects to make additional cash contributions of $2.5million for the remainder of 2005.

 

**9.****                 Derivativefinancial instruments**

 

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

 

12

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***Commodity price riskmanagement***

 

The costs of copper, the Company’s most significant raw material, andaluminum have historically been subject to considerable volatility. To managethe risk associated with such volatility, the Company enters into futurescontracts to match the metal component of customer product pricing with thecost component of the inventory shipped. These futures contracts have been designatedas cash flow hedges with unrealized gains and losses recorded in othercomprehensive income. Gains and losses are reclassified into earnings, as acomponent of cost of goods sold, when the hedged sales transactions arereflected in the income statement. Hedge ineffectiveness, which is notsignificant, is immediately recognized in earnings. The Company’s commoditiesfutures purchase contracts are summarized as follows at June 30, 2005:

 
| **Type**   | ** ** | **Notional  Amount**          | ** ** | **Maturity  Date** | ** ** | **Weighted  Average  Settlement Rate** | ** ** | **Fair Value  Gain (Loss)** | ** ** |
|------------|------------|-------------------------------|------------|--------------------|------------|----------------------------------------|------------|-----------------------------|------------|
| ** ** | ** ** | **(in thousands of  pounds)** | ** ** | ** **         | ** ** | ** **                             | ** ** | **(in  thousands)**         | ** ** |
|       |       |                          |       |               |       |                                   |       |                        |       |
| Copper     |       | 6,150                         |       | 2005               |       | 1.48                                   |       | $                           | 1,999      |   |
| Copper     |       | 2,350                         |       | 2006               |       | 1.30                                   |       | 306                         |       |
|       |       |                          |       |               |       |                                   |       | $                           | 2,305      |   |

 

***Interest rate riskmanagement***

 

In order to limit the Company’s exposure to rising interest rates withrespect to borrowings under its variable rate senior secured revolving creditfacility, the Company has entered into interest rate cap agreements. Changes inthe fair value of these contracts are reflected in current earnings. Thefollowing interest rate cap agreements were outstanding as of June 30,2005:

 
| **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 |               | $          | 276 |   |
| Interest rate cap |       | 15,000               |       | 30-day LIBOR      |         | 5.0          | %          | April 2007     |               | 10                 |       |
| Interest rate cap |       | 12,500               |       | 30-day LIBOR      |         | 5.0          | %          | May 2006       |               | —             |       |
| Interest rate cap |       | 30,000               |       | 3-month LIBOR     |         | 5.0          | %          | December 2005  |               | —             |       |
|                   |            |                      |            |                   |              |              |            |                     |                    |                    |            |  |  |

 

***Foreign currencyexchange risk management***

 

The Company engages, to a limited extent, in the sale of products whichresult in accounts receivable denominated in foreign currencies. The Companyenters into foreign currency forward exchange contracts to hedge againstfluctuations in the value of these receivables. Changes in the fair value ofthese contracts are reflected in current earnings. At June 30, 2005, theCompany had outstanding foreign currency forward exchange contracts to exchange6.2 million Canadian dollars for $5.1 million in July 2005. The fair valueof the forward exchange contracts was insignificant at June 30, 2005.

 

**10.****          Commitments andcontingencies**

 

The Company is subject to lawsuits incidental to its business. In theopinion of management, based on its examination of such matters and discussionswith counsel, the ultimate resolution of all pending or threatened litigation,claims and assessments will not have a material adverse effect upon the Company’sfinancial position, liquidity or results of operations.

 

The Company’s operations are subject to environmental laws andregulations in each of the jurisdictions in which it owns or operatesfacilities governing, among other things, emissions into the air, discharges towater, the use, handling and disposal of hazardous substances and theinvestigation and remediation of soil and groundwater contamination bothon-site at past and current facilities and at off-site disposal locations.On-site contamination at certain of the Company’s facilities is the result ofhistoric activities, including certain activities attributable to SuperiorTeleCom’s (or one of its subsidiaries) and the Company’s operations and thoseoccurring prior to the use of a facility by Superior TeleCom or the Company. Off-siteliability includes clean-up responsibilities and response costs incurred byothers at various sites, under federal or state statutes, for which Superior

 

13

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TeleCom (or one of its subsidiaries) has been identified by the UnitedStates Environmental Protection Agency, or state environmental agency, as aPotentially Responsible Party, (“PRP”), or the equivalent.

 

In addition, many of the sites for which Essex International and itssubsidiaries had been named as a PRP are covered by an indemnity from UnitedTechnologies Corporation provided in connection with the February 1988sale of Essex Group by United Technologies to Essex International. Pursuant tothe indemnity, United Technologies agreed to indemnify Essex Internationalagainst losses incurred under any environmental protection and pollutioncontrol laws or resulting from, or in connection with, damage or pollution tothe environment arising from events, operations or activities of Essex Groupprior to February 29, 1988, or from conditions or circumstances existingat or prior to February 29, 1988. To be covered by the indemnity, thecondition, event or circumstance must have been known to United Technologiesprior to the date of sale (February 29, 1988), and United Technologiesmust have received notice of the indemnity claim prior to February 28,1993. The sites covered by this indemnity historically have been handleddirectly by United Technologies and required payments generally have been madedirectly by United Technologies. Most of these sites are mature sites whereallocations of liability have been settled and remediation is well underway orhas been completed.

 

United Technologies also provided an additional environmentalindemnity, referred to as the “basket indemnity.” This indemnity relates toliabilities arising from environmental events, conditions or circumstancesexisting at or prior to February 29, 1988 of which United Technologiesreceived notice prior to February 28, 1993. 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.

 

None of the sites or matters mentioned above involves the imposition ofsanctions, fines or administrative penalties on the Company.

 

The Company believes that any other environmental matters orproceedings in which it is involved have been addressed in the bankruptcyclaims resolution process, are subject to indemnification, or will not have amaterial adverse effect either individually, or in the aggregate, upon itsbusiness, financial condition, liquidity or results of operations. There can beno assurance that future developments will not alter this conclusion.

 

On June 3, 2005, the Indiana Department of Environmental Management(“IDEM”) issued a Notice of Violation alleging air quality permittingviolations at the Company’s magnet wire facility in Vincennes, Indiana.  IDEM has asserted that the alleged violationsmay subject Essex Group to civil penalties. The Company has entered intonegotiations with IDEM to reach a resolution of this matter.  The Company believes that any penalties whichmay be assessed will not have a material adverse effect upon its business,financial condition, liquidity or results of operations. 

 

Since approximately 1990, Essex International and certain subsidiarieshave been named as defendants in a number of product liability lawsuits broughtby electricians, other skilled tradesmen and others claiming injury, in asubstantial majority of cases, from exposure to asbestos found in electricalwire products produced many years ago. Litigation against various past insurersof Essex International who had previously refused to defend and indemnify EssexInternational against these lawsuits was settled during 1999. Under thesettlement, Essex International was reimbursed for substantially all of itscosts and expenses incurred in the defense of these lawsuits, and the insurershave undertaken to defend, are currently directly defending and, if it shouldbecome necessary, will indemnify Essex International against those asbestoslawsuits, subject to the terms and limits of the respective policies. Under theplan of reorganization, certain of the claimants in these actions will be ableto assert 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.

 

On January 18, 2002, United Technologies brought a third partyclaim against Essex International in a civil action in Massachusetts. UnitedTechnologies had been sued by an insurer for, among other things, approximately$3.1 million in compensatory damages for retrospective premiums for 1999,2000 and 2001 relating to certain events that allegedly occurred while EssexGroup was a subsidiary of United Technologies. United Technologies’ third partycomplaint against Essex International contended, among other things, that EssexInternational had agreed, in the stock purchase agreement dated January 15,1998, to pay such premiums and sought a declaratory judgment, contribution andindemnification for any such retrospective premiums that United Technologiesmight have to pay the insurer. On January 13, 2003, the court granted theinsurer’s motion for summary judgment against United Technologies and EssexInternational’s motion to dismiss with prejudice United Technologies’ claimagainst it. United Technologies thereafter indicated an intention to appeal theruling dismissing the action against Essex International. However, before EssexInternational’s time to respond, those proceedings were stayed by the filing ofSuperior TeleCom’s bankruptcy proceedings. United Technologies and the insurerfiled proofs of claim in connection with Superior TeleCom’s bankruptcy. TheCompany believes that these claims have been addressed in the bankruptcy claimsresolution process and 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 that futuredevelopments will not alter this conclusion.

 

14

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The Company accepts certain customer orders for future delivery atfixed prices. As copper is the most significant raw material used in themanufacturing process, the Company enters into forward purchase fixed pricecommitments for copper to properly match its cost to the value of the copper tobe billed to these customers. At June 30, 2005, the Company had forwardfixed price copper purchase commitments for delivery through May 2006 for$27.4 million. Additionally at June 30, 2005, the Company has forwardpurchase fixed price commitments for natural gas primarily for delivery in 2005amounting to $2.8 million.

 

The Company has income taxes payable at June 30, 2005 related topre-petition claims primarily resulting from state income tax audits ofSuperior TeleCom. The Company is currently in negotiations with state taxingauthorities to settle these claims.  Ifcurrent negotiations are resolved in the Company’s favor, the Company couldrecognize a non-cash tax benefit of up to approximately $6 million. Althoughthe Company believes it has adequately provided for any liability that mayresult from settlement of these claims, the ultimate outcome of thenegotiations cannot be predicted with certainty.

 

**11.****          Business segments**

 

The Company’s reportable segments are communications cable, magnet wireand distribution 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 use is recorded by the consuming segment at cost as a component ofcost of goods sold.

