General Cable's CEO Hosts 2013 Investor Day Conference (Transcript)

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General Cable Corporation (NYSE:BGC)

2013 Investor Day Conference

March 26, 2013 1:00 pm ET


Gregory B. Kenny - Chief Executive Officer, President and Director

Brian J. Robinson - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Robert D. Kenny - Vice President and General Manager of Datacom Cables

Mark Thackeray - Former Senior Vice President of North American Operations

Len Texter - Director of Investor Relations


Brian K. Langenberg - Langenberg & Company, LLC


This is the operator. You may now begin your conference.

Gregory B. Kenny

Thank you, and good afternoon. I'm Greg Kenny, the CEO of General Cable. This is the first, sort of, deep background on the company that we've done since 1995. So maybe we're overdue. But we thought, with the new acquisitions, that we might take the time to go through this. In 1995, we were part of a British company called Wassal, so it's been a while. This is the agenda that we'll go through. We'll have a short break. We can do some Q&A then and Q&A in the end. There has been a slight change. Greg Lampert, who I'll introduce in a minute via his photo, has lost voice. He's been traveling hard. He got to barely a whisper this morning, so we said stay home. So I'm going to go through the Americas and Brian will take -- Brian Robinson will do the growth strategy, which he's been very much a part of. So apologies for Greg Lampert. We nearly chose Bob Kenny and Mark Thackeray, who are here from the North American group, and I'll introduce them in a second.

Normal safe harbor. So we'll be talking about GAAP and non-GAAP measurements throughout this. So I know you all understand the safe harbor. We're going to take you through General Cable's story. Really, if you look back 10 or 12 years ago, we were a couple product company, primarily focused in the U.S and had a view that we could take some of the know-how and free cash and get in the markets that were building a grid for the first time. Also, we saw reconductoring of North America, so we entered into the electrical and infrastructure and energy segments back in the 1999 timeframe. So there's been a huge change from a company that's 150 years old, dating the Samuel Morse and George Westinghouse. So invented really, the industry, really coming from the textile or women's hoop skirts was the antecedent and then Samuel Morse asked if we could make a piece of cable for him to work with.

So this is a long history, but the modern history really has been one of geographic and product diversity, as well as an extraordinary focus on wire and cable; not running from it, because it can be a tough business and a cyclical business. We're celebrating it. And we'll tell you that story over the next bit of time. Today, we're around 14,000 people, 57 plants, 26 countries, selling into probably 100-plus countries. So again, a heavy product that is somewhat freight-sensitive. There are regional specifications. So the serving area, generally, is 1,000 or 2,000 miles around that plant, depending on where it is. If you take last year's results and add the pro forma results of the acquisitions, we're around a $7 billion company, a Fortune 500 company. Emerging economies is a big part of our story. They're not always linear, but they are exciting and we'll take you through a little bit of our profile in Latin America, Southeast Asia, Asia, more generally and Sub-Saharan Africa. Some of the customers we've grown up with are Graybar who started in New York, which is one of the largest distributors in this country; WESCO; ConEd, who serves the utility here; as well as Verizon. They're all customers of ours. And again, these are 10- and 50-year kinds of relationships. We are a leader in both the portfolio and the geography, so while focused, we get different parts of the world getting hot and cold at different times, and we'll walk you through where that profile is currently.

Clearly, the biggest driver for us is construction and then you get into what kinds of construction but broadly, we're, while we have early-cycle businesses and we'll describe them, we're more of a late cyclical. And as we see, the construction cycle begin to kick back in again, led by North America. That's a good thing for us in the acquisition that we did, particularly on Alcan, it leverages that as well. And we've kept a very good credit profile right through this financial crisis, and really, have a very strong balance sheet and good EBITDA to interest coverage, et cetera. This is our team.

We've just added Sonya Reed who came out of the Rest of World, but we were looking for an executive. If you believe anyone can buy the equipment in this industry, it's really -- it goes without saying, it's the people that make the difference. And Sonya has got some terrific experience. I was looking for an executive like her, so we've elevated her to the leadership team of the company. And then introducing Peter Campbell, who was working in ROW in Asia-Pacific. But as we thought through ROW, we began to want to accelerate, really, to focus on the region, so we named, in the last months, CEO and Chief Executive VP for Asia-Pac, which is a long region from Oman, all the way to the Fiji Islands and North China. We also have an executive who's not part of the operating committee focused on Sub-Saharan Africa.

Just a little bit of a background. I've been with the company full time since '92, in and out of it since '82. Prior to that, I was in the diplomatic service in the international economics and trade. There's a lot of leverage learning that goes with being on other boards, and I'm part of the Cardinal Health, which is a very large distributor in the healthcare space and our Corn Products, now known as Ingredion, which is a global agribusiness company in many the same markets as we are. I've also been privileged to be part of the Cleveland Fed, which is, in part, a witness to history. They're very interested in what we're seeing globally because obviously, sheer U.S. models don't describe global activity. So that's my background.

Brian has come from Deloitte & Touche, and was working with global clients out of London. He's been with us for 14 years and he's been my partner in operating the company. Greg Lampert, again, apologies, with a lost voice, but he's a chemical engineer, came out of Dow Chemical and again, if you think about our business, chemistry is a major driver, metallurgy, electrical engineering, but Greg is now in-charge of the Americas, which is a $4.5 billion business from Canada all the way to Argentina and Chile. Peter Campbell, also a chemical engineer, out of BP and Fosroc, some linguistic capabilities. He's based in Bangkok. Emmanuel has a great history in France of physicists and people who think about electrical problems, really led by EDF. Emmanuel is really a product of that and his father was also a PhD physicist. But he's driving our European business, which has some of the most complicated engineering and manufacturing around high-voltage, as well as submarine. And a lot of the European utilities have sort of led the curve in kind of looking at new applications for cable and transformers, et cetera. Sonya came out of Zurich, the financial services company. She is fully bilingual, which is a great help. We have about 5,000 Spanish speaking employees. And then Roddy, who's not here, was a Brigadier in the British Army, special ops, special forces and mechanical engineer, speaks German and he's been really been looking at new markets, new products and then helping coordinate one phase to global customers such as Rexdale or Sonepar.

Bob Kenny, in the back, Bob if you could stand a second. Bob holds a number of patents in the communications world and really has taken our communications data cable business elevated it to a leadership position in the U.S. and Canada, and he's been so successful that we -- a lot of the companies' antecedents are within communications. So we have -- you'll see a business pushing up toward $800 million to $1 billion. It's one of the historical businesses of the company, again, with Samuel Morse. So we've ask Bob to take really global leadership for the Communications business, which now includes submarine, fiber optics, electronic cable, as well as telephone cable and fiber optics. Mark Thackeray, here to my left, he's a black belt and has really been one of the great thinkers around continuous improvement. In the company, we won a number of awards, almost annually from Industry Week, as Best in U.S. manufacturing, North American Manufacturing. And Mark really has -- we've been at it very consistently for more than 10 years. So Mark is a big part of that, as well as he's to uptake some of the lessons we've learned in the U.S. and globalize them. So a big part of our culture.

And you'll see later, in really tough times in the U.S. for a late cyclical, we were making 3, 4, 5x more money than we're making in 2001, 2003 on essentially the same business base. And that's really, year-after-year, pulling out tens of millions of cost, you give some back in the market because your customer -- your competitors are doing the same thing. But it adds up. So I love the leverage and the explosiveness, and Mark also is driving our manufacturing know-how globally, and you'll get a chance to have -- hear from Mark in a few minutes.

We -- growing up in the business, I always was fearful of corporate centers with lots of people who watched and pointed out in hindsight what people could do better. So we've sort of had an aversion in a tough business to getting lots of folks whose job is to aggregate count, share wisdom and really wanted to get everybody in the front lines, and instead of saying we're global but have a global center, which has been a historical model we've seen, or people who call themselves global but don’t ever get any leverage because it's really a holding company that's in a business or a couple of businesses, but they don't really talk to each other, what we really did is, knowing we're in a fast-moving local business, but knowing there are certain things that can separate us over time from our competitors, we developed a view -- I'm sure others have done it, but what we really said is "Let's not get a big corporate center, but let's make sure if we have a breakthrough in the Philippines today, that it's known in Zambia in 10 minutes." And that's an idea. We've now done that in manufacturing. We're doing it in other areas. But we look at core things that can make us different. If you have a safe factory, generally, it's a very good factory and you'll see later that our safety metrics are 3, 4, 5x better than the average industrial company in the world or in the U.S.

So best practices around safety, core thing for the company. We look at every injury or near miss with great level of seriousness. And I think that's allowed us to get better. We're now watching Europe get far better than it was 3 years ago, headed toward the U.S. levels and actually Phelps Dodge, which came out of the mining culture, was even better than the U.S. So now those lessons have been leveraged. So a big story for us there.

Technology, there's a lot chemistry in what we do, electrical engineering, application engineering and if you -- you don’t want to reinvent these things 10 times around or 56 times around our factories, so we have a technology council that's looking at a variety of breakthroughs, and you'll see in the presentation, I've given a little bit about how fast we've accelerated in applying technology, not all of it invented by us. Sometimes, we purchase it or co-develop with a supplier. But that's been a big idea for us and I think Bob Kenny will hit that, I'll also hit that.

Sourcing, it's -- a lot of folks would say "Well, are you big enough to matter to your suppliers or your customers?" And in some ways, it's back to how do you use who you are? We're already pretty big company, but it's whether you can approach a Dow or a Borealis with one voice, or do they hear 15 voices. And we do a very good job with one voice. And you'll see with Alcan, Procables, as well as Prestolite, a lot of leverage in-sourcing and other areas. Mark will take you through the manufacturing best practices, but that's an expectation that put aside inflation and put aside volume. It's making one foot of production exactly right every time. So it's less scrap, less waste, it's operator-led process control and it's something that we feel in our DNA from top to bottom. And that's really been almost table stakes to be successful in this business is a culture of continuous cost out.

