General Cable Corp.(BGC)

Presented by:Vignesh Murali, Akrati Johari,

Charlie Gambino and Michelle Oboarekpe

April 6, 2010

  

Presentation Overview Business Overview Microeconomic Analysis Industry Analysis Competitor Analysis Multiples Valuation Management Assessment Pro-forma and DCF Recommendation

Background Incorporated in New Jersey in

1927 Went public in 1997 (NYSE: BGC)

Headquarters Highland Heights, KY

Operates in 22 countries 44 manufacturing factory locations

Manufactures and distributes copper, aluminum, and fiber optic cable and wire products

3rd largest cable & wire company in the world

Growth primarily through acquisitions

Business OverviewProduct Categories Electric Utility – LV & HV aerial and underground cables

Electrical Infrastructure – Specialty cables – Military, Transit; industrial power and construction cables; mining, oil, gas & petrochemical products; transportation and industrial harness assemblies; portable power cords and electronics

Construction – Residential & Non-residential construction cables; low-smoke , zero-halogen retardant cables

Communication – high bandwidth networking cables , submarine fiber optic communication cables, multi- conductor and coaxial electronic wires

Rod Mill – Copper and aluminum rods for OEM applications

Revenue BreakdownProduct Revenues Segment Revenues

North America - 34%

Europe & North Africa - 35%

ROW - 31%

Industry Highlights Industry growth is influenced by a number of factors

Regulation, construction and industrial activity, government spending on infrastructure

Consolidation – Significant M&A activity

Cost Structure Purchases of raw materials account for 75% of total manufacturing costs for most

manufacturers

Concentration Top 4 companies – 42.7% market share

Competitive High barriers to entry Low switching costs

Strengths (SWOT Analysis) Market leadership

Diversified portfolio Across its target markets Breadth of product offerings

Consistent track record of successful acquisitions

Weaknesses Cost of inputs are rising faster than the

company’s ability to pass these costs through to customers.

Limited sources of inputs

Cash flows are generated primarily from its international segments

Opportunities

Increased demand in emerging markets Exponential population growth in developing

countries and emerging markets Growing middle class

Increased demand for fiber optic products

Threats Weak demand expected for Electrical Utilities Volatile raw material prices Pricing pressure from manufacturers in China

and India Technological shift from copper to fiber optic

communication products Significant exposure to geo-political risks

Macroeconomic Factors Forecasted GDP growth

Government incentives for alternative energy

Global growth in energy infrastructure spending

Ratio Analysis  2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

Profitability        Return on Assets % 3.09% 4.46% 7.88% 7.65% 6.93% 4.15% 5.13% 6.26% 5.64% 6.14% 6.39%    Return on Equity % 13.85% 13.18% 36.77% 29.30% 21.68% 10.15% 13.82% 15.02% 12.65% 12.46% 12.65% Margin Analysis        Gross Margin % 10.89% 11.37% 12.85% 14.36% 12.88% 13.62% 14.00% 14.00% 14.00% 14.00% 14.00%    SG&A Margin % 8.03% 7.23% 6.41% 6.43% 6.12% 7.74% 6.00% 5.00% 6.00% 6.00% 6.00%    Net Income Margin % 1.92% 1.65% 3.65% 4.15% 3.03% 2.48% 4.51% 5.28% 4.66% 4.74% 4.83% Asset Turnover        Total Asset Turnover 1.7x 1.7x 2.0x 1.5x 1.6x 1.1x 1.1x 1.2x 1.2x 1.3x 1.3x    Fixed Asset Turnover 5.7x 6.6x 9.4x 8.0x 7.7x 4.6x 4.6x 5.3x 6.2x 7.3x 8.7x    Accounts Receivable        Turnover 6.2x 5.2x 5.8x 5.0x 5.8x 4.5x 4.9x 5.2x 5.0x 5.0x 5.1x    Inventory Turnover 6.1x 6.2x 6.9x 5.3x 5.8x 4.2x 5.3x 5.4x 5.5x 5.6x 6.2x Short Term Liquidity        Current Ratio 1.6x 1.5x 1.7x 1.5x 1.8x 2.1x 2.4x 2.5x 2.6x 2.6x 2.5x    Quick Ratio 0.8x 0.9x 1.0x 0.8x 0.9x 1.2x 1.6x 1.7x 1.8x 1.8x 1.8x Long Term Solvency        Total Debt/Equity 124.39% 153.97% 170.49% 133.96% 143.97% 72.61% 58.60% 45.87% 37.47% 31.01% 25.64%    LT Debt/Equity 124.02% 151.79% 157.71% 88.99% 117.51% 68.44% 55.00% 43.87% 36.15% 29.35% 23.47%