 

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

 

Financial information with respect to reportable segments is presentedbelow. Corporate and other items shown below are provided to reconcile to theaccompanying consolidated statements of operations.

 
| ** **                                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| ** **                                             | ** ** | **2005**                              | ** ** | **2004**                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                             | ** ** | **(in thousands)**                    | ** ** |
| Net sales:                                             |       |                                  |       |                                |       |   |   |   |   |
| Communications cable                                   |       | $                                     | 177,612    |                                | $          | 131,026 |   | $ | 329,576 |   | $ | 221,626 |   |
| Magnet wire and distribution                           |       | 183,109                               |       | 153,153                             |       | 367,649 |   | 299,516 |   |
| Copper rod                                             |       | 69,225                                |       | 73,172                              |       | 136,009 |   | 138,060 |   |
|                                                   |       | $                                     | 429,946    |                                | $          | 357,351 |   | $ | 833,234 |   | $ | 659,202 |   |
| Operating income (loss):                               |       |                                  |       |                                |       |   |   |   |   |
| Communications cable                                   |       | $                                     | 14,910     |                                | $          | 6,044 |   | $ | 26,614 |   | $ | 9,941 |   |
| Magnet wire and distribution                           |       | 9,221                                 |       | 8,670                               |       | 18,905 |   | 15,971 |   |
| Copper rod                                             |       | (147                                  | )          | 106                                 |       | 102 |   | 819 |   |
| Corporate and other                                    |       | (4,304                                | )          | (3,494                              | )          | (9,493 | ) | (6,696 | ) |
| Gain on sale of product line                           |       | —                                |       | —                              |       | 10,355 |   | — |   |
| Restructuring and other charges and asset  impairments |       | (180                                  | )          | (406                                | )          | (2,938 | ) | (1,486 | ) |
|                                                   |       | $                                     | 19,500     |                                | $          | 10,920 |   | $ | 43,545 |   | $ | 18,549 |   |

 

15

----

 
| ** **                   | ** ** | **June 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** **                   | ** ** | **(in thousands)**      | ** ** |
| Total assets:                |       |                    |       |                   |       |
| Communications cable         |       | $                       | 324,948    |                   | $          | 294,109 |   |
| Magnet wire and distribution |       | 302,252                 |       | 290,542                |       |
| Copper rod                   |       | 29,891                  |       | 38,625                 |       |
| Corporate and other          |       | 8,102                   |       | 7,695                  |       |
|                         |       | $                       | 665,193    |                   | $          | 630,971 |   |

 

**12.****          Supplemental guarantorinformation**

 

The 9% senior unsecured notes were issued by Superior EssexCommunications and Essex Group, as joint and several obligors. The notes arejointly and severally guaranteed by the Company and each of its existing andfuture domestic restricted subsidiaries (as defined in the indenture governingthe notes). All of the Company’s current domestic subsidiaries, other than IPLicensing LLP, are restricted subsidiaries. The following consolidatinginformation presents information about the Company (the “Parent”), the issuers,guarantor subsidiaries and non-guarantor subsidiaries. Investments insubsidiaries are presented on the equity method. Intercompany transactions areeliminated in consolidation.

 
| ** **                                     | ** ** | **June 30, 2005** | ** ** |
|------------------------------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **Parent**             | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                     | ** ** | **(in thousands)**     | ** ** |
| **ASSETS**                                     |       |                   |       |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                |       |                   |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                      |       | $                      | (157       | ) | $ | 9,011 |   | $ | 289 |   | $ | 2,209 |   | $ | — |   | $ | 11,352 |   |
| Accounts receivable, net                       |       | —                 |       | 164,876 |   | 3,130 |   | 6,680 |   | — |   | 174,686 |   |
| Inventories, net                               |       | —                 |       | 162,913 |   | 14,230 |   | 3,495 |   | — |   | 180,638 |   |
| Other current assets                           |       | 2,962                  |       | 15,672 |   | 120 |   | 2,326 |   | — |   | 21,080 |   |
| Total current assets                           |       | 2,805                  |       | 352,472 |   | 17,769 |   | 14,710 |   | — |   | 387,756 |   |
| Property, plant and equipment, net             |       | 246                    |       | 204,332 |   | 18,018 |   | 12,373 |   | — |   | 234,969 |   |
| Intangible and other long-term assets          |       | 12,936                 |       | 40,061 |   | 2 |   | 35 |   | (10,566 | ) | 42,468 |   |
| Investment in subsidiaries                     |       | 201,644                |       | 33,918 |   | 179,013 |   | — |   | (414,575 | ) | — |   |
| Intercompany accounts                          |       | 4,745                  |       | 18,280 |   | — |   | — |   | (23,025 | ) | — |   |
| Total assets                                   |       | $                      | 222,376    |   | $ | 649,063 |   | $ | 214,802 |   | $ | 27,118 |   | $ | (448,166 | ) | $ | 665,193 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY** |       |                   |       |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                           |       |                   |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings                          |       | —                 |       | 40,000 |   | — |   | 146 |   | $ | — |   | $ | 40,146 |   |
| Accounts payable                               |       | 3,484                  |       | 74,765 |   | 1,639 |   | 1,845 |   | — |   | 81,733 |   |
| Accrued expenses                               |       | 18,491                 |       | 22,175 |   | 24 |   | 325 |   | — |   | 41,015 |   |
| Total current liabilities                      |       | 21,975                 |       | 136,940 |   | 1,663 |   | 2,316 |   | — |   | 162,894 |   |
| Long term-debt, less current portion           |       | —                 |       | 257,770 |   | 5,000 |   | — |   | — |   | 262,770 |   |
| Other long-term liabilities                    |       | 8,823                  |       | 47,893 |   | 385 |   | 1,416 |   | (10,566 | ) | 47,951 |   |
| Intercompany accounts                          |       | —                 |       | — |   | 6,111 |   | 16,914 |   | (23,025 | ) | — |   |
| Total liabilities                              |       | 30,798                 |       | 442,603 |   | 13,159 |   | 20,646 |   | (33,591 | ) | 473,615 |   |
| Stockholders’ equity                      |       | 191,578                |       | 206,460 |   | 201,643 |   | 6,472 |   | (414,575 | ) | 191,578 |   |
|                                           |       | $                      | 222,376    |   | $ | 649,063 |   | $ | 214,802 |   | $ | 27,118 |   | $ | (448,166 | ) | $ | 665,193 |   |

 

16

----

 
| ** **                                     | ** ** | **December 31, 2004** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|
| ** **                                     | ** ** | **Parent**                 | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                     | ** ** | **(in thousands)**         | ** ** |
| **ASSETS**                                     |       |                       |       |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                |       |                       |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                      |       | $                          | 106        |   | $ | 18,097 |   | $ | 43 |   | $ | 66 |   | — |   | $ | 18,312 |   |
| Accounts receivable, net                       |       | —                     |       | 134,433 |   | 2,086 |   | 8,435 |   | — |   | 144,954 |   |
| Inventories, net                               |       | —                     |       | 148,918 |   | 9,054 |   | 2,897 |   | — |   | 160,869 |   |
| Other current assets                           |       | 2,323                      |       | 21,029 |   | 44 |   | 2,452 |   | — |   | 25,848 |   |
| Total current assets                           |       | 2,429                      |       | 322,477 |   | 11,227 |   | 13,850 |   | — |   | 349,983 |   |
| Property, plant and equipment, net             |       | 249                        |       | 206,433 |   | 17,844 |   | 14,693 |   | — |   | 239,219 |   |
| Intangible and other long-term assets          |       | 10,243                     |       | 42,091 |   | 2 |   | — |   | (10,567 | ) | 41,769 |   |
| Investment in subsidiaries                     |       | 185,844                    |       | 36,508 |   | 164,433 |   | — |   | (386,785 | ) | — |   |
| Intercompany accounts                          |       | 2,916                      |       | 13,803 |   | — |   | — |   | (16,719 | ) | — |   |
| Total assets                                   |       | $                          | 201,681    |   | $ | 621,312 |   | $ | 193,506 |   | $ | 28,543 |   | $ | (414,071 | ) | $ | 630,971 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY** |       |                       |       |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                           |       |                       |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings                          |       | $                          | —     |   | $ | 30,000 |   | $ | — |   | $ | 785 |   | — |   | $ | 30,785 |   |
| Accounts payable                               |       | 3,860                      |       | 59,416 |   | 2,232 |   | 647 |   | — |   | 66,155 |   |
| Accrued expenses                               |       | 22,698                     |       | 34,164 |   | 158 |   | 486 |   | — |   | 57,506 |   |
| Total current liabilities                      |       | 26,558                     |       | 123,580 |   | 2,390 |   | 1,918 |   | — |   | 154,446 |   |
| Long term-debt, less current portion           |       | —                     |       | 257,444 |   | 5,000 |   | — |   | — |   | 262,444 |   |
| Other long-term liabilities                    |       | 925                        |       | 49,549 |   | — |   | (24 | ) | (10,567 | ) | 39,883 |   |
| Intercompany accounts                          |       | —                     |       | — |   | 272 |   | 16,447 |   | (16,719 | ) | — |   |
| Total liabilities                              |       | 27,483                     |       | 430,573 |   | 7,662 |   | 18,341 |   | (27,286 | ) | 456,773 |   |
| Stockholders’ equity                      |       | 174,198                    |       | 190,739 |   | 185,844 |   | 10,202 |   | (386,785 | ) | 174,198 |   |
|                                           |       | $                          | 201,681    |   | $ | 621,312 |   | $ | 193,506 |   | $ | 28,543 |   | $ | (414,071 | ) | $ | 630,971 |   |

 

17

----

 
| ** **                                                                       | ** ** | **Three Months Ended June 30, 2005** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                       | ** ** | **Parent**                                | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                       | ** ** | **(in thousands)**                        | ** ** |
| Net sales                                                                        |       | $                                         | 4,362      |   | $ | 427,764 |   | $ | 33,749 |   | $ | 12,988 |   | $ | (48,917 | ) | $ | 429,946 |   |
| Cost of goods sold                                                               |       | —                                    |       | 383,658 |   | 33,665 |   | 12,808 |   | (44,555 | ) | 385,576 |   |
| Gross profit                                                                     |       | 4,362                                     |       | 44,106 |   | 84 |   | 180 |   | (4,362 | ) | 44,370 |   |
| Selling, general and administrative  expenses                                    |       | (4,293                                    | )          | (23,840 | ) | (275 | ) | (644 | ) | 4,362 |   | (24,690 | ) |
| Restructuring and other charges                                                  |       | (71                                       | )          | (109 | ) | — |   | — |   | — |   | (180 | ) |
| Operating income (loss)                                                          |       | (2                                        | )          | 20,157 |   | (191 | ) | (464 | ) | — |   | 19,500 |   |
| Interest expense                                                                 |       | —                                    |       | (7,322 | ) | (81 | ) | (6 | ) | — |   | (7,409 | ) |
| Other income, net                                                                |       | 2                                         |       | 83 |   | (4 | ) | — |   | — |   | 81 |   |
| Income (loss) before income taxes and equity  in earnings (loss) of subsidiaries |       | —                                    |       | 12,918 |   | (276 | ) | (470 | ) | — |   | 12,172 |   |
| Benefit (provision) for income taxes                                             |       | —                                    |       | (4,794 | ) | 109 |   | (453 | ) | — |   | (5,138 | ) |
| Equity in earnings (loss) of subsidiaries                                        |       | 7,034                                     |       | (1,011 | ) | 7,201 |   | — |   | (13,224 | ) | — |   |
| Net income (loss)                                                                |       | $                                         | 7,034      |   | $ | 7,113 |   | $ | 7,034 |   | $ | (923 | ) | $ | (13,224 | ) | $ | 7,034 |   |