The communications products, as I introduce Bob Kenny, these are cables that may be this big if it's an old telephone cable, but most of them are the size of a finger, and they would be a high-speed data cable look where you're [ph] networking. It could be to actuate a motor or drive on a factory floor. It might be a broadcast cable for the Super Bowl. We're in all those places. There could be a fiber optics undersea, where NSW was an inventor of that technology. But that's one where a lot of the specs are driven out of the U.S. and we've really -- and a lot of our intellectual capital is here. So we've really taken the U.S. intellectual capital and now globalized it. And with Bob, in addition to day-to-day running North America, is -- has a functional P&L for this business globally. We're quite excited about it. A good return on capital, great place to distinguish yourself with know-how of value added.

As we move into the -- we'll show a little bit later about it. We have about $250 million business that's putting cable in the ocean or it's putting cable in the land. But there, we'd take a turnkey responsibility for that work. It's complex work and it involves either subcontracted construction companies, it involves a lot of engineering, it's work-site related. So we thought that we -- there's aspects of General Cable that have pieces of floor at Foster Wheeler that -- so we create a construction council really to look at best practices around when you own turnkey responsibility. Because the utilities, as you know, don't put in that many high-voltage cables or undersea cable, so they typically look at the highest end of our business to the manufacturing to do that on a turnkey basis.

And then lastly, we were doing a lot of work around the world that looks at everything from the emissions from the company to being a good neighbor in Africa, where if you're not taking care of AIDS, malaria and everything else, police, fire, you're probably out of business anyway. But we began to say this has become an important piece of our culture. It's also been important for customers, but we nearly never thought about it. This also gets the values as you have as a company and how you approach your work. So it's a -- while we're in many geographies, there is a General Cable culture and then it's manifest in this area. Again, these have to be win-win. You don't -- our job is not to go out and cure the world from hunger. Our job is to make money for our shareholders. But there are a lot of places where doing our job links nicely around the environment and around our neighbors and citizens. So that's it's.

I invite you to go to our website. We finally have put that together in the last year, so you could all see it in one place, what we do. There was a Spanish employee who said if we can ever act with the speed and agility of our small competitors, but the strength and power of a large company, we'll have something, and that's always sort of our mantra. This is where we had come from. It's, again, very focused on wire and cable. We celebrate the hard work we do. Our view is around product -- the product portfolio, as well as geographic expansion, taking know-how from Europe to United States. And as the countries industrialize in Colombia or Brazil, taking that know-how there and then building your position, as well as leveraging that global know-how around continuous improvement. So it's perfect quality, intellectual property. It's true integration with suppliers, as well as customers, and we're fairly well advance with how we do our work up and down the supply chain. And then of course, leverage learning. So we want to get rapid transfer of ideas, we don't want to invent them a thousand times.

And then I think the right blend of management that comes from outside the company with new ideas and that healthy contention, as well as people that have seen a cycle or 2, it's a great blend and that's part of the reason today that I introduced you to the depth in the company. This is really looking at some business cycles over time. We had a tough time in '02 to '04. And this is really -- this is just a measure of metal pounds. Of course, there's been acquisitions and adjusted operating income. But the real measure for me is how well we've done in the U.S. and Canada on virtually the same portfolio. In probably a tougher cycle, certainly from a construction, certainly from a utility standpoint. And again, we're starting to see this pick-up, and we'll talk a little bit about the leverage in the business in a minute.

This is really looking at -- we're return-on-capital oriented. A lot of folks say we only want to do high-margin stuff. We make cables that have a lot of copper or aluminum in them. So if you really follow that, you'd say, well, where we're going to do things without too much metal and then you get into a fairly narrow market. What we really look at is what kind of operating income and the capital employed will we receive over time? And Alcan makes pretty metal-intensive products, but we think over the cycle and with our synergies, that will be a terrific return on investment for the company. So while we pay attention to operating margins, some of that can get masked by what's copper, what's aluminum, and you really almost have to think of what's your absolute profit, and then of course, what's the return on investment. So we're paying a lot of attention to buying property, plant, equipment efficiently and well, or getting your net working capital down. We look at different classes or different channels to market. Some have much more extended dating than others, and we're measuring all of that live.

So we -- you can see, we had a wonderful period where the whole world was in this tremendous uptick and we've been hammering back through that time as we recover. But we like our hand going forward. The reason we haven't seen a stronger snapback from '09 forward is one, there's kind of a long recovery from a financial meltdown, but also, we put capital to work in 5 different new activities, which are only now just sort of crossing some of the early ones, crossing through being value creative. So we've invested, as well as we've really seen almost no construction recovery unlike the typical peak to trough and maybe 7 years, if you look back over economic history.

This is really looking at us over a 10-year period and we spend about $1.1 billion in capital spending. We've also been acquisitive. We have also acquired our shares when others didn't care to own them. And as we look at the market and said, where can we put our capital to work. And at moments, we could get a superior return there, and other moments, we could do better in buying an Alcan or something like that. So we've looked at this over time and we continue to look at it. We have an authorization in place now for $125 million. We're constantly looking at that in terms of what's the free cash coming out of the business. We will be investing below depreciation, we believe, this year. There's a lot of companies for sale. On the other hand, we're always looking at risk/reward and then getting or working the assets you've got in place and making sure you have a return there. So it's a dynamic equation, but we have bought, over the last several months in the fourth quarter.

This is us versus the S&P. Our product mix is a lot like the industry. There's really only one consulting firm that follows this industry. It's called the CRU. There's also Energer. So there's not a lot of independent work, but our mix looks pretty close to what the industry is. And as you drill in the geographies, you'll see a different mix. But primarily, we're a late cyclical with some early-cycle businesses. So we do have businesses tied to MRO; that's maintenance, repair and operations in the factory. Or if you're making something in the factory, our cable might be on that particular good. But we broadly need construction to be happening for us to really feel good about the demand side of our business. And as many of you have listened to our conference calls, we went through, in the last five years, with demand from the electric utilities by approximately half or more from where it was in the last decade. So we've really seen some extraordinary times and I think we're really, in most areas, in terms of just sort of rebuilding the business.

We also -- we use the General Cable name, which is a powerful one. It's in the '50s and '60s, it was a public company. Gerald Ford was on the Board of Directors, President Ford. It was building the U.S. infrastructure. Some of the advertising referred to General Motors, General Cable and General Electric back in the '50s and '60s, and then the company really fell into being part of conglomerates, was not really looked after or treasured. So today, we really use the General Cable name everywhere, but because of the preference of utilities and contractors, we still celebrate the companies we've acquired. So names like Carol or CLEC, or Prestolite, or Stabiloy are all important names, Brand Rex, BICC and these are really legacy names. So let's say, General Cable, BICC brand or CLEC brand. And I think, again, that gives some identity. We have spec position with those names, but it's always back to the one company, General Cable.

We do see aluminum, as you think about conductor, to either copper or aluminum, there's some exotic materials, but generally as copper or aluminum. It, can be optical glass, if you're talking platonics. But we've seen aluminum in some applications nibble into copper. And right now, it's 2/3 as electrically efficient and 1/3, the cost of copper. So we kind of like our hand -- we're not seeing a big move from copper to aluminum, but there is some nibbling on the edges and it's actually used in a lot of the developing world, aluminum. Alcan brought tremendous know-how in this area, and we've had the Alcan team who know a great deal about aluminum melting and forming out in the field, really elevating our whole game. But this is a big part of our story.

Aluminum trades at $1 a pound, copper is $3.44 today. So copper, 700 million pounds of cost of goods sold x $3.44. It's still the biggest piece of the company in terms of that. But in terms of just weight, we're now at 50-50, which is a little closer to -- of the industry average, but we kind of like were we've been on that aspect.

We're often looked that as one of the most industrially diverse companies by markets and also by geography. The United States is 31% of the business with Alcan, United States and Canada will be up to 45% in Prestolite. So back to 45% leverage pro forma going forward, but we have lots of 2%, 3%, 4%, 5% markets, some of them growing nicely. Again, you'll see some of these companies as -- no one ever grows up, and says "I want to get in the wire and cable business," but when you think about all the things that you do in terms of markets being made, where this product goes, it's in about every part of the economy and no one thinks about it, unless you happen to be in the industry. But it's everywhere until you have a cable that gets cuts or a circuit that gets overloaded and then you miss it. But it's really a very interesting business and pretty good surrogate for economic activity. A lot of attention is always paid to copper. Wire and cable is about 65% of the overall demand for copper.

Some household names. Very, very diversified. And again, this is revenues in the country. We make product in Spain and ship it all over Europe. But that's revenues by country. This is the portfolio, looking at last year's numbers. So #1 in the U.S. and Canada, easily the most diverse supplier in the business. And then Europe, we have a smaller position, mostly in Western Europe, on some of the difficult products. And then about $1.5 billion of revenues in Latin America pro forma in 2013, $600 million or $700 million in Asia-Pacific and about $300 million in Sub-Saharan Africa. This is the turnkey business we talked about earlier. It's $0.25 billion in revenues. It can be profitable. The land piece has been profitable. We've had some issues in submarine, both with the -- on the installation side, project delays, very complex. And again, within submarine, there's submarine power, and then we also have a submarine oil & gas and a submarine communications, which are separate businesses, but this is the submarine power side.

It's a large business and growing quickly, but it is again subject to public policy on the submarine side, meaning is the public willing to pay for offshore wind? And then just the difficulty of all these projects are being done for the first time in the North Sea, which many of you have read about. This is the Sub-Saharan story. Again, selling all over Sub-Saharan Africa, but primarily in the southern part, #3 in that market with a fair amount of opportunity. Economy is sort of moving sideways currently, but we kind of like our position as things begin to come back together there. In Asia Pacific, the biggest facilities for us are Thailand and the Philippines. And then we have a major position in Australia. We've just bought -- built a greenfield in Northern India. And then Alcan brought us a very large selling organization and a very unique product into China, which we're looking at now as to can we bring more products into the China market on the back of the Alcan selling team?

In the end, we pulled out a lot of costs in Europe, which has been -- we see Europe as being worse this year than last. We think it's bottoming. We'd like to see it get better. We have a shot at that where we can help ourselves. But generally, Europe has lagged down, but we think it's somewhere around the bottom and we expect it to contribute on an operating income basis, 0% to 10% of the company's profits. Again, it has some volatility because of this percentage of completion in these large contracts.