Dupont Analysis - Historical

Dupont Analysis – Forward

Industry Competitors Belden, Inc. (NYSE:BDC)

Designs, manufactures and markets signal transmission solutions, including cables, connectors and I/O modules as well as network devices and control, load sensing and load moment limitation systems designed for safety-critical applications ranging from industrial automation to data centers, broadcast studios and the aviation and aerospace industry.

The company focuses on segments of the worldwide cable and automation markets that require both highly specialized and readily available products.

It primarily operates in the United States, Canada, Europe, Latin America, Africa, the Asia Pacific, and the Middle East.

Industry Competitors CommScope, Inc. (NYSE:CTV)

Provides infrastructure solutions for communication networks worldwide. The company operates in four segments: Antenna, Cable and Cabinet

Group (ACCG); Enterprise; Broadband; and Wireless Network Solutions (WNS). The ACCG segment includes product offerings of primarily passive transmission devices

for the wireless infrastructure market. The Enterprise segment provides structured cabling systems for business enterprise

applications and connectivity solutions for wired and wireless networks. The Broadband segment consists of coaxial cable, fiber optic cable, and conduit for cable

television system operators. The WNS segment include base station subsystems and core network products, such as

power amplifiers, filters, location-based systems, network optimization systems, and products and solutions that extend and enhance the coverage of wireless networks, such as RF repeaters and distributed antenna systems.

It markets its products directly to telecommunication service providers or to OEMs that sell equipment to the providers, as well as through a global network of distributors, system integrators, and value-added resellers.

CommScope was founded in 1997 and is headquartered in Hickory, North Carolina.

Competitor Analysis Nexans SA

Global leader in cables and cabling solutions Designs, manufactures, and markets cables,

connection accessories, cabling systems, and network supervision and control software worldwide.

Serves infrastructure, industry, building, and local area network markets.

Industry Competitors Draka Holding NV

Engages in the development, production, and sale of cable and cable systems worldwide.

The company operates in three groups: Energy and Infrastructure, Industry and Specialty, and Communications.

The Energy and Infrastructure group offers low-voltage and instrumentation cables. It offers cables for construction, industrial, and infrastructure markets in Europe and the Asia-Pacific areas.

The Industry and Specialty group engages in the specialty cable operations. It offers automotive cables, and cables for wind turbines, aviation, defense, and offshore oil and gas industries in North America and the Far East.

The Communications group offers optical fiber cable products. It also offers cable solutions for telecommunications, data communications, and broadband access networks markets.

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^SPX - Share Pricing NYSE:BGC - Share Pricing NYSE:BDC - Share Pricing

NYSE:CTV - Share Pricing ENXTAM:DRAK - Share Pricing ENXTPA:NEX - Share Pricing

Financial Comparison

Financial data provided by                              

Company Name Gross Margin % LTM

EBITDA Margin % LTM

EBIT Margin % LTM

Net Income Margin % LTM

Total Revenues, 1 Yr Growth % LTM

Net Income, 1 Yr Growth % LTM

Total Debt/EquityLTM

General Cable Corp. (NYSE:BGC)

13.6

8.2

5.9

2.5

(29.6)

(42.5)

72.61

Belden, Inc. (NYSE:BDC)

33.2

12.0

8.0

(1.8)

(29.4)

NM

107.11

CommScope, Inc. (NYSE:CTV)

29.3

16.3

9.6

2.6

(24.7)

NM

102.48

Draka Holding NV (ENXTPA:DRAK) 9.43 3.50 0.4 (0.9) (24.3) NM 67.04

Nexans SA (ENXTPA:NEX)