 
| ** **                                                                       | ** ** | **Three Months Ended June 30, 2004** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                       | ** ** | **Parent**                                | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                       | ** ** | **(in thousands)**                        | ** ** |
| Net sales                                                                        |       | $                                         | 4,165      |   | $ | 347,375 |   | $ | 24,348 |   | $ | 13,867 |   | $ | (32,404 | ) | $ | 357,351 |   |
| Cost of goods sold                                                               |       | —                                    |       | 314,557 |   | 23,938 |   | 13,478 |   | (28,239 | ) | 323,734 |   |
| Gross profit                                                                     |       | 4,165                                     |       | 32,818 |   | 410 |   | 389 |   | (4,165 | ) | 33,617 |   |
| Selling, general and administrative  expenses                                    |       | (3,478                                    | )          | (22,305 | ) | (95 | ) | (578 | ) | 4,165 |   | (22,291 | ) |
| Restructuring and other charges                                                  |       | (291                                      | )          | (115 | ) | — |   | — |   | — |   | (406 | ) |
| Operating income (loss)                                                          |       | 396                                       |       | 10,398 |   | 315 |   | (189 | ) | — |   | 10,920 |   |
| Interest expense                                                                 |       | 7                                         |       | (6,988 | ) | (120 | ) | (10 | ) | — |   | (7,111 | ) |
| Other income (expense), net                                                      |       | (403                                      | )          | (107 | ) | — |   | (7 | ) | — |   | (517 | ) |
| Income (loss) before income taxes and  equity in earnings (loss) of subsidiaries |       | —                                    |       | 3,303 |   | 195 |   | (206 | ) | — |   | 3,292 |   |
| Benefit (provision) for income taxes                                             |       | —                                    |       | (1,257 | ) | (76 | ) | 83 |   | — |   | (1,250 | ) |
| Equity in earnings (loss) of subsidiaries                                        |       | 2,042                                     |       | 79 |   | 1,923 |   | — |   | (4,044 | ) | — |   |
| Net income (loss)                                                                |       | $                                         | 2,042      |   | $ | 2,125 |   | $ | 2,042 |   | $ | (123 | ) | $ | (4,044 | ) | $ | 2,042 |   |

 

18

----

 
| ** **                                                                       | ** ** | **Six Months Ended June 30, 2005** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                       | ** ** | **Parent**                              | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                       | ** ** | **(in thousands)**                      | ** ** |
| Net sales                                                                        |       | $                                       | 9,637      |   | $ | 827,784 |   | $ | 65,549 |   | $ | 25,869 |   | (95,605 | ) | $ | 833,234 |   |
| Cost of goods sold                                                               |       | —                                  |       | 742,025 |   | 65,493 |   | 25,393 |   | (85,968 | ) | 746,943 |   |
| Gross profit                                                                     |       | 9,637                                   |       | 85,759 |   | 56 |   | 476 |   | (9,637 | ) | 86,291 |   |
| Selling, general and administrative  expenses                                    |       | (9,471                                  | )          | (48,726 | ) | (524 | ) | (1,079 | ) | 9,637 |   | (50,163 | ) |
| Restructuring and other charges                                                  |       | (168                                    | )          | (464 | ) | — |   | — |   | — |   | (632 | ) |
| Asset impairment charge                                                          |       | —                                  |       | — |   | — |   | (2,306 | ) | — |   | (2,306 | ) |
| Gain on sale of product line                                                     |       | —                                  |       | 10,355 |   | — |   | — |   | — |   | 10,355 |   |
| Operating income (loss)                                                          |       | (2                                      | )          | 46,924 |   | (468 | ) | (2,909 | ) | — |   | 43,545 |   |
| Interest expense                                                                 |       | —                                  |       | (14,312 | ) | (159 | ) | (11 | ) | — |   | (14,482 | ) |
| Other income, net                                                                |       | 2                                       |       | 177 |   | 17 |   | — |   | — |   | 196 |   |
| Income (loss) before income taxes and  equity in earnings (loss) of subsidiaries |       | —                                  |       | 32,789 |   | (610 | ) | (2,920 | ) | — |   | 29,259 |   |
| Benefit (provision) for income taxes                                             |       | —                                  |       | (11,869 | ) | 238 |   | (613 | ) | — |   | (12,244 | ) |
| Equity in earnings (loss) of subsidiaries                                        |       | 17,015                                  |       | (3,747 | ) | 17,387 |   | — |   | (30,655 | ) | — |   |
| Net income (loss)                                                                |       | $                                       | 17,015     |   | $ | 17,173 |   | $ | 17,015 |   | $ | (3,533 | ) | $ | (30,655 | ) | $ | 17,015 |   |
|                                                                                  |            |                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                                                       | ** ** | **Six Months Ended June 30, 2004** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                       | ** ** | **Parent**                              | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                                                       | ** ** | **(in thousands)**                      | ** ** |
| Net sales                                                                        |       | $                                       | 8,588      |   | $ | 640,115 |   | $ | 43,894 |   | $ | 27,429 |   | $ | (60,824 | ) | $ | 659,202 |   |
| Cost of goods sold                                                               |       | —                                  |       | 578,290 |   | 43,240 |   | 26,691 |   | (52,236 | ) | 595,985 |   |
| Gross profit                                                                     |       | 8,588                                   |       | 61,825 |   | 654 |   | 738 |   | (8,588 | ) | 63,217 |   |
| Selling, general and administrative expenses                                     |       | (6,675                                  | )          | (43,929 | ) | (182 | ) | (984 | ) | 8,588 |   | (43,182 | ) |
| Restructuring and other charges                                                  |       | (1,057                                  | )          | (429 | ) | — |   | — |   | — |   | (1,486 | ) |
| Operating income (loss)                                                          |       | 856                                     |       | 17,467 |   | 472 |   | (246 | ) | — |   | 18,549 |   |
| Interest expense                                                                 |       | (453                                    | )          | (11,267 | ) | (239 | ) | (21 | ) | — |   | (11,980 | ) |
| Other income (expense), net                                                      |       | (403                                    | )          | (66 | ) | (5 | ) | (119 | ) | — |   | (593 | ) |
| Income (loss) before income taxes and  equity in earnings (loss) of subsidiaries |       | —                                  |       | 6,134 |   | 228 |   | (386 | ) | — |   | 5,976 |   |
| Benefit (provision) for income taxes                                             |       | —                                  |       | (2,461 | ) | (88 | ) | (31 | ) | — |   | (2,580 | ) |
| Equity in earnings (loss) of subsidiaries                                        |       | 3,396                                   |       | (116 | ) | 3,256 |   | — |   | (6,536 | ) | — |   |
| Net income (loss)                                                                |       | $                                       | 3,396      |   | $ | 3,557 |   | $ | 3,396 |   | $ | (417 | ) | $ | (6,536 | ) | $ | 3,396 |   |

 

19

----

 
| ** **                                              | ** ** | **Six Months Ended June 30, 2005** | ** ** |
|---------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                              | ** ** | **Parent**                              | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                              | ** ** | **(in thousands)**                      | ** ** |
| Cash flows provided by (used for) operating  activities |       | $                                       | 899        |   | $ | (7,178 | ) | $ | (6,222 | ) | $ | 1,659 |   | $ | — |   | $ | (10,842 | ) |
| Cash flows from investing activities:                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                    |       | (38                                     | )          | (6,041 | ) | (962 | ) | (431 | ) | — |   | (7,472 | ) |
| Belden asset acquisition contingent payment             |       | —                                  |       | (10,000 | ) | — |   | — |   | — |   | (10,000 | ) |
| Proceeds from sale of product line                      |       | —                                  |       | 11,563 |   | — |   | — |   | — |   | 11,563 |   |
| Investment in subsidiaries                              |       | —                                  |       | (1,800 | ) | — |   | — |   | 1,800 |   | — |   |
| Dividends received                                      |       | —                                  |       | — |   | 238 |   | — |   | (238 | ) | — |   |
| Cash flows used for investing activities                |       | (38                                     | )          | (6,278 | ) | (724 | ) | (431 | ) | 1,562 |   | (5,909 | ) |
| Cash flows from financing activities:                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings (repayments), net                 |       | —                                  |       | 10,000 |   | — |   | (610 | ) | — |   | 9,390 |   |
| Proceeds from exercise of stock options                 |       | 705                                     |       | — |   | — |   | — |   | — |   | 705 |   |
| Capital contributions                                   |       | —                                  |       | — |   | — |   | 1,800 |   | (1,800 | ) | — |   |
| Dividends paid                                          |       | —                                  |       | (238 | ) | — |   | — |   | 238 |   | — |   |
| Intercompany accounts                                   |       | (1,829                                  | )          | (4,480 | ) | 7,192 |   | (883 | ) | — |   | — |   |
| Cash flows provided by (used for) financing  activities |       | (1,124                                  | )          | 5,282 |   | 7,192 |   | 307 |   | (1,562 | ) | 10,095 |   |
| Effect of exchange rate changes on cash                 |       | —                                  |       | (912 | ) | — |   | 608 |   | — |   | (304 | ) |
| Net increase (decrease) in cash and cash  equivalents   |       | (263                                    | )          | (9,086 | ) | 246 |   | 2,143 |   | — |   | (6,960 | ) |
| Cash and cash equivalents at beginning of  period       |       | 106                                     |       | 18,097 |   | 43 |   | 66 |   | — |   | 18,312 |   |
| Cash and cash equivalents at end of period              |       | $                                       | (157       | ) | $ | 9,011 |   | $ | 289 |   | $ | 2,209 |   | $ | — |   | $ | 11,352 |   |

 