North America, even without a construction recovery, without a big utility spend except on transmission, has been a star. And the Americas, South America is probably the second-best market. Philippines is probably right in there, and Thailand has been recovering lately. We still need capacity utilization to pull up. We see a lot of capacity that was built in the 5, 6, 7, 8, 9 years ago, coming out of the business or not working. A lot of companies are for sale in the industry because again, it's been 5.5 years of fairly tough times. So we need the utilization to come up. In some markets, we're in the 80s, in the 60% percent range. There is no independent figures for utilization. But that will help drive. As utilization comes up, we both get a net contribution margin against our fix. We have plenty of open capacity, generally, as well as occasionally, you get some pricing power.

So this is the wrap on the company. It's a $175 billion industry, which few people have thought about in terms of that size and scale. It is a -- we have a very good emerging markets presence. We are virtually in every product line. The only place we're not strong in is motor winding cable.

We do some specialty cables there but that's something we've chosen not to participate in. We do have a culture of we're going to be better tomorrow than today, which is continuous improvement. I've introduced our team. We've got the balance sheet to go to work but we approached the capital as if it's our own and take it very seriously so we don't get emotional about our acquisitions or other things. Where a long cycle of people and we've got a lot of operating leverage in the business. I'll introduce Brian Robinson. He'll discuss the next piece.

Brian J. Robinson

Good afternoon. It's Brian Robinson, CFO and Treasurer. Welcome. Thank you for spending your afternoon with us. I'm going to take you through a little bit of history on the growth strategy and sort of projecting forward where we're going on the growth strategy. Just before I turn it over, we'll go into a deeper discussion around the Americas, which is about 60% of our business. We'll give a little more color around the communications businesses we mentioned, and Mark Thackeray will take you through the lean which runs through the fabric of the company. So from a strategic perspective, you can see -- maybe starting with the takeaway here. Singularly focused on wire and cable. Something we do very well, we believe, and a tremendous learning for us as a company coming through, as Greg mentioned earlier, when you saw it on an earlier slide around the earnings in the business troughing in that '02, '03 timeframe. So a very different company at that time. I think we really -- we came out of that crisis, which is a very difficult time for the company and said, we're going to be really good in a very tough business. And clearly, that's what we operate in today and that's why you're seeing some many important threads throughout the presentation today. The things that continue -- for example, lean was one of the big legs that help carry us through that '02, '03 timeframe and a very important piece of everything we're doing today. So from an overall growth or strategy perspective, primary business, wire and cable. Focused on long-term growth with the return on capital mindset. Greg talked earlier about the return on capital mindset. And then a few of these next items, we've been talking about and those of you that know what to see, you've seen a lot of our presentations, a lot of our materials, but large in developing country populations with middle classes. And so we have key positions, important positions in Thailand, in the Philippines and Brazil. Markets that you know very well and we're very pleased with those positions and they continue to offer attractive growth for us. Products supporting renewable energy addressing sovereign concerns. You'll see this and we really, I believe, flushed this out in the Americas feeds. So where our cables are really going, everywhere. Oil and gas, traditional technology, into wind, offshore wind, nuclear, solar. And again, we'll give you -- we'll flush it out for you in the Americas section. We talked to the faster-growing, higher value-added product line. Again, balancing that with a return on capital. So again, we're really trying to achieve both the proper return, as well as migrate the business. We're not going to run away from businesses that are thought as commoditized. We've got some great positions in key markets where what you would think of is commoditized products has been some of our most successful products. So having that important mix. I'll talk a little more in this section around how we think about M&A. You've seen it's a critical part of our success story over time. I'll show you a little more on that here in a few slides. And lastly, you can see we -- the CSR, the corporate social responsibility, Greg covered that on a previous slide. But again, an equal commitment to doing the right thing. As Greg mentioned, shareholder returns are a huge driver of everything that we're doing but we also want to do it in the right way in the environments in which we operate. The next couple of slides again are -- before I get into some of the newer material, would be slides that you've seen -- and to be consistent that we've really wanted to just remind and ground everyone around. So those of you who know us know we really put this company together through M&A. We're very pleased and proud of how we've repositioned the company from a company that was primarily a couple of products in the North American market in the late '90s to a company today that is one of the most diverse industrial companies in the world, leveraged towards the electrical infrastructure, electric utility. Communications is, I think, a well-kept secret in the company. We're going to share a little more around the communications business with you today. But you can see the number of transactions. They all bring something to the company. Some have made more of an immediate impact than others. For example, the 2007 acquisition of PDIC, Phelps Dodge International, brought us most of our emerging markets footprint. So you'll hear us talk a lot about initiatives, that's the emerging middle classes that are well served by our legacy PDIC entity. And then you saw a circle back in 2012 and come back into one of our markets we know really well, the North American market, buying the Alcan cable business, buying Prestolite business and again, we're going to take you into a deeper understanding and we hope to provide you with a deeper understanding of both the North American business and those acquisitions here in the next segment. And then your -- pictorially, I think this really says it all and really summarizes my previous comments. So in the top section, you can see going back over the 14-year period, migrating the business from heavily North American, dependent on a narrow set of products to broadly -- to very diversified today. The North American business will be just over 40% of the revenue base and we expect it to be just over 40% in 2013. Just still a nice mix between North America, what we call the ROW, and our European & Med business. And in the bottom, again, you can see that we've really -- we believe rounded out of the portfolio. Again, big emphasis around Electric Utility and electrical infrastructure but also about 10% to 12% of the company focused towards the communications. We'll talk about that. The construction, which is principally for us, say in the 2000s and recent history, been more in the emerging markets and in Spain. And we've migrated back into that with respect to the North American market with the Alcan acquisition, a business that we built on very nice leverage to the construction cycle in North America. Again, we will talk about that in a few slides. So the product diversification, and as we showed on the earlier slide in terms of the earnings going trough to trough, the diversification of the product mix certainly in North America has been a key part of differentiating the company over that 8 to 10 years. And then bringing all this together. So really, we came out of that '02, '03 crisis, very difficult time, recapitalized the balance sheet and then really started to grow the company, convicted behind us being very good in a tough business, with wire and cable being our singular focus. And you can see the numbers here in that '05 to '11 timeframe. We completed 14 acquisitions. We invested $850 million and we estimate the incremental revenue that brought us at about $2 billion. During that same timeframe, and again piggybacking on, for example, the PDIC acquisition. So a team that really knows the emerging markets well, that knows how to operate in these markets. We did a number of Greenfield investments, 7 Greenfield projects where we invested about $180 million and we estimate those investments are capable of generating about $300 million of revenue. And again, you'll see this in slides that follow in the financial section. This is where -- this is one of the areas where we believe there's significant upside in terms of the leverage in the business as we continue to work these projects to get them to corporate average with respect to profitability. And then in 2012, we circled back, as I mentioned, with 4 important acquisitions. Clearly, the 3 that are largest and we talk about the most were the Alcan acquisition, Prestolite and Procables, which I'll talk about here in the slide. So important repositioning of the company, we would argue, we've really transformed the company from a geographic footprint perspective and you can see that more than half of our earnings today come from acquisitions that we've completed in this timeframe. So as promised, and again, we'll have a little more of this in the Americas section as well. We completed -- we look back on 2012, we completed 3 deals which together are very important, and add to the transformation of the company, adding about $1 billion in revenue. Starting left to right, you can see the Alcan Cable business, a leading producer of aluminum cable, as well as rod and strip products. So really enhancing our product offering in the Americas on the aluminum side about the business just under 0.5 point towards Electric Utility but then you can see also bringing us nice position into the construction cycle. We talked a little bit about the conductivity of the 2 metals. I think importantly, when we take a step back on the overall company, these acquisitions broadly leave us from a volume perspective about half copper and about half aluminum, which you saw on an earlier slide. The Procables acquisition in the Colombian market, you can see a similar footprint about half of business leverage towards Electric Utility. Construction is an important market for the business in Colombia, as that market continues to build out for the first time with new construction, emerging middle-class. So a lot of the things that you see on the emerging markets play. It's the revenue about $100 million to $120 million. So, the #2 player in the Colombian market, and equally important is the ability to use existing assets, really take the General Cable know-how around operations and geographic distribution network in the Americas, particularly in Latin America. To put that capacity through the business in Colombia, I think we'll be able to report some happy upside in terms of the revenue base coming out of the Procables business over the next couple of years.

Right now, principally focused on building and really getting the assets out to the General Cable standard in terms of production, but we're really, really pleased with this acquisition as well. And then last but not least, the Prestolite Wire acquisition. We talked about, again, primarily in the U.S. market pointed towards the automotive industry, primarily on the OEMs side. And again, about 90% of the product which we -- which Prestolite makes are complementary to the existing General Cable footprint. So again, another business which closed late in 2012 and we are very excited about. Both of these businesses, the Alcan business and the Prestolite business, we'll go into a deeper discussion on and we'll have a page or 2 in the Americas section. So from an acquisition perspective, I think it's an important piece to this is really not just being able to identify the acquisition, but being able to be patient, to be patient buyers, to take it all the way through identification to diligence, to the purchase, to integration and making it a successful part of General Cable. I think we've got a very strong demonstrate a track record in that capacity. We don't get hung up on earnings multiples. We're patient, as you can see in our numbers, our business is very economically sensitive. Obviously, everyone wants a peak multiple off of the peak earnings, and it takes patience and I think we've demonstrated that certainly in the Alcan Cable transaction. So the criteria we're measuring against you can see here, the strategic fit, very important, the opportunity to grow the business and then looking at it over a cycle is critically important. I think, again, in hindsight, I think the Alcan Cable acquisition, we -- I'm optimistic that, that will be at hindsight should be a very good time in terms of the construction cycle in the U.S. and Canada. Valuations matter. As I mentioned, we don’t get fixed on a property, we're patient and I think when you look at our balance sheet, the majority of the goodwill and the intangible that are on our books relate to one acquisition, which was the PDIC acquisition which brought us a very different place set in terms of the rounding out of the geographies. And then we're obviously, we're always looking and learning from synergies in all directions both through the supply chain, all the way to the Commercial Markets, as well as learning from and taking synergies from the acquired entity.