14.91 7.51 5.1 0.2 (25.8) (90.2) 51.07

Multiples Valuation

Multiples Valuation

Stock Price Calculation

Trailing P/E

P/B Forward P/E

P/S TEV/EBITDA LTM

High $65.53 $56.18 $61.06 $75.90 $23.05 Low $49.71 $22.18 $45.29 $35.31 ($1.99)Mean $57.62 $37.14 $53.42 $56.75 $9.80 Median $57.62 $35.11 $53.68 $57.89 $9.07

Range = $37 ~ $58

Management AssessmentManagement has set out to diversify the business through an aggressive growth strategy

Today 70% of its business is done outside the U.S vs. 3% 10 years ago. 3rd Largest cable maker in the world.

Despite volatile revenues, margins have remained consistent. They have been active in controlling costs• Shift to average costs to add shareholder value

• High acquisition activity until this year to establish dominant market share in a variety of markets. High capex to set up factories to meet future demand in emerging markets.

• Management had done an excellent job maintaining a lean business and anticipating future market cycles.

• One thing they haven’t been consistent is in their earnings estimates. However this is due to active efforts to reduce immediate debts

Financial Statements Projections

Though BGC has seen explosive growth in the last 5 years, we predict it will see steadier and slower increases in the immediate future.

Revenues reflect growing significance of markets in Asia and North Africa.

Industrial activity has picked up in these area Capital Expenditure: Using management guidance as well as

looking at present capacities , we predicted Capex to be minimal (compared to previous years) in the coming years

Inventory turnover reflects growing efficiency in selling goods as well as average costs method.

Long term growth rate of 3%.

WACC Calculation

Cost of Debt 7.125%

CAPM

Beta 1.81

Risk-free Rate 3.86%

Equity Premium 6%

Cost of Equity 14.74%

Return on Equity - Past 4 Years

BGC ROE 21.54%

S&P ROE 0.95%

WACC CalculationWeights

Weight of Equity 59.35%

Weight of Debt 40.65%

Tax Rate 33.76%

Goal Post WACC = 60% CAPM 40%ROE

CAPM WACC 10.66%

ROE WACC 14.70%

Goal Post WACC 12.28%

DCF ValuationDCF Valuation

Total PV of FCF 2987.39

Less: Debt 922.08

Equity Value 2065.31

# of Shares 52.00

Intrinsic Value $38.13

Value -10% +10%

  $34.32 $41.94

Sensitivity Analysis 

WACC

  $0.89 8.00% 9.00% 10.00% 11.00% 12.00% 12.28% 13.00% 14.00%

Growth Rate

2.50% $78.79 $62.16 $50.06 $40.87 $33.67 $31.93 $27.90 $23.17

3.00% $87.74 $68.24 $54.41 $44.10 $36.15 $34.24 $29.85 $24.73

3.50% $98.69 $75.43 $59.43 $47.77 $38.93 $36.82 $32.00 $26.43

4.00% $112.38 $84.06 $65.29 $51.97 $42.05 $38.13 $34.39 $28.31

4.50% $129.99 $94.61 $72.22 $56.81 $45.59 $42.97 $37.07 $30.39

5.00% $153.47 $107.81 $80.54 $62.46 $49.63 $46.69 $40.08 $32.70

5.50% $186.36 $124.78 $90.71 $69.15 $54.31 $50.95 $43.49 $35.28

TriangulationPrice Weights

Forward P/E $53.42 10%

Price/Sales $56.75 10%

Price/Book $37.14 10%

Trailing P/E $57.62 10%

TEV/EBITDA $9.80 0%

DCF $39.72 60%

Triangulated Value $ 43.37

Portfolio Correlation

BGC

MOS 0.5831935

MCD 0.3260399

WFR 0.9031524

AEO 0.4961705

JKHY 0.785174

DO 0.7171007

WAG 0.1285925

Recommendation DCF Intrinsic Value = $38.13 Multiples Value = $37 ~ $58 Triangulated Value = $ 44.32 Current Stock Price @ 4/5 = $ 28.32

Thus, we recommend a BUY of 200 shares BGC @ market price.