20

----

 
| ** **                                              | ** ** | **Six Months Ended June 30, 2004** | ** ** |
|---------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                              | ** ** | **Parent**                              | ** ** | **Issuers** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| ** **                                              | ** ** | **(in thousands)**                      | ** ** |
| Cash flows used for operating activities                |       | $                                       | (2,676     | ) | $ | (12,274 | ) | $ | (765 | ) | $ | (2,903 | ) | $ | — |   | $ | (18,618 | ) |
| Cash flows from investing activities:                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                    |       | (7                                      | )          | (3,888 | ) | — |   | (15 | ) | — |   | (3,910 | ) |
| Belden asset acquisition                                |       | —                                  |       | (83,010 | ) | — |   | — |   | — |   | (83,010 | ) |
| Other                                                   |       | 25                                      |       | 942 |   | — |   | — |   | (942 | ) | 25 |   |
| Cash flows provided by (used for) investing  activities |       | 18                                      |       | (85,956 | ) | — |   | (15 | ) | (942 | ) | (86,895 | ) |
| Cash flows from financing activities:                   |       |                                    |       |   |   |   |   |   |   |   |   |   |   |
| Short-term borrowings, net                              |       | —                                  |       | 6,854 |   | — |   | 123 |   | — |   | 6,977 |   |
| Debt issuance costs                                     |       | —                                  |       | (4,507 | ) | — |   | — |   | — |   | (4,507 | ) |
| Long-term borrowings                                    |       | —                                  |       | 250,004 |   | — |   | — |   | — |   | 250,004 |   |
| Repayment of long-term borrowings                       |       | —                                  |       | (145,000 | ) | — |   | — |   | — |   | (145,000 | ) |
| Other                                                   |       | —                                  |       | — |   | — |   | (942 | ) | 942 |   | — |   |
| Intercompany accounts                                   |       | 3,412                                   |       | (4,846 | ) | 550 |   | 884 |   | — |   | — |   |
| Cash flows provided by financing activities             |       | 3,412                                   |       | 102,505 |   | 550 |   | 65 |   | 942 |   | 107,474 |   |
| Effect of exchange rate changes on cash                 |       | —                                  |       | 159 |   | — |   | (214 | ) | — |   | (55 | ) |
| Net increase (decrease) in cash and cash  equivalents   |       | 754                                     |       | 4,434 |   | (215 | ) | (3,067 | ) | — |   | 1,906 |   |
| Cash and cash equivalents at beginning of  period       |       | —                                  |       | 6,544 |   | 300 |   | 3,762 |   | — |   | 10,606 |   |
| Cash and cash equivalents at end of period              |       | $                                       | 754        |   | $ | 10,978 |   | $ | 85 |   | $ | 695 |   | $ | — |   | $ | 12,512 |   |

 

**(13)****     SubsequentEvent**

 

On July 27, 2005, the Company entered into a definitive agreement(the “Agreement”) with Nexans to acquire majority control of Nexans’ magnetwire operations in Europe through formation of a corporate joint venturecombining the Company’s UK magnet wire business and Nexans’ European magnetwire and enamel businesses. The Company will initially own 60% of the jointventure and Nexans will retain a 40% minority ownership. Closing of thetransaction is subject to a number of conditions, including regulatoryapprovals and customary consents from lenders, bondholders and certain otherparties. The Agreement contemplates that the following transactions will occurat or prior to the closing:

 

•                     TheCompany and Nexans will form a French holding company (“JV Holding Company”)

 

•                     TheCompany will contribute net cash €14.8 million and the common stock of its U.K.magnet wire business for equity of the JV Holding Company.

 

•                     TheJV Holding Company will enter into a €35.0 million financing arrangement with a3rd party financial institution.

 

•                     TheJV Holding Company will purchase Nexans’ European magnet wire and enamelbusinesses for a net €34.8 million, issuance of an €11.3 million subordinatednote in favor of Nexans and a 40% equity interest in the JV Holding Company.

 

21

----

 

If the net book value of Nexans’ contribution is more than €64 million,based on the final net book values of acquired net assets as of the closingdate, the Company shall pay in cash to Nexans 60% of such excess up to €4.2million.   If the net book value ofNexans’ contributions is more than €71 million, Nexans will also receive apromissory note issued by a subsidiary of the JV Holding Company of up to €2million payable at the end of one year, subject to meeting certain liquidityconditions.  There are similar adjustmentprovisions with respect to the net book value of the contributions of theCompany.

 

The Agreement provides for the Company to pay additional contingentcash consideration to Nexans of up to €3.0 million if JV Holding Companyachieves certain specified levels of Adjusted EBITDA (as defined in theAgreement) for the year ended December 31, 2006.

 

At any time following the one-year anniversary of the closing of thetransaction, the Company will have the option to purchase Nexans 40% interestin JV Holding Company at a price equal to Nexans’ initial allocated equity valueplus 40% of (i) the cumulative net income (adjusted for certain items asspecified in the shareholders agreement between the Company, Nexans and the JVHolding Company to be entered into at closing) of the JV Holding Company, and (ii) anypost-closing capital contributions minus any post-closing distributions. Thecall price may be increased by up to €2.0 million if the JV Holding Companyachieves at least €9.0 million of Adjusted EBITDA for the year ended December 31,2006.  Furthermore, if the Companyexercises the call option on or after September 30, 2008, the call pricemay be increased by up to €10 million provided the JV Holding Company achievescertain specified levels of EBITDA in 2008, 2009 or 2010. The call price ispayable only in cash.

 

Nexans will have the right to require the Company to purchase its 40%interest in the JV Holding Company at the call price, but only if Adjusted EBITDAof the JV Holding Company exceeds €14.0 million in 2008, 2009 or 2010. The putright is exercisable for one year following the completion of audited financialstatements demonstrating that the Adjusted EBITDA threshold was met during2008, 2009 or 2010. At the Company’s option, the put price may be paid in cash bythe Company or the JV Holding Company or by issuance of the Company’s commonstock (or a combination thereof). If the Company elects to pay the put price inCompany common stock, the portion of the put price payable in common stock ofthe Company is subject to certain limitations specified in the shareholdersagreement, including a general limit of 7.5% of the outstanding common stock ofthe Company, with any excess put price payable in cash. Furthermore, theportion of the put price paid in common stock of the Company will be increasedby 5% (or 15% if certain conditions are not met with regard to the registrationof such shares).

 

The subordinated note will bear interest payable quarterly at the yieldto maturity of the Company’s 9% senior subordinated notes. A total of €3.8million in principal is due September 30, 2009 and the remainder matures September 30,2010. The maturity of the subordinated note will be accelerated if the Companyexercises its call option.

 

The transaction will be accounted for as a purchase of the Nexansmagnet wire and enamel businesses. The Company believes the acquisition will enhanceits ability to serve its global customer base, provide synergies with respectto its UK magnet wire business and increase its geographic diversification.

 

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**ITEM 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**General**

 

Superior Essex Inc., a Delaware holding company, and its operatingsubsidiaries were formed in 2003 to acquire and conduct the business formerlyconducted by Superior TeleCom Inc. and its subsidiaries.

 

We manufacture a portfolio of wire and cable products grouped into thefollowing primary industry segments: (i) our communications cable segment;(ii) our magnet wire and distribution segment; and (iii) our copperrod segment. Our communications cable segment manufactures communications wireand cable products sold to telephone companies, CATV companies, distributorsand systems integrators, principally in North America. Our magnet wire anddistribution segment manufactures and supplies magnet wire, fabricatedinsulation and accessory products for motors, transformers and electricalcontrols sold primarily to original equipment manufacturers, or OEMs. Ourcopper rod segment includes sales of copper rod produced by our continuouscasting units to external customers.

 

Industry segment financial data (including sales and operating incomeby industry segment) for the three and six month periods ended June 30,2005 and 2004 is included in Note 11 to the accompanying condensedconsolidated financial statements.

 

**Asset Acquisitions**

 

***Belden AssetAcquisition***

 

On June 1, 2004, Superior Essex Communications acquired certainassets from operating subsidiaries of Belden Inc. (“Belden”) related totheir North American copper OSP communications wire and cable business (the “BeldenAsset Acquisition”). Under the terms of the asset purchase agreement, SuperiorEssex Communications acquired certain inventories, selected machinery andequipment and certain customer contracts related to a portion of Belden’scommunications cable business for total consideration of $83.1 millionincluding a contingent payment of $10 million made in March 2005. Theequipment acquired from Belden is being deployed in the communications cablesegment. Belden retained its manufacturing facilities and employees togetherwith all of the associated liabilities, including, among others, accountspayable, any employee-related obligations, plant shutdown costs andenvironmental obligations.

 

***Nexans AssetAcquisition***

 

On September 7, 2004, Essex Group acquired certain assets fromNexans Magnet Wire USA Inc., a wholly-owned subsidiary of Nexans. Underthe terms of the purchase agreement, Essex Group acquired substantially allinventory associated with Nexans’ U.S. magnet wire operations and assumedcertain U.S. customer contractual arrangements. The Company used the assetsacquired in its magnet wire and distribution business. The total purchase pricefor the acquisition was $11.6 million.

 

**Impact of Copper Price Fluctuations onOperating Results**

 

Copper is the principal raw material used in our wire and cable productmanufacturing. Fluctuations in the price of copper affect per unit productpricing and related revenues. Historically the cost of copper has not had amaterial impact on profitability, as, in certain cases, we have the ability toadjust prices billed for our products to properly match the copper costcomponent of inventory shipped. In our communications cable segment theseadjustments include, among others, certain contractual arrangements under whichproduct prices are adjusted quarterly based on an average of previous periods’copper indices. Beginning in the fourth quarter of 2003 and continuing through 2004,copper prices escalated rapidly. The average daily COMEX price per pound forcopper was $1.53 and $1.23 per pound for the three months ended June 30,2005 and 2004, respectively, and $1.50 and $1.23 per pound, respectively for thesix months ended June 30, 2005 and 2004. Rapid increases in copper pricescan impact profitability in the short term based upon the timing of productprice adjustments to match the increased copper costs. Increases in copperprices can also impact our working capital. See “Liquidity and CapitalResources” below.