On Slide 8, around the -- where are we going in terms of M&A. So when we think about 2013, we're not going on a defensive. We are not folding our horns in, but we're really -- so our strategy really remains the same. We've been very successful on the M&A side, but we're also very focused on getting what we've bought integrated, well-run and very focused on getting the Greenfields that we invest over the last 2 years consistently profitable to the corporate averages. So you should expect to see us continue to do that. We'll generate -- we expect to generate meaningful and nice cash flow. We'll go through that more in the Financial section on the back end, but we'll always be looking for M&A. And to the extent, you can expect us to be disciplined. We've shown that over time, to be patient, and if there's a transaction to be done, it will be done after it's well thought out and in the interest of all parties. But you can see here, pictorially where we continue to see lots of opportunity growth in Southeast Asia to grow the business and Africa, Eastern Europe and in the Americas, particularly in South America. And then, last couple of slides here on the growth strategy. You can continue to expect to see us taking a lot of the technology and the know-how out of the -- what I'll call, the mature organizations in North America. In Europe, whether it's tech product technology or people know-how, and you'll see that I think a great selling point, a great reason for optimism around Americas. The ability to take so much of the talent of the North American organization, bring those into the Americas and I think, we'll see that, that's is really going to accelerate the business over the next couple of years. But moving technology into these markets Bob Kenny's business on the communication side is a great example of taking a product that we've been highly successful in the U.S. in, in the U.S. and Canada, and moving that into other markets. So Bob will give you some great examples of that in his section. So you can see our Global Centers of Excellence, Europe and Med remains sort of our intellectual center for high-voltage and extra-high voltage and submarine cable technology, as well as obviously, that's where those businesses are based. Halogen -- low-smoke zero-halogen cables really were borne out of our Spanish organization and we've used that technology successfully throughout actually our global footprint. Greg will cover the North America piece here. I think, not to do a disservice to the Rest of the World. Because they're experts in Rob's favorite patient and drawing. Again, what doesn't appear here is an expert management team here in these local countries that know how to navigate markets, that know how to do business in all these markets and is really are our eyes and ears in the emerging markets.

So lastly, bringing all these together. Highly diversified, we think one of the most highly diversified industrial companies in the world. Broad product line of over 100,000 products, leading market positions, well positioned for the future of the growth opportunities. Again, I think we've been very consistent around this strategy, and we'll continue to -- you should expect us to continue to execute on that strategy. We'll focus on the return on capital, we've always been focused on that, we'll continue to do so. And a big point here, this last point around the construction cycle. We're going to show you more on that in the Americas. And as we said, we have not seen a great recovery in the construction markets. We've done very well, I think, without that and we hope to see the tailwind of that construction continue to support the business. So with that, let me turn it back over to Greg to take you through the Americas.

Gregory B. Kenny

It's a little warm in here, so please if you want a soft drink, Angel's going to -- Angel's helping us, Angel Kelley. I think also Len Texter, I think all of you know, is responsible for Investor Relations, as well as a lot of other projects as well as M&A support in the company and Len's in the back of the room. But please get a cool drink if you want. This is really a section that Greg Lampert was meant to give. Greg, I've been partnered with Greg for 15 years. He has really operated in North America in the beginning of his career, both in terms of the sales, as well as product management. He also is strong in the technology and manufacturing. He then got involved in a lot of the global purchasing and technology council areas. And then with a strong link, North to South, in terms of product flows, idea flows, as well as trade flows, when we had a change of management in ROW, I looked at the Americas as really by bringing them together operationally, as a way to further accelerate some of the opportunity in, we call it, Latin America, which is really Mexico and South. So again, Greg has been traveling heavily and his voice is a casualty of that travel schedule, I assume. But I'm sure you will meet him at investor conferences and he's out fairly frequently and will get out even more as we go forward. The products -- it's very interesting. We're on everything from a nuclear reactor to the -- a ray cable is going up the tower, connecting the wind farms, obviously haul transmission. The cables that actuate the robotic welder. We're all over railcars, all the cables to link a solar farm and then bring that to the grid, up and down the offshore jackup rigs. We've got cables in the new Chevrolet SUVs and some of the passenger cars, and then deep into cables in gas and coal-fired power plants. So it's really every part of the economy and again, I find that endlessly interesting as we touch every part of the economic sector in nearly every market in the world. This is the Americas, these are not all manufacturing facilities. So some of them are distribution facilities as well. Pro forma, we see this as about a $4.5 billion business at current metals in 2013. In some places in the world, where you can't buy rods, so that's taking a big sheet of cathode or ingot, aluminum or copper cathode and melting it into something that you can make into conductors. So that's typically 5/16-inch rod. Where that market doesn't exist or it gives you an opportunity to differentiate yourself, we actually operate a rod mill. So we have rod mills in Latin America and with Alcan, came a big rod mill up in Canada, above Montréal. We're the largest in the Americas by a fair amount. The other big companies would be Southwire, which is private and you see Nexans and Prysmian, as well as the Mexican producers, Condumex and a company called Xignux or also known as Conductores Monterrey, would be the main players. Also Berkshire Hathaway is in the market through the Marmon Group. So those are the major players but there are a lot of smaller players in different niches. The reason for bringing it together was really -- the strategy we had where we make the basic products in the developing world and as they industrialize, we already have the playbook and recipes to bring those products either by importing them into the country if the tariffs allow in the freight, we're actually making the product. So right now, Bob Kenny will tell you a story about the things we're bringing into Brazil, but among them is data cable, we're following with a global channel partner, a connectivity partner, Panduit, a linked performance network and now we're going to supply Panduit in Brazil with a product that will -- and also sell the Brazilian market generally. So that's the kind of things that we're doing. There's lots of verticals, as you'll see later where we're starting to dive deep into different end-use segments of the market. And then also, just using what we have efficiently, we're constantly through lean and looking as one company instead of creating separate little empires in the company, we want to really put utilization on assets. And I think this is going to help us further utilize the assets we have. This in North America. So as an industry, it came out of the textile industry, went south as the South industrialized and then of course, Mexico is a tremendously competitive place to manufacture goods so we became a major player in Mexico as well. Operating profit, again, with very little help from the construction sector broadly and with utility spending generally weak except for transmission, we're -- again, thanks to Mark who, along with Larry Fast, were sort of the fathers of this continuous improvement culture that we have. We made a nice profit last year, a nice return on capital, and you'll see that we've generally have spent less -- our assets are in great shape. We keep getting more entitlement capacity without having to put more capital into these assets except in the highest return areas. We also have tremendous technology here so that technology will help support the company globally but also in Latin America, and then the organic growth has been certainly stronger than the overall economy led by transmission, but a few other sectors have picked up recently. So this is both growth markets and execution, bringing reward for the shareholders over time. I'm going to show you some of the growth markets. So this is broadly how we think about what we do in North America. So utilities are a big chunk of what we do and that will be people like ConEd. Communications would be the Verizons where the data installers or communications installers, electronic cable are all in there. So these are typically smaller cables and their low voltage signaling in many, many applications. And today, many cables will have an electrical, as well as a communications feature to them. So they're actually telling something to go right or left and actually monitoring what's happening. So we call those composite cables. And then there's a whole series of things within electrical infrastructure tied to housing, to portable power and control, in industrial environments, mining, et cetera. But many, many niches; we're very good. There was a lot of that's all tied to the Brand Rex business historically. And then we sell mechanical rod and strips so this is really the surplus production that we don't need out of some of our rod mill in Canada. These are some of the brands that we talked about early on. And again, synonymous with really the industrialization of America, we're really proud of them and continue to come under the General Cable moniker, but the Carol Brand or BICC Brand being typically evident, great quality to the installer. We do a lot of work -- in this business, if you can see into what's being sold, you can reduce your capital employed. So what we love is we have a distributor that says, will you look into our distribution center and as we sell something, will you go ahead and hit an automatic replenishment? We also will do that backward with our suppliers. So as we really grow with these customers, we try to get into the business where we look at each other's mistakes or weak points, eliminate them so we can make a seamless integration between the companies. So we'll sell through distribution, which is a bit more than half the business. so we have a channel partner that may call on this hotel who's about ready to rewire the hotel. We'll try to specify our gen speed data cable and other things, sell a package through a Graybar at WESCO, Sonepar, Rexel. It depends on the project. We'll also sell directly to OEMs. We'll also sell to utilities. And then there's all kinds of subspecialist like industrial distributors, electronic distributors, communications distributors; some of them are hybrids. But again, it reaches the market in lots of different ways. We're measuring within those channels the inventory velocity, the cycle time, breakage or below the line cost. So you have your sell price minus -- and then your gross profit and then you have all the places where money can leak out from transportation to rebates allowances and so on. So we're constantly looking at channel profitability and pricing. And again, we sweep all the way across through distribution through direct selling. A lot of it will be specked with the application engineering firm. So we'll go ahead and convince a retailer that they should use our zero halogen data cables for a variety of reasons and may get that specked in so ours will be the only product that actually would be able to be used on that job site. We also had taken -- take the same view to our supplier. So again, the long-standing relationships, we're tough on each other because we've got to be successful in a tough business. So this is nothing taken for granted. But we really know these folks well. We meet at the highest levels, at my level to be sure we're pointing the right direction together. If we have issues, we need to get them out on the table, as well as integrate right through it operationally. And this isn't just about lowest price. This is about can you run the material? What's the quality of the material, or how is the supply chain running? And again, Mark has spent a lot of time in that area. Within Electric Utility, there's the long haul, which could be underground or in the air, to link the grid. And that's been now in a couple of years of strong growth in part because FERC is allowing a higher return on investment in the area, but it basically allows you to move power from areas of surplus to deficit to achieve equilibrium in U.S. power prices.

And without a grid that can also handle peak load, you could have blackouts or you'll have pockets of high cost power or stranded power, especially with a lot of the wind projects that have come online. They're typically where there are a lot of demand. So you need to be able to move that power on out. It's difficult to store, so you've got to get it out into the grid. Then there's the power to come down your neighborhood and then finally to link your house some medium voltage and low-voltage. The medium and low voltage markets have been really tough over the last years because the power demand has been weak. Utilities have started to pulling their horns and we've had very little non -- or we've had very little residential disruption and non-resi has been unspectacular. We're beginning to see over the last year, the utilities actually spending a bit more, sort of bottoming off for heater and distribution circuits, which is a good thing. And then we've had the overlay of demand for cables for the wind, which has just been renewed late last year. So we expect that to start up again as well. The utility demand, this is really looking at Edison Electric Institute which tracks the utilities but you can see transmission after really being strong in the '60s and '70s when sort of the highways were built around the country and then load usage grew. Until now, you have some highways that don't have a lot of headroom. And then over the last 3 or 4 years, you can see that, that's begun to pick up and up materially. 40% or so is where we think we'll be, up from, say 2010 or so or 35%. And then more projects, presumably continue to get planned. These are the ones that you can see near-term but this is back from years ago where a lot of this work was done and says to have a first world grid, the U.S. needs to spend $300 billion. Rule of thumb, this cable might be 5% to 10% of that spend. So you're talking about maybe $15 billion or $30 billion where the whole market's only -- for transmission, it's only a couple of billion dollars a year. So a huge pent-up demand finally being released over the last years, in part because of this FERC rule. There's also a piece of that which is underground, where you're coming into a city like New York, we can make that cable in France or in Mexico. And clearly, if you're beginning to put load and putting houses back on the grid, some of this will pick up. So as we've said in many conference calls, demand for medium voltage cable or low voltage cable to utilities over the last couple of years has been at 50% or less of where it was on average in the last decade. And again, with housing coming up, we have begun to see that start to pick up, which is a good thing. This is in 2006, 2007, our Utility business had a golden moment. It made a good amount of money, a good return on capital and then the demand collapsed. As we talked about, we began to see transmission tick its head up and now, we're finally seeing the distribution and feeder markets. But you can see, our return on capital has begun to pick up as well with this market coming off the bottom. So a lot of travel distance to get back to where we were in '06, '07 and now probably some more weapons, because '06, '07 transmission wasn't very good. It was more driven by the low and medium voltage. So if we can get transmission up, which is what's happening, and then begin to get some recovery in housing, this is a big, important business in the U.S. in the billion dollar class and could be a real driver for the company going forward. We've also worked hard on getting the finished goods turns up and it's been a big part of our success in the U.S. despite the fall off in some other markets with the economy. We're actually -- we can make any type of cable for any application within the oil and gas space. So as we think about it, electrical utilities take -- they will generate power and then transmit it on the front end. In the exploration, production, generation, we make cables for every application. And we've said, I haven't looked at it recently but roughly half of the companies' demand came from somewhere along the energy exploration, production, generation, transmission and distribution continuum and that's probably still roughly accurate. Again, with all that being triggered, a lot of that being triggered by geopolitics but also you need construction in order to put power plants up and you need energy usage. So this is again, a global business. In the U.S. we actually make cables that are so specialized, they're sold into China and elsewhere. They are really high valued. They have to sometimes be tested for years to make sure they do what we say they're going to do. And with oil at the current levels, we're seeing a nice healthy investment in the oil and gas sector. As you draw into these verticals, you'll see that we're a very strong leader for cables in the transit world, which is a very harsh environment, also in the automotive. I'll show you later that the cables -- the cars are using 3x and 4x more cable than they used to use. The broadcast world is one that we've really worked hard on. Bob is pushed into there and then we found, in the OEM side, that the harnesses and assemblies is a business where customers sometimes want us to be able to go ahead and finish it with connectors on the end and get it just in time to their factory and we have 2 major facilities in Mexico that can do that for the North American market. And a good business for us where we make the wire, we'll let them the purchase the connectors or we may have connector alliances and then we'll finish the product and it will go to people like GE Med, GE Transit, Raytheon for the Patriot Missile and so on. These are the verticals that we talked about and it's $650 million North American market alone. The design, the engineering, all the testing matters and typically return on capital, return on value added is stronger here. Again, these are generally good markets. They're not broad enough to carry the whole company but they're something that we've always tried to be good in the big, high volume areas that lock your position in with the distributors and OEMs but then also, be equally adroit as if you're a $30 million or $50 million company, a pure play around nuclear or transit or broadcast. In the U.S. a long time ago, we took a view that instead of running little SBUs, strategic business units, we said customers are buying a blend of products, they don't want to see 7 salespeople. The want to see one person representing General Cable. If there's a special problem, they want to have the engineering technology support to come in. So we're really running a functional matrix in North America. So there's one face to the key customers, there's people who are responsible for the product and profitability and making sure that product is hitting all the channels, there's experts on manufacturing, supply chain and finance. But it's -- again, it's worked very well for us because oftentimes, and I'll show you some data, you can be important with a customer with one thing but you never ask for the other business. And if you look at what our distributor is carrying today, it's everything we make and it would be a shame to hit that distributor 7 different ways. So we made a very important strategic decision 15 years ago to unify our sales force, given the specialized expertise behind that customer-facing sales force and then spend a lot of time on electronic data interchange and making sure we're heavily integrated electronically into that customer. And that's really worked really well for us and we're now doing a lot of that elsewhere in the world where it's applicable. So Mark will take you deep into this area but a lot of people said you couldn't do continuous improvement in the process industry because you sort of set up your machines, you run it through and you don't have a lot of handwork. It's really more like a steel or aluminum business or chemical business where there's big capital and then there's process control. We really have proven that even in a process-oriented industry, not to mention assembly work, that you can get better every year. And we've made Industry Week's Best Plants. We're out talking a year ago or less about companies that were able to be consistent, not just saying I want to have black belts in continuous improvements and go hire some outside consultants and then the CEO forgets about it and you're glad that you have that program in place. It means you're constantly referring back to it and making sure that we're thinking about it both in the manufacturing site but also in the back rooms, where are we wasting time. If you place an order, where does that order go, where does it get queued and where is time wasted? So again, Mark and Larry Fast are fathers of this business, fathers of this process for us. We carried it globally. We're seeing it as a common vernacular everywhere including Europe, which this was really not part of the culture in Europe. And then someone explosively bringing it into the developing world with complementing the Phelps Dodge systems with the General Cable system. So these are all our plans that have made the top 10. This is the top 10, there's no clear winner, it's just the 10 best manufacturing plants in the U.S. and it's against people like Toyota, GE, Emerson and others. This is the result of 10 years of that work. This is the effective parts per million units. We're way below industry averages. The safety, way below the numbers for the average industrial company in the U.S. So safety is dollars, safety is also not hurting your associates, which is our most important work. And then quality, a lot of the stuff is mission critical. In cable, if it fails, you've got rework and you may have worse problems if you haven't done your job. So this is really big stuff for us and I really think this really sets the ground as we get the U.S. economy back onto some footing. We just keep -- have stayed at this and the power of what we've done. If we can get some volume into the company, it's going to be powerful. The other thing and again, I credit Greg Lampert for really driving this. Greg has been a great identifier of talent, recruiter of new talent. The company is a tough industry, really hadn't had new classes of people at engineering schools or business schools in years. Greg has gone out and worked with some key universities. We're paying a lot of attention to career development and then we're spending a lot of time really, in a very fast-moving way around the technology. Again, some of it is leveraging stuff that's being developed with partners in India, some of the stuff that we're doing in some part of the world. But these have really become an important part of our business. So these are new products, sales as a percentage of the total and look how far we've come. So again, I'm surrounded by engineers and people who know markets and this is the kind of results you get when you have those kinds of folks focused on this work. We have a global technology council. So there's a breakthrough in the U.S. for a market. Those opportunities are being assessed around the world. Would -- geez, would this work in Zambia or would it work in the Philippines or vice versa? And we're now moving into clever marketing and packaging kinds of ideas that might work in different markets. A lot of times, in the developing world, more out of necessity, they could really get some really interesting ideas. So we're trying to get that to move back and forth easily. This is also the cycle time to get new products to launch. I mean, this is a stage gate process. We stay at it, we stay at it, we stay at it. But this is really making calls quickly, not falling in love with everything and then getting them out and then look at the patent applications that have come up. So this rivals companies with big, central R&D and again, this stuff is generally focused on something that we think we have an opportunity for, not simply innovation for the sake of filing a patent. And then again, a lot of these things we don't want to patent, we keep these sort of an in-house art because of wanting to protect it in a different way. So we've come long way, really from a fast follower, with some -- we've done, as Brian showed you, 25 acquisitions. Some of them like CLEC or Prestolite, invented great bodies of knowledge within their sectors. But we are really accelerating around this and generally, these new products have better margins and because fewer people can do it or maybe protect it. These are some of the examples of taking a Spanish code that says we want every house to have the same level of cables as if it was a hospital. Zero halogen in terms of protection, we took some of that chemistry know-how and said let's go ahead and play with that in the Datacom area. Bob was clever enough to recognize it and suddenly, we have a major new product line that our competitors will try to race and catch up with us when we have some protection there, wherein that we're developing cables for wind applications. This is a submersible cables in the oilfield. In the automotive area, they're going to aluminum for weight, they're also getting tremendous temperature ratings that they want. So we're really leveraging that body of knowledge again, without putting 300 people in the middle of somewhere to go ahead and invent stuff. It's really distributed knowledge around centers of excellence around the world, comes together either in person, video conference and telephone and moves through it in terms of where we spend our time and how we go ahead and commercialize.

This is -- Brian's taking you through Alcan. This is an interesting chart here. It's just the aluminum share of feeders. So feeder cable is a heavier cable coming sort of into a commercial buildings as opposed to copper. But you can see, because that's a place where the specifying engineer can make a trade and still meet code, you can see that aluminum is growing and again, aluminum is used in a lot of the developing world. So we really like the fact that we know aluminum as well as we know copper. And again, we're sort of shameless acquirers of knowledge and I have found in my career that invariably, the company you're acquiring knows as much or more than you ever dreamt and surprises you in certain ways. So if you have an open heart about -- as opposed to simply we've acquired you, welcome, here's the rulebook, we found very explosive ideas from people at Alcan, Phelps Dodge that have made the whole company better. So this is -- This I feel very good about. And again, Alcan's leveraged to transmission in North America, that's the long haul, moving power. It's leveraged to construction of all types, that's the low voltage power. And then lastly, it's got a whole bunch of OEM products which we've also been pleased about and then it comes with $100 million business in China aimed at the commercial feeder market which we hope to leverage other products into. I'll be there in a couple of weeks to work on that.