 

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**Results of Operations—ThreeMonth Period Ended June 30, 2005 Compared to the Three Month Period Ended June 30,2004**

 

Average copper prices for the three months ended June 30, 2005increased 24% as compared to the three months ended June 30, 2004. Due tothe impact of this increase on reported sales, the following table providessupplemental sales information adjusted to a constant $1.00/lb COMEX cost ofcopper to aid in a comparison of period-to-period revenues by segment.

 
| ** **                         | ** ** | **Actual**                            | ** ** | **Copper-adjusted** | ** ** |
|------------------------------------|------------|---------------------------------------|------------|---------------------|------------|
| ** **                         | ** ** | **Three Months Ended  June 30,** | ** ** | **%**               | ** ** | **Three Months Ended  June 30,** | ** ** | **%** | ** ** |
| ** **                         | ** ** | **2005**                              | ** ** | **2004**            | ** ** | **Change** | ** ** | **2005** | ** ** | **2004** | ** ** | **Change** | ** ** |
| Net sales:                         |       |                                  |       |                |       |   |   |   |   |   |   |   |   |
| Communications cable               |       | $                                     | 177,612    |                | $          | 131,026 |   | 36 | % | $ | 157,996 |   | $ | 126,970 |   | 24 | % |
| Magnet wire and distribution       |       | 183,109                               |       | 153,153             |       | 20 | % | 157,008 |   | 143,538 |   | 9 | % |
| Copper rod                         |       | 69,225                                |       | 73,172              |       | (5 | )% | 46,917 |   | 60,218 |   | (22 | )% |
|                               |       | 429,946                               |       | 357,351             |       | 20 | % | 361,921 |   | 330,726 |   | 9 | % |
| Constant cost of copper adjustment |       | —                                |       | —              |       | — |   | 68,025 |   | 26,625 |   | — |   |
| Total                              |       | $                                     | 429,946    |                | $          | 357,351 |   | 20 | % | $ | 429,946 |   | $ | 357,351 |   | 20 | % |

 

Consolidated sales for the three months ended June 30, 2005 were$429.9 million, an increase of 20% as compared to consolidated sales of$357.4 million for the quarter ended June 30, 2004. Sales for the2005 quarter were significantly impacted by the increase in copper prices.Sales adjusted for a constant cost of copper increased 9% for the quarter endedJune 30, 2005 compared to the prior year period reflecting incrementalsales attributable to the 2004 Belden and Nexans asset acquisitions as well asorganic growth in both the communications cable and magnet wire anddistribution segments.

 

Sales for our communications cable segment for the June 30, 2005quarter were $177.6 million, an increase of 36%, as compared to sales of $131.0million for the quarter ended June 30, 2004. Sales adjusted for a constantcost of copper increased 24%. The copper-adjusted increase reflects theincremental sales from customer contracts acquired in the June 2004 Beldenasset acquisition as well as an approximately 30% growth in sales of fiberoptic and premises wire and cable products. We believe the increase in demandfor our copper and fiber optic premise products is supported by growinginvestment in information technology, including new and upgraded computersystems and associated wiring and an increase in our market share.Additionally, the overall demand for OSP fiber products has increased as aresult of increased use by certain regional bell operating companies (“RBOCs”)of fiber optic cable further downstream in their networks.

 

Sales for our magnet wire and distribution segment were $183.1 millionfor the quarter ended June 30 2005, an increase of 20% as compared to theprior year. On a copper-adjusted basis, sales for the quarter increased 9% fromthe same quarter in the prior year. The copper-adjusted increase includesincremental sales from the September 2004 Nexans asset acquisition. Inaddition, the 2005 quarter sales increase reflects copper-adjusted growthresulting from market share gains at certain targeted customers as well as amoderate overall increase in our North American end markets. These gains wereoffset to some extent by decreased volumes in our UK magnet wire subsidiary.

 

Copper rod sales for the three months ended June 30, 2005 were$69.2 million compared to $73.2 million for the comparable 2004period, a decrease of $4.0 million. On a copper-adjusted basis, sales forour copper rod segment decreased by 22% for the three months ended June 30,2005 compared to the prior year period. The copper-adjusted decrease in the2005 quarter reflects reduced demand from certain automotive related customersand other planned reductions. Copper rod segment sales consist primarily ofexternal sales of processed copper rod that cannot be used for internalproduction and allow for fixed cost recovery at gross profit margins that aregenerally break even.

 

For the quarter ended June 30, 2005, gross profit was $44.4 million,an increase of 32% as compared to the prior year quarter primarily attributableto increased volume in our communications cable and magnet wire anddistribution segments and gross profit margin improvements in ourcommunications cable segment. The gross profit margin in the 2005 quarter was10.3% compared to 9.4% for same quarter in 2004. The increase in gross profitmargin reflects improved capacity utilization due to increased volumes offsetsomewhat by the effects of increased copper prices on sales. Gross profitmargin on a copper-adjusted basis (computed as gross profit divided bycopper-adjusted sales) was 12.3% for the three months ended June 30, 2005compared to 10.2% for the three months ended June 30, 2004. Copper-adjustedgross profit margins in our communications cable business increased for the2005 quarter compared to the prior year quarter due to improved fixed cost absorptionas a result of increased

 

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sales and related production volumes. Additionally, margins in the 2004quarter were negatively impacted by integration costs incurred in connectionwith the Belden Asset Acquisition and shortfalls in recovering second quarter2004 increases in copper costs through contractual price adjustments. Copper-adjustedgross profit margin for our magnet wire and distribution business for the threemonths ended June 30, 2005 decreased compared to the prior year quarter asincreased throughput and price surcharges did not fully offset the effects ofcertain non-copper cost increases including higher natural gas prices, freightcosts and copper producer premiums. Margins in the magnet wire and distributionsegment were also negatively impacted by lower sales volumes and pricingexperienced by our UK subsidiary and changes in product mix withproportionately lower sales through our higher margin distribution business,including the effects of the sale of the US Seal product line in the firstquarter of 2005.

 

Selling, general and administrative expenses (“SG&A expense”) forthe three month period ended June 30, 2005 were $24.7 million, an increaseof 11% as compared to SG&A expense of $22.3 million for the three monthsended June 30, 2004. The increase is attributable to a number of factorsincluding corporate stock-based compensation and supplemental executiveretirement plan charges, professional fees and costs related to compliance withSection 404 of the Sarbanes-Oxley Act, amortization charges related to intangibleassets acquired in the Belden and Nexans asset acquisitions and the impact ofincreased sales volume and related sales costs and commissions in ourcommunications cable segment.

 

We had operating income of $19.5 million for the quarter ended June 30,2005, compared to $10.9 million for the same period in 2004. The comparativeimprovement in operating income for the current year was principallyattributable to increased sales volumes and related gross profit as well asimprovements in gross profit margin.

 

Interest expense for the quarter ended June 30, 2005 was $7.4 millioncompared to interest expense of $7.1 million for the quarter ended June 30,2004. The increase in interest expense in 2005 primarily reflects increasedborrowings outstanding under our credit agreement.

 

Our effective income tax rate for the three months ended June 30,2005 was 42% compared to an effective tax rate of 38% for the three monthsended June 30, 2004. The effective tax rate for the three months ended June 30,2005 and 2004 exceeds the U.S. statutory rate of 35% due to the effects ofstate taxes and a valuation allowance established with respect to operatinglosses incurred by our U.K. subsidiary.

 

**Results ofOperations—Six Month Period Ended June 30, 2005 Compared to the Six MonthPeriod Ended June 30, 2004**

 

Average copper prices for the six months ended June 30, 2005increased 22% as compared to the six months ended June 30, 2004. Due tothe impact of this increase on reported sales, the following table providessupplemental sales information adjusted to a constant $1.00/lb COMEX cost ofcopper to aid in a comparison of period-to-period revenues by segment.

 
| ** **                         | ** ** | **Actual**                          | ** ** | **Copper-adjusted** | ** ** |
|------------------------------------|------------|-------------------------------------|------------|---------------------|------------|
| ** **                         | ** ** | **Six Months Ended  June 30,** | ** ** | **%**               | ** ** | **Six Months Ended  June 30,** | ** ** | **%** | ** ** |
| ** **                         | ** ** | **2005**                            | ** ** | **2004**            | ** ** | **Change** | ** ** | **2005** | ** ** | **2004** | ** ** | **Change** | ** ** |
| Net sales:                         |       |                                |       |                |       |   |   |   |   |   |   |   |   |
| Communications cable               |       | $                                   | 329,576    |                | $          | 221,626 |   | 49 | % | $ | 295,622 |   | $ | 219,275 |   | 35 | % |
| Magnet wire and distribution       |       | 367,649                             |       | 299,516             |       | 23 | % | 317,145 |   | 282,628 |   | 12 | % |
| Copper rod                         |       | 136,009                             |       | 138,060             |       | (1 | )% | 93,886 |   | 113,118 |   | (17 | )% |
|                               |       | 833,234                             |       | 659,202             |       | 26 | % | 706,653 |   | 615,021 |   | 15 | % |
| Constant cost of copper adjustment |       | —                              |       | —              |       | — |   | 126,581 |   | 44,181 |   | — |   |
| Total                              |       | $                                   | 833,234    |                | $          | 659,202 |   | 26 | % | $ | 833,234 |   | $ | 659,202 |   | 26 | % |

 

Consolidated sales for the six months ended June 30, 2005 were$833.2 million, an increase of 26% as compared to consolidated sales of $659.2 millionfor the six months ended June 30, 2004. Sales for the 2005 period weresignificantly impacted by the increase in copper prices. Sales adjusted for aconstant cost of copper increased 15% for the six months ended June 30,2005 compared to the prior year period reflecting incremental salesattributable to the 2004 Belden and Nexans asset acquisitions as well asorganic growth in both the communications cable and magnet wire anddistribution segments.

 

Sales for our communications cable segment for the six months ended June 30,2005 were $329.6 million, an increase of 49%, as compared to sales of $221.6 millionfor the six months ended June 30, 2004. Sales adjusted for a constant costof copper increased 35%. The copper-adjusted increase primarily reflects theincremental sales from customer contracts acquired in the June 2004 Beldenasset acquisition as well as growth in sales of fiber optic and premises wireand cable products.

 

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Sales for our magnet wire and distribution segment were $367.6 millionfor the six months ended June 30, 2005, an increase of 23% as compared tothe prior year. On a copper-adjusted basis, sales for the six months ended June 30,2005 increased 12% from the same period in the prior year. The copper-adjustedincrease includes incremental sales from the September 2004 Nexans assetacquisition. In addition, the 2005 sales increase reflects copper-adjustedgrowth resulting from market share gains at certain targeted customers as wellas moderate industry-wide demand expansion of our basic end markets. Thesegains were offset to some extent by decreased volumes and pricing in our UKmagnet wire subsidiary.

 

Copper rod sales for the six months ended June 30, 2005 were$136.0 million compared to $138.1 million for the comparable 2004 period, adecrease of $2.1 million. On a copper-adjusted basis, sales for our copper rodsegment decreased by 17% for the six months ended June 30, 2005 comparedto the prior year period. The copper-adjusted decrease in the 2005 periodreflects reduced demand from certain automotive related customers and otherplanned reductions. Copper rod segment sales consist primarily of externalsales of processed copper rod that cannot be used for internal production andallow for fixed cost recovery at gross profit margins that are generally breakeven.

 

For the six months ended June 30, 2005, gross profit was $86.3million, an increase of 36% as compared to the prior year period primarilyattributable to increased volume in our communications cable and magnet wireand distribution segments and gross profit margin improvements in ourcommunications cable segment. The gross profit margin for the six months ended June 30,2005 was 10.4% compared to 9.6% for same period in 2004. The increase in grossprofit margin reflects improved capacity utilization due to increased volumesoffset somewhat by the effects of increased copper prices on sales. Grossprofit margin on a copper-adjusted basis (computed as gross profit divided bycopper-adjusted sales) was 12.2% for the six months ended June 30, 2005compared to 10.3% for the six months ended June 30, 2004. Copper-adjustedgross profit margins in our communications cable business increased for the2005 period compared to the prior year period due to improved fixed costabsorption as a result of increased sales and related production volumes. Additionally,margins in the first half of 2004 were negatively impacted by integration costsincurred in connection with the Belden Asset Acquisition and shortfalls inrecovering second quarter 2004 increases in copper costs through contractualprice adjustments. Copper-adjusted gross profit margin for our magnet wire anddistribution business for the six months ended June 30, 2005 decreasedslightly compared to the prior year period as increased throughput and pricesurcharges did not fully offset the effects of non-copper cost increasesincluding higher natural gas prices, freight costs and copper producerpremiums. Margins in the magnet wire and distribution segment were alsonegatively impacted by lower sales volumes and pricing experienced by our UKsubsidiary and changes in product mix with proportionately lower sales throughour higher margin distribution business, including the effects of the sale ofthe US Seal product line in the first quarter of 2005.

 

Selling, general and administrative expenses (“SG&A expense”) forthe six month period ended June 30, 2005 were $50.2 million, an increase of16% as compared to SG&A expense of $43.2 million for the six months ended June 30,2004. The increase is attributable to a number of factors including corporatestock-based compensation and supplemental executive retirement plan charges,professional fees and costs related to compliance with Section 404 of theSarbanes-Oxley Act, amortization charges related to intangible assets acquiredin the Belden and Nexans asset acquisitions and the impact of increased salesvolume and related sales costs and commissions in our communications cablesegment.

 

During the first quarter of 2005 we recorded an impairment charge of$2.3 million related to property, plant and equipment of our U.K.subsidiary. We evaluated the long-lived assets of our U.K. subsidiary forimpairment as of March 31, 2005 after consideration of the continueddeterioration in the European magnet wire market in the first quarter of 2005,the loss of a major customer in 2005 and negotiated reductions in the valueascribed to the U.K. net assets in connection with the Nexans transactiondiscussed below. The impairment test was based on probability weightedestimated cash flows associated with such assets. The fair value of the assetswas based on appraised value determined primarily by comparison to prices forsimilar assets. The U.K. operation is included in the magnet wire anddistribution segment.

 

Restructuring and other charges for the six months ended June 30,2005 consisted of $0.4 million of facility exit costs related to closureof an insulation manufacturing facility in Athens, Georgia and $0.2 millionof professional fees related to the implementation of Superior TeleCom’s planof reorganization. The facility exit costs primarily consisted of future leasepayments net of estimated sublease rentals. Restructuring and other charges forthe six months ended June 30, 2004 were $1.5 million consisting primarilyof professional fees related to implementation of the plan of reorganizationand employee retention and severance payments under plans established bySuperior TeleCom in connection with its bankruptcy proceedings.

 

In March 2005, we sold accounts receivable and inventory totalingapproximately $1.2 million together with related trademarks and servicenames constituting the business conducted by us under the US Seal trade namefor a total purchase price

 

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of $11.6 million. A gain of $10.4 million was recognized onthe sale. Total sales with respect to the US Seal product line wereapproximately $5.2 million for the year ended December 31, 2004. Inconnection with the sale, we also signed a non-exclusive distribution agreementto act as a distributor for certain of the US Seal products for a period offive years. We believe the expected revenues under the distribution agreementrepresent a significant continuation of the direct cash flows of the disposedUS Seal product line. The US Seal product line is included in the magnet wireand distribution segment.

 

We had operating income of $43.6 million for the six months ended June 30,2005, compared to $18.5 million for the same period in 2004. The comparativeimprovement in operating income for the current year was principallyattributable to increased sales volumes and related improvements in grossprofit and gross profit margin and the gain on the sale of the US Seal productline partially offset by an increase in SG & A expense and assetimpairment charges.

 

Interest expense for the six months ended June 30, 2005 was $14.5 millioncompared to interest expense of $12.0 million for the six months ended June 30,2004. The increase in interest expense in 2005 reflects increased borrowingsoutstanding primarily attributable to our senior notes issued in April 2004to finance the Belden Asset Acquisition.

 

Our effective income tax rate for the six months ended June 30,2005 was 42% compared to an effective tax rate of 43% for the six months ended June 30,2004. The effective tax rate for the six months ended June 30, 2005exceeds the U.S. statutory rate of 35% due to the effects of state taxes and avaluation allowance established with respect to operating losses incurred byour U.K. subsidiary partially offset by a $0.7 million positive settlementof prior outstanding foreign tax contingencies. The effective tax rate for the2004 quarter exceeds the U.S. statutory tax rate due to the impact of statetaxes and a valuation allowance established with respect to operating lossesincurred by our U.K. subsidiary.

 

**Other Matters**

 

On July 27, 2005, we entered into a definitive agreement withNexans to acquire majority control of Nexans’ magnet wire operations in Europethrough formation of a corporate joint venture combining our UK magnet wirebusiness and Nexans’ European magnet wire and enamel businesses. We willinitially own 60% of the joint venture and Nexans will retain a 40% minorityownership. We believe the acquisition will enhance our ability to serve ourglobal customer base, provide synergies with respect to our U.K. magnet wirebusiness and increase our geographic diversification. Closing of thetransaction is subject to a number of conditions, including regulatoryapprovals and customary consents from lenders and certain other parties. Therecan be no assurance that the transaction will be consummated. Additionalinformation regarding the transaction is included in note 13 to theaccompanying condensed consolidated financial statements.

 

In June 2005 we reached a new three-year labor agreement with UnitedSteel Workers Local 6-509 which represents approximately 200 workers atthe our Vincennes, Indiana facility. Workers at our Vincennes facility had beenworking under an extension of the previous labor agreement which expired in October 2004.

 

In July 2005 workers at one of the Communication Cable segment’s majorcopper suppliers voted to go on strike. Until this situation is resolved, weexpect our gross margins will be negatively impacted as we must procure thereplacement supply of copper rod from less cost effective sources and we maynot be able to fully recover these cost increases.

 

**Liquidity and Capital Resources**

 

***Cash from OperatingActivities***

 

We reported cash used by operating activities of $10.8 million for the sixmonths ended June 30, 2005 compared to cash used by operating activitiesof $18.6 million for the six months ended June 30, 2004. Cash used byoperations for the 2004 quarter includes approximately $12.3 million we paidduring 2004 of previously accrued reorganization costs consisting primarily ofprofessional fees related to implementation of the plan of reorganization andemployee retention and severance payments under plans established by SuperiorTeleCom in connection with its bankruptcy. Cash used by operating activitiesfor the six months ended June 30, 2005 and 2004 includes net workingcapital increases of $32.9 million and $21.1 million, respectively, whichreflect normal seasonal build in accounts receivable and inventory and theimpact of substantially higher copper costs. The seasonal increase in ourworking capital results from increased production, inventory stocking levelsand related sales attributable to historically higher customer demand levels inMarch through October. Conversely, our sales volumes are generally lowerin our fourth and early first quarters due primarily to cold weather relatedreduction in demand from our communications cable segment customers and theimpact of year end holiday related plant shutdowns of major OEM customers ofour magnet wire and

 

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distribution segment. The 2005 working capital increase also includes additionalaccounts receivable attributable to incremental sales associated with customercontracts acquired in the Belden and Nexans asset acquisitions. Cash from 2005investing activities includes a payment of $10 million with respect to theBelden Asset Acquisition as well as $11.6 million of proceeds received inconnection with our sale of the US Seal product line.

 

***Capital Resources***

 

Our senior notes were initially issued jointly by Superior EssexCommunications and Essex Group in an aggregate principal amount of$145 million due in November 2008, with interest payablesemi-annually in cash at a rate of 9 1⁄2 %. On April 29, 2004 weredeemed the senior notes with the proceeds from a Rule 144A privateplacement offering of $257.1 million of 9% unsecured senior notes (the “9%Notes”), completed on April 14, 2004. Interest on the 9% Notes is payable April 15and October 15 of each year beginning on October 15, 2004. The 9%Notes were issued at an original issue discount of $7.1 million. Theproceeds from the offering were also used to pay fees and expenses of theoffering and fund the Belden Asset Acquisition. In October 2004, wecompleted an exchange offering whereby the 9% Notes were exchanged for an equalamount of registered notes with substantially identical terms.

 

The 9% Notes were issued by Superior Essex Communications and EssexGroup and are fully and unconditionally guaranteed by us and each of ourexisting and future domestic restricted subsidiaries. We may redeem some or allof the 9% Notes at any time on or after April 15, 2008 at the followingredemption prices (expressed as percentages of the principal amount thereof) ifredeemed during the twelve-month period commencing on April 15 of the yearset forth below:

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

 

We may also redeem up to 40% of the aggregate principal amount of the9% Notes at a redemption price of 109% of the principal amount thereof usingthe proceeds of one or more equity offerings completed before April 15,2007. Additionally, upon the occurrence of specific kinds of changes in controlas specified in the indenture governing the 9% Notes, holders of the 9% Noteswill have the right to require us to purchase all or a portion of theoutstanding 9% Notes at a purchase price equal to 101% of the principal amountthereof plus accrued interest.

 

The indenture governing the 9% Notes contains covenants which restrictour ability and the ability of certain of our subsidiaries to, among otherthings: incur additional debt and issue preferred stock; make certaindistributions, investments and other restricted payments; create certain liens;enter into transactions with affiliates; and merge, consolidate or sellsubstantially all of our assets.