Prestolite invented the automotive headlight. It was part of Ford Motor, it was part of Allied Signal and today, we're really excited about it. We already had an important business focus on transportation and cabling problems. Prestolite brought another body of knowledge, hugely compatible from everything from bulk wire sold to OEMs, which is without a connector on the end to connectorizing and just in time delivering to a freight trucking -- a truck company or an automotive company. This has a spare of global components to this business. So we're in Brazil, we're in France and have a small operation in China as well as multiple operations in Mexico and the U.S. So again, about a $350 million to $400 million business and you're getting paid for your intellectual capital in this business and we're good at it. So we like this business a lot. This a kind of a look at what's happening in automobiles. The number of multiplexers inside a car and then the amount of work that's going on in terms of signaling is huge, so lots of places to play in terms of either copper versus aluminum and then in data bus cables and ABS cables and on and on and on. And it rolls right into the rollout as it is with the hybrids and electric cars, all are heavy cable users. So we're going to like Prestolite and we like the addition to our core business, there's a great team there. Finally, this is looking at the operating income in the U.S. Again, the markets have been mostly mushing sideways. You can see the new products has increased nicely, the Utility business has come up nicely in profitability. We have a very big specialty business. These are again, lots of specific kinds of applications that we're solving problems with the specifying engineers. Our communications business has become a market leader with our relationship with Panduit and Bob and his team. We continue to be obsessed with the selling, general and administrative expenses and again, constantly looking at can we combine jobs, do we need that job, do we need that work? And then lastly, and again, I credit Greg particularly for driving new talent into the company. Capital employed, if we can do around the world what we do in the U.S., we'll be very happy. We think we can push the U.S. and Canada further up. This is capital employed, so that's receivables plus inventory minus payables as a percentage of revenues. So we work on both networking capital as a percentage of sales as well as operating income into capital employed, which is your networking capital plus your net property plant and equipment roughly. So you can see, we've driven, on one of those graphs, the net working capital as a percentage of sales has come down. We've also been great stewards of capital. We're spending less than depreciation but we have fabulous assets. Lean allows you to get more with less. So this basically a theory constraints. If you think you're running it flat out, what's the entitlement capacity? So Mark and his team would look at every constraint, how do you eliminate that constraint and get basically, the machine running at its theoretical limits. And then you look at the whole series of machines and then look at those constraints and it's a big simultaneous equation. They're really good at solving it. So I think that's allowed us in a sense, to continue to underspend depreciation and still have really good facilities. So going forward, we expect the acquisitions to perform at the North American averages, maybe a bit better depending on where we are in the cycle. Continuous improvements. So cost out, cost out. If that doesn't go away, we're talking tens of millions of targets. Some of which we give back because our competitor is on the same journey though maybe differently and then keep pulling capital out of the business in terms of the working capital required to support $1 of sales. So it's sort of the engine room which, considering where the U.S. economy has been, I'm proud of this team. As we now rotate into really an America's view of the company, as I said, in 2012 without Procables, we're at $1.2 billion. Procables is another $100 million plus we have some growth in our other businesses. So we'll be $1.3 billion to $1.5 billion depending on how things go in these economies. But it's an important business. We're probably tied with Nexans and 2 Mexican producers are important. We're probably a bit bigger than Nexans but depends on which market we're talking about. But from Mexico south, we're probably the leader. There are some tough competitors but we like our hand and I think in the end, the global team is taking knowledge from Europe or North America, bringing it into these developing markets and making sure they have access to the best thinking as those economies develop, which we're seeing places like Colombia and Peru develop very quickly, Chile, et cetera. This is the main -- the business. You can see that we've had a view, to Brian's point, we've paid some goodwill for Phelps Dodge, we wanted to accelerate behind that expertise in operating in these countries by building out. And again, we've built greenfields or brownfields in Mexico, Peru, acquired Columbia and then have added a whole series of specialty and data cable product lines to our operations in Brazil, a lot of which will bear fruit over the coming years. The mix is more construction-oriented because these are economies that aren't quite as industrialized as Europe and the U.S. but you'll see that electrical infrastructure, electric utility, communications businesses grow as a part of the pie over time. These are our revenues by country. It's a pretty good blend. We like Central America a lot. It's a difficult place to operate but we're good at it. We also trade from Costa Rica into the Caribbean Islands. And again, Mexico, in many ways, is as powerful competitor as China in terms of labor costs, engineering and in some way, superior because of the logistics and turnover issues. So very, very strong manufacturing center and we're positioned to make all our product lines in Mexico or bring the products from U.S. or elsewhere into Mexico. So in the end, we're going to leverage everything we know. We really, first and foremost, are an Americas company, we're a global company but the Americas are sort of the center of the line. And you'll see us now pour on the resources to accelerate really, these greenfields, brownfields in Latin America. You can see the growth rates broadly are higher than the U.S, though the U.S. is in a strong snapback, I think, with the construction cycle. But I love places like Colombia. It's got the same population as Spain, a very young population, they just got a mortgage market but if you're in Barranquilla or Bogota, you'd be astounded to see what's going on or in Peru, as I was a couple of weeks ago. Venezuela, we're the leader there. There's obviously an election going on. We're successful. If the issue is getting your cash out, we've gotten some. Long-term, these things have a way of sorting themselves out. There's obviously high inflation and you saw in today's journal, they're beginning to auction dollars for key industries because there is shortages of basic staples as there's an election on the 14th. So we can talk about Venezuela during one of the breaks, if you want, but it's an important market. Oil and gas, we're really good and there's a heck of a team down there that runs in very difficult conditions. So the broad drivers are really construction for Latin America. These are some of the programs that are going on and we're a leader of cabling for construction. They're beginning to build their electrical infrastructure so again, ahead of the Olympic Games and the World Cup in Brazil. Chile's got a huge mining sector as does Peru, there's also oil in these areas. So they'll use all the products that we make in North America with European designs. You'll see some in our results. Brazil, these big transmission projects can be a bit lumpy and Brazil has been on and off but there's a lot of work to obviously link the power zones within Brazil, not always on time and on target but obviously, a massive undertaking. I was in Venezuela a few weeks ago and just really impressed with the team who work under difficult conditions and obviously, there's issues that you read about in terms of just the daily work and some of the threats to civil society. There was some lawlessness and I know the government is work -- is trying -- is recognizing it has an issue. It also needs to get oil output out and we make cables that are sold heavily to PDVSA. It's the kind of place that long-term, should be a very good market for us. They do buy a lot of product. Over time, these things get sorted out but right now, obviously we've had a devaluation and there's a black market or parallel rate that goes on as well. But it's another election year and all of you know that Chavez died a few weeks ago. So we'll hang tight and see what the future brings. We always are looking at do we take our cash and buy hard assets in that country, can we get cash out? We own some bonds which are loosely guaranteed at certain conversion rates. So this is something that takes my time and Brian's time but again, we have hundreds people down there doing a really good job in that country and I'm proud of them. Colombia, again, it's going to be a powerhouse, it's the kind of bet. Everyone talks BRICS. Colombia, Philippines, Peru, very interesting kinds of places for us, Mexico. This is the accelerate -- this is really optimizing our know-how and that's part of what Mark does and Bob Kenny as without thinking. It's not, "Well, I'm only responsible for North America," and Mark thinks globally. He's head of the manufacturing council and he has to produce results in North America. But you'll find a very selfless group of executives who really, truly think one company and we work at that every day. So broadly, we think we're early in the curve in the Americas. We're focused on capital employed, getting our greenfields right and on the lookout for new opportunities. We were a bit contrary in circling back to the U.S. from an acquisition standpoint, tremendous synergies with Prestolite and Alcan. If we see those kinds of things, we'll do them again if we can. We also keep our eyes out on Latin America. If we see that kind of opportunity, Procables was the kind of thing that we were patient, decided not to build a greenfield in Colombia because we want to accelerate into that market, so it was accelerating quickly. So we own 60% of Procables with them, with some optionality further out in terms of increasing our position. So that's our story. I think we're having a short break. Is that, Len we'll called for?

Unknown Executive


Gregory B. Kenny

Are we actually ahead of schedule? We can take questions, if you want. Yes. Now but also more for group but we'll hang around to get some air. We'll get started again in 15.


Robert D. Kenny

Good afternoon. My name is Bob Kenny. I run the communications business for General Cable. I've been with General Cable for 5 years, been in the industry for 26, all in the wire and cable communications side of the business.

Now when we talk about the communications segment, there's really a couple of ways that we can look at it. So we spent a lot of the time today talking about the power side of General Cable, but there's also a very strong communication side of General Cable as well. So when we think of power cable, we're thinking of the transmission of power, the transmission of energy, whereas on the communications side, we're really looking at the transmission of data, the transmission of information. And even within the information segment, we really need to divide it up even a little further, and we really look at it in 3 different ways. We look at the segment that we call short-reach data, so you find things like that inside of a hotel or inside of a premises building. And typically, the length of these cables are anywhere from 100 to 200 meters in distance with an awful lot of electronics to go with it, an awful lot of wireless devices to go with it, and it's really a pretty good sizable piece of the business.

Then the second area that we look at is the long-reach-telephony type business. And you're probably familiar with this, best with things like fiber to the home, certainly with the long haul telephony signals. And by the way, both of these areas are serviced really with 3 different type of topologies: You really have your copper-based type of metallic area, and then you also have your fiber-based glass-type transmission, but you also have your wireless transmission as well, which is embedded within these, and they really all are interconnected and serve each other. In fact, in almost every building, you're going to encounter all 3 types of these cables.

And then finally, we have our broadcast and electronics cable, which we don't talk about as much, but actually has an incredible wide base of applications. Really, any piece of equipment you have, whether it's a computer or wireless device, or an extruder in our case, you're going to have an awful lot of cable that goes into those OEM devices. And then, of course, we also have our broadcast division as well, where it's our professional audio and video coaxial-type cables that go into these.

And the reason that we really divided up into these 3 segments is the cable within each of these are very unique. So even though you have fiber, wireless and copper in short-reach data, the type of copper, the type of fiber is very different than what you see in long-reach data. So for instance, in short reach, you hear of things like category cables. I'm sure everybody here has heard of Category 5e, it's in your home, it's in your office. And then also you have multi-mode fiber, which again is your short-reach type of fiber. You often find that in data centers, you often find that going to your desk. But in long-reach data and telephony, you're really looking more at single-mode type fiber, fiber that has to drive singles very, very long distances, and also high pair count cable, which is hooked up to hundreds and millions of homes throughout the U.S. and is being maintained for many years to come. And then, of course, in broadcast electronics cables, where you have a higher voltage, you have a higher current, you're actually doing things, signaling, as Greg mentioned earlier, access doors, things of that type, a very unique type of cable, often coax, often twinax, 2 pair, 1 pair, 18 gauge, things that really control things like your fire alarm and security systems. So again, 3 different areas, all cable related, but really unique in the type of markets and cable that they serve.