 

Holders of the series A preferred stock issued by our subsidiary,Superior Essex Holding, are entitled to receive cumulative cash dividends at arate of 9 1⁄2 % per annum per share, payable semi-annually. Theseries A preferred stock ranks junior to all other classes of preferredstock of Superior Essex Holding. The series A preferred stock ismandatorily redeemable in November 2013 at $1 per share plus accrued andunpaid dividends. The series A preferred stock contains certain othermandatory and optional redemption provisions. Each share of series Apreferred stock shall have one vote with respect to all matters submitted tostockholders for a vote, provided however, that holders of the series Apreferred stock shall not be entitled to vote generally for directors.

 

Superior Essex Communications and Essex Group are borrowers under a$175 million senior secured revolving credit facility with a$25 million sublimit for letters of credit. Superior Essex, Superior EssexHolding and our domestic subsidiaries have fully guaranteed the senior securedrevolving credit facility. Interest accrues on outstanding borrowings at anannual rate equal to, at our option, LIBOR or a base rate, plus, in each case,an applicable margin, determined quarterly based on average borrowingavailability, 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 quarter of2005 was 1.75% for LIBOR loans and 0.25% for base rate loans. Obligations underthe senior secured revolving credit facility are secured by substantially allof our tangible and intangible assets. Availability under the senior securedrevolving credit facility is subject to a borrowing base equal to the lesser of(1) $175 million less outstanding letters of credit and (2) aspecified percentage of eligible accounts receivable and inventory lessspecified reserves. The specified percentages of eligible accounts receivableand eligible inventory are each subject to decrease in the reasonable creditjudgment of the administrative agent. Currently, the applicable percentages are(i) 85% of eligible receivables and (ii) with respect to eligibleinventory the lesser of (a) $70 million or (b) the lesser of(x) 65% of the value of the eligible inventory and (y) 85% 

 

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multiplied by the net orderly liquidation value percentage thenapplicable to our inventory multiplied by the value of the eligible inventory.The specified reserves that reduce availability are not fixed and may beimposed by the administrative agent of the revolving credit facility in itsreasonable credit judgment. Current reserves include a rent reserve related toproperty on which collateral is located. The senior secured revolving creditfacility was amended in July 2005 to:

 

•                  increasethe amount of permitted consigned inventory from $30 million to $50 million andthe extent to which consigned inventory located in the United States or Canada(other than the Province of Quebec, Canada) may be included in thedetermination of the borrowing base for revolving loans to the lesser of 20% ofthe inventory formula amount or $30 million;

 

•                  exemptup to $25 million of the total $50 million of permitted consigned inventoryfrom the requirement for filing a financing statement under the UniformCommercial Code of the applicable state of the United States or the PersonalProperty Security Act (“PPSA”)(as in effect in any Province of Canada otherthan the Province of Quebec, Canada);

 

•                  modifythe definition of eligible consignee to permit the use of financing statementsfiled under the PPSA;

 

•                  recognizethe creation of various entities to facilitate Essex Group’s investment in aChina magnet wire facility and related operations in an amount up to $30million as a Foreign Venture Investment (as defined in the credit agreement);

 

•                  providefor the pledge by Essex Group of 66% of its equity interests in the parententity (SE Holding, C.V.) through which such Essex Group investment in China isheld; and

 

•                  permitscertain transactions between the borrowers (or their subsidiaries) and SEHolding, C.V., or its subsidiaries, such as the license of intellectual property,the sale or transfer of equipment and the sale of inventory, subject to thelimitations described therein.

 

Under the senior secured revolving credit facility, if availabilityunder the revolving credit line falls below $15 million for any period oftwo consecutive days, the borrowers will be required to maintain a ratio of 1.1to 1 of (a) the sum of the consolidated EBITDA of the borrowers minusspecified distributions of the borrowers relating to capital expenditures,foreign investments, tax distributions and pension contributions of theborrowers to (b) all principal and cash interest payments on specifieddebt of the borrowers. The senior secured revolving credit facility alsocontains covenants that limit our and our subsidiaries’ ability to (i) paydividends, redeem capital stock or make other restricted payments, (ii) sellor dispose of assets, (iii) incur additional indebtedness or permit liensto exist on our property, (iv) engage in transactions with affiliates and (v) makeadditional investments or acquisitions. Under the terms of the senior securedrevolving credit facility, Superior Essex Communications and Essex Group maynot declare or make any distributions to Superior Essex except fordistributions made for the payment of certain corporate operating expenses,income taxes and certain other specified costs. We are currently obligated topay an unused commitment fee of 0.375% per annum on the unused amount of themaximum committed amount and a fee of 0.125% per annum on the outstanding faceamount of outstanding letters of credit. A total of $40.0 million was drawnunder this facility as of June 30, 2005. Undrawn availability (afterconsidering outstanding letters of credit of $4.4 million) on such dateamounted to $130.6 million. The senior secured revolving credit facilitymatures in November 2007, however in accordance with Emerging Issues TaskForce Issue 95-22, *Balance SheetClassification of Borrowings Outstanding under Revolving Credit Agreements ThatInclude Both a Subjective Acceleration Clause and a Lock-Box Arrangement*,borrowings under our senior secured revolving credit facility have beenclassified as a current liability.

 

***Liquidity***

 

Our principal cash requirements generally include interest payments onour senior secured revolving credit facility and the 9% Notes, dividendpayments on our series A preferred stock, capital expenditures currentlyestimated at approximately $14 million to $18 million annually andobligations related to our defined benefit pension plans. In addition, theaverage price of copper, our principal raw material, has increasedapproximately 16% for the six months ended June 30, 2005 compared to theyear ended December 31, 2004. Significant increases in the price of copperand the resultant increase in accounts receivable and, to a lesser degree,inventory impacts our working capital funding requirements.

 

In February 2005 we announced plans to construct a wholly-ownedgreenfield manufacturing facility near Shanghai in China. Total investment forthe initial phase of construction is expected to be approximately $20 to $25 millionto be expended in 2005 and 2006.

 

29

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As discussed above, with respect to the Nexans European joint venturetransaction, our initial cash investment is expected to be €14.8 million to€19.0 million based on the actual net assets of the Nexans business acquired atthe closing date. We may also be required to pay additional contingent cashconsideration to Nexans of up to €3.0 million if JV Holding Company achievescertain specified levels of Adjusted EBITDA (as defined in the definitiveagreement) for the year ended December 31, 2006. The terms of thetransaction also contain put and call options with respect to Nexans’ 40%minority interest in the joint venture as discussed in note 13 to theaccompanying condensed consolidated financial statements. Other than the €3.0million contingent purchase price and the Nexans put right, there are noadditional mandatory capital contributions to the joint venture. Operations ofthe joint venture are expected to be financed through cash flow from itsoperations and a €35.0 million financing arrangement with a 3rdparty financial institution entered into by the joint venture. We, Essex Group,or any of our other subsidiaries will not be guarantors under the factoringarrangement or under any other debt agreement of the joint venture.

 

We believe that cash provided by operations, together with borrowingavailability under our senior secured revolving credit facility ($130.6 millionat June 30, 2005) together with our cash on hand will be sufficient tomeet our obligations (including the acquisition of the Nexans’ magnet wireoperations discussed above) and fund our working capital requirements for theforeseeable future.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

We, to a limited extent, use or have used forward fixed price contractsand derivative financial instruments to manage commodity price, interest rateand foreign currency exchange risks. We do not hold or issue financialinstruments for investment or trading purposes. We are exposed to credit riskin the event of nonperformance by counterparties for foreign exchange forwardcontracts, metal forward price contracts and metals futures contracts but we donot anticipate nonperformance by any of these counterparties. The amount ofsuch exposure is generally limited to any unrealized gains within theunderlying contracts.

 

**Commodity price risk management**

 

The costs of copper, our most significant raw material, and aluminumhave historically been subject to considerable volatility. To manage the riskassociated with such volatility, we enter into futures contracts to match themetal component of customer product pricing with the cost component of theinventory shipped. These futures contracts have been designated as cash flowhedges with unrealized gains and losses recorded in other comprehensive income.Gains and losses are reclassified into earnings, as a component of cost ofgoods sold, when the hedged sales transactions are reflected in the incomestatement. Hedge ineffectiveness, which is not significant, is immediatelyrecognized in earnings. Our commodities futures purchase contracts aresummarized as follows at June 30, 2005:

 
| **Type**   | ** ** | **Notional  Amount**          | ** ** | **Maturity Date** | ** ** | **Weighted Average  Settlement Rate** | ** ** | **Fair Value  Gain (Loss)** | ** ** |
|------------|------------|-------------------------------|------------|-------------------|------------|---------------------------------------|------------|-----------------------------|------------|
| ** ** | ** ** | **(in thousands of  pounds)** | ** ** | ** **        | ** ** | ** **                            | ** ** | **(in thousands)**          | ** ** |
|       |       |                          |       |              |       |                                  |       |                        |       |
| Copper     |       | 6,150                         |       | 2005              |       | 1.48                                  |       | $                           | 1,999      |   |
| Copper     |       | 2,350                         |       | 2006              |       | 1.30                                  |       | 306                         |       |
|       |       |                          |       |              |       |                                  |       | $                           | 2,305      |   |

 

**Interest rate risk management**

 

In order to limit our exposure to rising interest rates with respect toborrowings under its variable rate senior secured revolving credit facility, wehave entered into interest rate cap agreements. Changes in the fair value ofthese contracts are reflected in current earnings. The following interest ratecap agreements were outstanding as of June 30, 2005:

 
| **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 |               | $          | 276 |   |
| Interest rate cap |       | 15,000               |       | 30-day LIBOR      |         | 5.0          | %          | April 2007     |               | 10                 |       |
| Interest rate cap |       | 12,500               |       | 30-day LIBOR      |         | 5.0          | %          | May 2006       |               | —             |       |
| Interest rate cap |       | 30,000               |       | 3-month LIBOR     |         | 5.0          | %          | December 2005  |               | —             |       |
|                   |            |                      |            |                   |              |              |            |                     |                    |                    |            |  |  |

 

30

----

 

**Foreign currency exchange risk management**

 

We engage, to a limited extent, in the sale of products which result inaccounts receivable denominated in foreign currencies. We enter into foreigncurrency forward exchange contracts to hedge against fluctuations in the valueof these receivables. Changes in the fair value of these contracts arereflected in current earnings. At June 30, 2005, the Company hadoutstanding foreign currency forward exchange contracts to exchange 6.2 millionCanadian dollars for $5.1 million in July 2005. The fair value of theforward exchange contracts was insignificant at June 30, 2005.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

*Evaluation of Controls and Procedures*

 

As of the end of the period covered by this Quarterly Report on Form 10-Q,we carried out an evaluation of the effectiveness of the design and operationof our disclosure controls and procedures, including internal controls overfinancial reporting, under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and Chief Financial Officer.Based on that evaluation, the Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures have beendesigned and are being operated in a manner that provides reasonable assurancethat the information required to be disclosed by us in reports filed under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andforms. Further, the Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures have been designed toensure that information required to be disclosed in reports filed by us underthe Securities Exchange Act of 1934, as amended, is accumulated andcommunicated to our management, including the Chief Executive Officer and ChiefFinancial Officer, in a manner to allow timely decisions regarding the requireddisclosure. A system of controls, no matter how well designed and operated,cannot provide absolute assurance that the objectives of the system of controlsare met, and no evaluation of controls provides absolute assurance that allcontrol issues and instances of fraud, if any, within a company have beendetected. Notwithstanding the above, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and proceduresare effective at a reasonable assurance level.