So when we look at this for General Cable, you can actually see that we have a very well-balanced portfolio in 3 of these very important segments. And you can see, really, our distribution in broadcast, electronics, short-reach data, long-reach data and telephony, is pretty evenly split within the company. And this is -- gives us a lot of advantages from customer base. One thing Greg also mentioned earlier is the penetration of customers with all of these type of products. Typically, a customer is buying most of these products. And having a balanced portfolio, really, helps us penetrate these customers in ways that our competitors can't.

Now within these segments, we have a few areas that we really like to talk about and unique areas within each one. So for instance, in broadcast and electronics, it was mentioned earlier, our Carol Brand, very, very well-known brand within the industry. In fact, our part numbers are almost the brand in themselves. We've been in that business for a very long time and have a very well-recognized name and a very large stack call out for these products.

One of the areas we are missing with electronics for a long time was our broadcast business. And we actually acquired a company called Gepco about 3 years ago, who really gave us an entrée into this professional AV market and has really been a nice add for our company, good growing revenues for our company and something we've also been able to leverage with our electronics products as well.

Within long-reach data and telephony, right, we're obviously a copper-based company. We do a very good job on the high pair count copper-based telephony, which is a market that is in kind of maintenance mode, kind of moving sideways, but also a very predictable and a very good business for General Cable.

But within that, also, we have a couple other very interesting segments. One of those segments within telephony is our fiber. Now most people would be familiar with what they call loose tube fiber, which many of our competitors make. We actually have something on our fiber, which is called micro-sheet technology, which is like loose tube, but actually is something that is considerably smaller. And in places like Europe, where you have very limited conduit sizes, a smaller-type cable has tremendous advantages. And we've actually been able to leverage that very well, very profitably with a very high growth within Europe, which is very interesting segment for us.

And also, as Greg mentioned earlier, we have our NSW submarine communications cable, which obviously is a telephony-type signal, but also carries data long distances undersea and is a very well-proven business for us. That business has been around for decades. We have many, many projects under our belt and it's been a good, strong consistent business for us for many years.

And then within short reach data, we obviously talked earlier about things like our 17 FREE portfolio, which is a great differentiated product. Other areas, we have our 10-gigabit-type copper cables, which has been very successful for General Cable. So each one of these segments have their own story, but I think the most important thing here is that we penetrate all these segments in a very balanced way.

Now obviously, you can see by this slide, we are very North-American-centric for our data cables. In fact, over 2/3 of our product line is with North America, but that's starting to change. We're actually working very hard to lever other areas, other geographies, other regions. For instance, the micro-sheet technology I told you about earlier, really is something based out of Europe. It is a fast-growing strong business for us. Rest of world also, we are going to be opening up a plant here in the upcoming weeks -- and I'm sorry, within a plant in Brazil to leverage our data cables there with our partner, Panduit, as Greg talked about earlier. So although we are very centric in North America, we're really using our strength in North America to help build up businesses outside of our region and help balance this portfolio better. So that really comes to our strategic initiatives with the communications cable. And we're going to spend a little time in each one of these initiatives and really give you a feel for what it is that we're trying to achieve within the communications business at General Cable.

The first thing is increasing our share with our most profitable product lines. Now it's interesting, there's a lot of segments within communications cable. And for those of you, and I talked to a few of you on the break, who really studied this business, you'll know that the communications business is a very dynamic, very wide-based business with many segments associated with it. And some of those segments have been around a very long time. So for instance, we talked about loose tube fiber that's been around for decades and can be a challenging business.

But also, there's segments within certain areas like long-haul fiber, like the micro-sheet technology, that actually can be very profitable on a very high-growing segment of the business. So we're very careful within this business about what we choose, what we choose to grow. The object isn't just to become #1. The object is to try to become #1 profitably and #1 consistently and also #1 in products that have a future associated with them. So there's certainly nothing wrong with being last in, but at the same time, what we've grown and we want to know has a strong future associated with it and also fits with the strategic values at General Cable.

The second area is targeting high-growth regions, and this really, in the same way, is targeting high-growth products. We target high-growth regions but also do it wisely. There's many areas of the world that are growing, but some of those are easier for communications cables to grow within and some of those are more difficult. And there's really no shortage of opportunity for communications cables around the globe. We find that there's areas within Africa, Sub-Saharan Africa, within South America, that look very promising for communications cables, places that we really feel that we can lever very successfully. Then there's other areas that you hear that are really fast growing, that could be a little bit more challenging, that we really look at and think really hard before investing our money into places that might have a more difficult rate of return. And really, as you saw that slide before, we have so much opportunity outside of North America. We can really be choosy at the beginning of about where we go out and how we go after it.

And then the third thing, which I really think is the greatest strength of General Cable, is our broad portfolio. One of the things that I think is our key advantage over our competitors is the fact that we really offer everything they need in just about every situation. So when I walk into a customer or I walk into a building, or even you just look in this room, you can see that this room doesn't just sell data cable, yet you have a lot of our competitors that, that's really all they do. But when I look up and look around in this room, you can see that there's portable power, you can see there's LED lighting, you can see there are lighting signs, you can see there's outlets on the wall. And we sell all those things, and customers buy those things at the same time. And we worked very, very hard in the last 5 to 6 years to try to leverage that purchase into one package, and we really gained some good traction which we're going to show you here in a minute.

Now more specifically, talking about each strategy. I put a few examples here and there's certainly more than this, and I'm welcome to talk into break about some of those other ones. But I'm going to pick on 2 areas that have really been a great success story for General Cable within communications. So the first one I picked is our Data Communications segment. So many of you are familiar again with the cable category cables. You've heard of Category 5e, you've heard of Category 6. You've heard of gigabit, you've heard of 10-gig, right. And there's a real evolution. People have this insatiable demand for data. And the great thing about our industry is people are not happy with the data they have. People want more data, they want more access to data. I see people in here with iPads, right. And what do you want? You want a faster connection, you want faster speeds, you want faster downloads. And all of this in some form drives data, it drives communications cables. And the real trick here though is to keep up with that insatiable drive for bandwidth. Now in the beginning, back in category cables in the late '80s, early '90s, it is all about Category 5, Category 5E, which was 100-kilobit real baseline technology, baseline data. But since then, we've involved (sic) [evolved] into these higher-end cables, these Category 6, these gigabit capable cables. Now we even have 10-gigabit capable copper cables for the short-reach data. And these new technologies can be very profitable, they can really drive very strong revenue. And phased back in 2002, we were really dominated by kind of this low-end category 5e cable, and we made a purposeful decision with General Cable that we needed to take this evolution, we needed to take this step into these higher, more profitable, higher revenue generating cables, namely our Category 6 and our 10 gig. Now the way we did that was having very good partners like Panduit, but also driving unique technology that people could not get from anywhere else.

So great examples of that, just talked about earlier with Greg was our 17 FREE technology, which we'll talk about in a minute, but also our matrix tape technology that gives you the feel of shielded cable without actually having to ground it. And it's really not about the technology about -- it's more about enabling the customers say, "I need that and I'm not sure I can get that anywhere else." And what that equation's done for us is really allowed us to grow our market share and what some people would call a mature market. Well, maybe in 5E it's mature, but not in Category 6 and not in 10 gig. And you can see that on the left, and we're really blessed in our industry with some very good measurements, some very good industry data. But you can see on the left that our market share growth back in 2002 is really dominated by this 5e cable. Now our strategy wasn't to get rid of that, our strategy was to augment and grow on top of that with our higher technology products. And you can really see what we've done with Category 6. We went with something with virtually 0 share and a very strong market to somewhere up to approximately 20% share with the high-end Category 6. And this story has been even better with our 10-gig cables. You can see, we started in right around the 15% when that was introduced back in 2007, and now we've been able to maintain 30% to 35% share within this market. And everybody here knows how life cycles work, right? Category 5e comes up, Category 5e goes down. Category 6 has come up, right? It's coming up near the top, and it's about to go down. And now you got 10 gig, which is coming up, right? And what we've done now is we've positioned ourselves in the #1 leading position in an area that's coming up, in an area that's also very profitable and a very high generator of revenue for our company. So a really great example of also how we use our capital. Much of the equipment that was used for Category 5e can easily be transformed into something that uses Category 6 and 10 gig. So we've actually taken the same extruders, the same twiners, the same jacket lines and have modified them to make these higher-end cables to give us a better return on our capital, which is also what's been driving the real solid results in our communications business over the last 3 to 4 years.

But it's not just all about copper. We have other segments of our business that have also been very successful. And one of the areas is our fiber. We really, really took focus on this in the last 3 years to say, "Look, we see some real drivers in the fiber area that we feel are going to be dominating this industry for the next 5 to 10 years." A great example is cell tower cables, right? Cell tower cables are a combination of power and fiber. And as everybody knows, cell tower cables are going crazy. You see people upgrading from 3G platform to 4G platform. And all of this information, this insatiable demand, is driving more and more construction of these cell towers. General Cable is one of the very few companies that actually can take these different components of power and fiber and bring them together into something that meets a customer need. And again, that's the power of General Cable that really makes it such a great company to be a part of is that we aren't just the person who makes the fiber. We aren't just the person who makes the power. We can actually take an application like a cell tower and bring all the components of it together and make it in a way that our competitors cannot.

Also within that fiber area, we have areas called Blolite, which is a very unique way to take conduit and after the fact, blow in the type of fiber that you need; very, very popular in the military environment, very popular in audio-video market. And then also, within the fiber arena is our data cable. So not everything is copper. Not everything's category cable. Data centers use a tremendous amount of fiber. Going from switch to switch uses a tremendous amount of fiber. And the other area that Greg talked about earlier that is so important to our business is the ability to leverage our salespeople to sell everything. We had a sales force that, 3 to 4 years ago, was really focused on selling copper, really focused on selling Category 5e. Now we have a sales force that's really focused on selling everything, selling our fibers, selling our high-end copper, selling our electronics. And leveraging these hundreds of sales peoples now to say, "Hey, we're not just going to sell the copper, we're going to sell the high-end fiber," it's actually had a real transforming effect on our year-over-year growth rate. So the fiber again, very profitable, very high growing, but we've also been able to really utilize our sales force, really utilize the assets of General Cable to capitalize on 2 very fast-growing markets.