 

*Changes in Internal Controls Over FinancialReporting*

 

There have been no changes in our internal control over financialreporting that occurred during the most recent fiscal quarter that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

**PART II. OTHER INFORMATION**

 

**ITEM 2. UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

The following table provides information about our purchases of equitysecurities that are registered pursuant to Section 12 of the Exchange Actduring the quarter ended June 30, 2005:

 
| **Period**        | ** ** | **Total Number of  Shares Purchased** | ** ** | **Average Price Paid  per Share** | ** ** | **Total Number of  Shares Purchased as  Part of Publicly  Announced Plans  or Programs** | ** ** | **Maximum Number of  Shares that May Yet  Be Purchased Under  the Plans or Programs** | ** ** |
|-------------------|------------|---------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| April 2005   |       | —                                |       | —                            |       | —                                                                                        |       | —                                                                                     |       |
| May 2005 (a) |       | 13,385                                |       | $                                 | 17.79      |                                                                                          | —     |                                                                                       | —     |   |
| June 2005    |       | —                                |       | —                            |       | —                                                                                        |       | —                                                                                     |       |
|                   |            |                                       |            |                                   |            |                                                                                               |            |                                                                                            |            |  |

 

----

(a)                                  Represents sharestendered by our Chief Executive Officer to satisfy minimum statutory taxwithholdings due upon the vesting of restricted stock awards.

 

31

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**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

The following matters were submitted to avote of security holders at the Company’s annual meeting of shareowners held onMay 3, 2005:

 
| ** **                                                                                                                             | ** ** | ** **     | ** ** | ** **  | ** ** | **Votes Cast For** | ** ** | **Votes Withheld**   | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|------------|-------------|------------|--------------------|------------|----------------------|------------|
| Election of Class I and II directors:                                                                                             |       |           |       |        |       |               |       |                 |       |
| Stephen M. Carter                                                                                                                      |       |           |       |        |       | 16,235,614         |       | 62,458               |       |
| Denys Gounot                                                                                                                           |       |           |       |        |       | 16,235,414         |       | 62,658               |       |
| James F. Guthrie                                                                                                                       |       |           |       |        |       | 16,235,614         |       | 62,458               |       |
| Andrew D. Africk                                                                                                                       |       |           |       |        |       | 15,462,219         |       | 835,853              |       |
| Perry J. Lewis                                                                                                                         |       |           |       |        |       | 16,235,614         |       | 62,458               |       |
|                                                                                                                                   |       |           |       |        |       |               |       |                 |       |
| ** **                                                                                                                             | ** ** | **Votes Cast** | ** ** | ** **  | ** ** | ** **         | ** ** |
| ** **                                                                                                                             | ** ** | **For**        | ** ** | **Against** | ** ** | **Abstain**        | ** ** | **Broker Non-Votes** | ** ** |
| Management proposals to:                                                                                                               |       |           |       |        |       |               |       |                 |       |
| Authorize the Superior Essex Inc. 2005  Incentive Plan                                                                                 |       | 9,234,155      |       | 956,412     |       | 3,250              |       | 6,104,255            |       |
| Authorized the Superior Essex Inc. 2005  Employee Stock Purchase Plan                                                                  |       | 9,350,274      |       | 840,293     |       | 3,250              |       | 6,104,255            |       |
| Amend the Company’s certificate of  incorporation to increase the maximum number of authorized members on the  board of directors |       | 13,056,080     |       | 3,238,742   |       | 3,250              |       | —               |       |
| Ratify the appointment of Deloitte &  Touche LLP as the Company’s independent registered public accountants              |       | 15,530,377     |       | 203         |       | 767,492            |       | —               |       |

 

**ITEM 6. EXHIBITS**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|---------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                 |       | Disclosure Statement with respect to First Amended Joint Plan of  Reorganization of Superior TeleCom Inc. and its affiliated debtors and  debtors-in-possession (including the Amended Joint Plan of Reorganization  attached as Exhibit A thereto) (incorporated herein by reference to Exhibit 2(a) to  the Registration Statement on Form 10 (Registration No. 000-50514)  of Superior Essex Inc., as filed with the Securities and Exchange Commission  on December 15, 2003, as amended (the “Superior Essex Form 10”)). |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.2                 |       | Asset Purchase Agreement, dated as of March 18, 2004, by and  among Superior Essex Communications LLC, Belden Communications Company and  Belden (Canada) Inc. (incorporated herein by reference to Exhibit 2.1 to  the Current Report on Form 8-K of Superior Essex Inc. dated June 16,  2004)                                                                                                                                                                                                                                                        |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.3                 |       | Contribution and Formation Agreement dated July 27, 2005 among  Superior Essex Inc., Essex Group, Inc., Nexans, Nexans Participations,  Nexans Wires and Lacroix and Kress Gmbh.                                                                                                                                                                                                                                                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 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).                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.3                 |       | Certificate of Amendment to Amended and Restated Certificate of  Incorporation of Superior Essex Inc. (incorporated herein by reference to Exhibit 3.3  to the Quarterly Report on Form 10-Q of Superior Essex Inc. for  the quarter ended March 31, 2005)                                                                                                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 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                                                                                                                                                                                                       |

 

32

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|   |   | 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).                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.6    |   | Form of Director Restricted Stock Certificate (incorporated  herein by reference to Exhibit 99.2 to the Current Report on Form 8-  K of Superior Essex Inc. dated November 10, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.7    |   | Specimen  Common Stock Certificate)incorporated herein by reference to Exhibit 4.11  to the Superior Essex Form S-3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 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 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   |   | Sixth Amendment to Credit Agreement, dated March 11, 2005, by  and among Superior Essex Communications LP, 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 10.27 to the Annual Report  on Form 10-K of                                                                                                                                                                                              |

 

33

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|   |   | Superior Essex Inc. for the year ended December 31, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.8   |   | Seventh  amendment to Credit Agreement, dated June 27, 2005, by and among  Superior Essex Communications L.P, 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, and  General Electric Capital Corporation, as syndication agent for the lenders  (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K  of Superior Essex dated July 15, 2005). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.9   |   | 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).                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.10  |   | Superior Essex Inc. 2003 Stock Incentive Plan (incorporated herein by  reference to Exhibit 10(e) to the Superior Essex Form 10).                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.11  |   | 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).                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.12  |   | 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).                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.13  |   | 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).                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.14  |   | 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).                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.15  |   | 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).                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.16  |   | 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).                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.17  |   | 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).                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.18  |   | 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”)).                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.19  |   | 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).                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.20  |   | 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”)).                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.21  |   | 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).                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.22  |   | 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”)).                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.23  |   | 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).                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.24  |   | 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).                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.25  |   | 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                                                                                                                                                                                                                                                                                         |

 

34

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|   |   | 10-K of Superior TeleCom Inc. for the year ended December 31,  2002).                                                                                                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                               |
| 10.26  |   | Superior Essex Inc. Senior Executive Retirement Plan (incorporated  herein by reference to Exhibit 10.27 to the Quarterly Report on Form 10-Q  of Superior Essex Inc. for the quarter ended September 30, 2004)                                                     |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.27  |   | Consulting Agreement, dated February 1, 2005, between DG Network  and Superior Essex Inc. (incorporated herein by reference to Exhibit 99.1  to the Current Report on Form 8-K of Superior Essex Inc. dated February 18,  2005)                                |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.28  |   | Superior Essex Inc. Director Compensation Plan (incorporated herein  by reference to Exhibit 99.1 to the Current Report on Form 8-K  of Superior Essex Inc. dated November 10, 2004)                                                                                |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.29  |   | Form of  Director Restricted Stock Certificate (incorporated herein by  reference to Exhibit 99.2 to the Current Report on Form 8-K  of Superior Essex Inc. dated November 10, 2004)                                                                           |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.30  |   | Form of Non-qualified Stock Option Certificate (incorporated  herein by reference to Exhibit 99.1 to the Current Report on Form 8-K  of Superior Essex Inc. dated April 1, 2005)                                                                               |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.31  |   | Superior Essex Inc. 2005 Incentive Plan (incorporated herein by  reference to Appendix C of the Company’s Definitive Proxy Statement on Schedule 14A  (File No. 000-50514) filed with the Securities and Exchange  Commission on March 30, 2005)               |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.32  |   | Superior Essex Inc. 2005 Employee Stock Purchase Plan (incorporated  herein by reference to Appendix D of the Company’s Definitive Proxy Statement  on Schedule 14A (File No. 000-50514) filed with the  Securities and Exchange Commission on March 30, 2005) |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.33  |   | Form of  Performance Accelerated Restricted Stock Award Certificate (incorporated  herein by reference to Exhibit 99.1 to the Current Report on Form 8-K  of Superior Essex Inc. dated April 20, 2005)                                                         |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.34  |   | Superior Essex Inc. 2005 Executive Bonus Plan (incorporated herein by  reference to Exhibit 99.3 to the Current Report on Form 8-K  of Superior Essex Inc. dated May 3, 2005)                                                                                       |
|   |   |                                                                                                                                                                                                                                                                               |
| 10.35  |   | Superior Essex Inc. 2005 Executive Special Recognition Bonus Plan  (incorporated herein by reference to Exhibit 99.4 to the Current Report  on Form 8-K of Superior Essex Inc. dated May 3, 2005)                                                                   |
|   |   |                                                                                                                                                                                                                                                                               |
| 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.                                                                                                  |

 

35

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                      | Superior Essex Inc. |
|---------------------------|---------------------|
|                      |                |   |
| Date: August 5, 2005 | 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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