Now talking about growth in different regions and expansion with our global footprint. There are definitely areas of the world that are growing. And even within the areas of the world that are not, there are always products, there are always markets that are. And I'll go back to our European operation with the micro-sheet technology. Fiber to the home is not dead in Europe. All right, everybody looks at Europe and says, "Wow, there's a lot of headwinds, there's a lot of headwinds." But actually, there's a lot of tailwinds on things like fiber to the home. There's a very robust market for fiber to the home products within Europe and we're penetrating those very well. We are very constrained in our operation on fiber, and we've really doubled down our investment there and are doubling our capacity. And I will tell you that capacity, every time we put a little more capacity up, somebody takes it because this is a market that's going to be growing for a long time. And the thing that's really wonderful about Europe and fiber to the home is that all these countries are kind of ticking off at different times. So when we go in, we would say, hey, we're going to penetrate France, right? And we do that. Then next you have the Netherlands, next you have Russia, next you have Slovenia. So you have all of these different areas that are popping at different times, which really makes us feel that there's going to be a very long tail on this technology moving forward. So again, it's not just about growing different regions, it's about finding the things within those regions that are growing well.

Other areas that we talked about was South America. We're not too late. South America is really growing, especially Brazil. They have a number of big events coming, a number big drivers for this type of cable. And we have actually found a fast footprint for this type of product within Brazil. So again, I think Brazil is just one example. Obviously, there's other places that look interesting within South America. But the thing that's really made this possible for communications and the other thing I think that's really great about General Cable, is its breadth of manufacturing facilities. Every one of those manufacturing facilities, whether it has communications or not, has the ability to have communications within it or have more communications within it. And Brazil is a great example. They didn't have communications within it, but they had this incredible manufacturing footprint, this incredible know-how. That's the beautiful thing about communications cable is it still uses extruders, it still uses twiners, it still uses standers, and it still uses jacket lines. So with that basic know-how, we can actually apply that into an existing facility and get instant leverage out of that facility to make different things, and that's exactly what was done in South America and are doing very successfully. Also, reenergizing things like our fiber optic submarine cable. There was a slide earlier talking about peaks and troughs, and every industry has their peaks and troughs. And we really see kind of the trough kind of ending here on the communications cable for submarine, and are really starting to see a lot of activity pick up in this area. This has been a real nice surprise for us this year for this type of cable, and we really feel very -- we really like our hand in this area. We have over 70 major projects behind us in this submarine fiber optic area. We're experts in this area. Many of the technologies that's used was invented by NSW. So again, this is an area that we really see as an enabler for General Cable moving forward all over the globe.

And then obviously, robust expansion to Africa. I know we had a slide on Africa earlier. And Africa has been a very interesting place for us. We're actually seeing a lot of drive in Sub-Saharan Africa, but also a great footprint in North Africa. We've actually had a lot of strong success in places like Algeria, in places like Morocco, and we also have seen success in Sub-Saharan Africa as well. And things -- trends are happening in the United States like cell tower cable are trends that are actually happening over in Africa and Europe as well. And again, we have the capability to make all of those types of products globally and penetrate those fast-growing markets. So again, it's not just about, "Hey, I'm in Africa." It's about, "What am I in Africa with? And is it a growing market, and how do I capitalize on that?" And we've actually done very well on capitalizing in these new regions.

But the most exciting part to me and the one that we've really seen traction on is our ability to leverage our entire portfolio. And it really took this snapshot, and this is actually a North American snapshot, but it's a point that I really drive home to our internal force, in our internal sales force, is the power of having a multiple portfolio. So many of our competitors really do have a kind of a single myopic focus, a myopic approach to how they go after certain segments. So either your fiber, either your data or either your power or either your electronics. In fact, I was talking to somebody over the break, there's a lot of companies out there that are really specific towards electronics. But companies buy all of this stuff at the same time. There are very few companies who don't buy all of these products at the same time. And this graph really is an interesting exercise for us, because we took a look and we have the ability in our data warehouse to gather this type of information. We looked at invoices that were copper only, and we look at it from the quote to the actual conversion process. And we really looked at 2 things. We looked at what was our success rate in conversion, and then what was the value of that conversion. And when we looked at invoices that just had copper data on them, you can see that we had about a 1 in 4 chance of actually converting it, which in our industry, for you who track this industry, is pretty good. It's pretty good, with an average quoted value of about $25,000. But interestingly, that when we had quotes that had copper data and another segment on it, like electronics, like broadcast, like telco, our conversion rate not only increased but as you would expect, the value of that increased as well. And we've heard from many of our customers, many of our partners that the importance of having a single source, the importance of being able to leverage a transaction, the importance of being able to leverage shipping, the importance of being able to leverage SG&A. And that's something we really don't think about, but it's really a savings for all of us when we can leverage multiple products into a same customer. Now for a lot of people, they say, "Boy, that sounds easy." It sounds easy, but there's something really unique about General Cable that makes it possible. And it's what Greg mentioned earlier, which is our matrix organization. We actually have an organization with salespeople that are responsible for all of our products. And I've worked for several wire and cable companies, and I can tell you that's not the case in many of the wire and cable companies that are out there. And having the ability for a salesperson to represent electronics, to represent our broadcast, to represent our data, is a very powerful tool. And we're also finding with our distributors that they have the same desire to try to collapse this decision process into a single process that leverages all of these types of cables. So this is something that really has gained great traction for us, and I would say, is one of our leading drivers of our growth within the communications segment.

Now we talked earlier about our ability to grow and our ability to grow platform. And this slide usually catches people a little bit by surprise, but we actually have a very solid footprint of communications-capable facilities around the world. So as you would expect, in North America, we have a strong footprint of 5 facilities. And then going into Central and South America, we talked about Brazil and how we're getting in there. You can see that in Europe, we have a very strong portfolio. In France, we have our CLEC operation, which is really fiber-dominant. Then in Germany, we have our NSD operation. And then in Portugal, we have our data cable. And then in Zambia, we have our telco-type cables. And then in Christchurch, New Zealand, data cables; Telco cables in Thailand. And you can really see this great portfolio, this great leverage. Because one thing that's true about cables, especially copper cables, is it's very expensive to transport. It's very expensive to move cable, right? And if you can be in the right spot in the right places, and especially from duties and trading and tariffs, even taking cable, for instance, from Portugal to the Middle East, these things have an inherent advantages to them that really gives us a strategic advantage. And again, if we overlay all our plans, what Mark's going to talk about, you can see that we have the potential to grow even further beyond this.

And all of this comes with differentiation, right? So we talked about our real strategic initiatives. But I wanted to pick on just a couple of things on the technology side. I'm an engineer by trade, I can't help myself. I got to have at least one technical discussion. And one of these is on the 17 FREE platform. This is a very important thing, and it's one of the reasons why we're driving our communications globally. So if you think about a 4-pair category cable, I don't care whether you go to Europe, Africa, China, India, wherever you go, it's 4-pair cable. Some might have shielding, some might have 23 gauge, 24 gauge, but all of them are really based on the same type of technology which we can leverage wherever we go globally. The one thing that really does make things different though, when you look across the globe, is the flame standards. Now in Europe, you run into a lot of places where you have this low-smoke, zero-halogen. And it's really sounds, wow, low smoke zero halogen. But all that really means is anything that's halogenated like chlorine or fluorine or bromine or iodine, all things used within the wire and cable industry, there's a lot of people that have really have an issue with halogens being in the cable. But in the United States, we know that halogens have actually been a huge benefit to our industry. It retards flame, it can retard smoke, it can give the fire engine time to get to the building, right? The cable is not facilitating the fire. But in Europe, right, they'll say "Look, the smoke kills, right." So when these gases come off these cables and you get these halogens, it's very concerning to them. We've actually been able to figure out a technology through the help of our Spanish operation that can do both, right, that can actually retard flame and not have halogen content within it. And we found for certain customer segments that this is a very, very important differentiator. So for instance in the retail, right, or for instance in hospital environments, there are certain people that have a certain aversion to certain type of halogens. Now we're able to say to them, "Hey, we can help you with that, but also provide you something that passes the proper standards, that passes the U.S. standards," and then do it in a way that's cost effective. And that actually has been something that has really resonated with our customers, because so much of the green movement is hard to touch. But with this technology you can touch it, you can grab it, you can feel it. You can say, "Wow, I just took out a metric ton of chlorine out of the environment." It's things that really have gravitated to our customer base and people really have found a liking to.

And that's really the story of a lot of our leading products. You see things up here that there really unique to General Cable, that General Cable's been able to lead, that General Cable has been able to drive. You don't just grow share just because you want to grow share, you have to have a facilitator. And really, the technology and the communication segment has been a great facilitator for General Cable to grow within the communications business.

So in summary, our communications business, as you've learned in the last 20 minutes or so, is a really dynamic business, a growing business within General Cable, and something that we feel is going to be leveraged really well going into the future.

So with that, I thank you for your time.

Mark Thackeray

All right, good afternoon. My name is Mark Thackeray, and as this slide suggests, I have a close-to-home responsibility for North American operation. And for that -- for us, that includes not only the manufacturing concern, but also sourcing, as well as supply chain and quality across the organization. I also have responsibility as leader of the Global Manufacturing Council. And as part of today's presentation, I'm going to speak to you about both of those duties.

So in my 25 year -- my past 25 years of career, I've been involved in various aspects and concepts of Lean, and 14 of those with General Cable. And one of the things that I've found is that the word Lean is probably one of the most overused and misunderstood words in modern business day jargon. So what I thought I'd do today to start is just talk a little bit about what Lean is in the context of General Cable.

First of all, we believe that it -- we have a passionate belief that any work process can be simplified. And the key words there are passionate and process simplification. There's 2 things we know about work: whatever that work is, whether that work is making a product, whether that work is moving information, running a call center. Whatever that work is, the first thing we know is that every element of that work has a cost. And the second thing we know is that not everything you do in that work is valued by the customer, whether that customer be internal or external. So this is really -- Lean thinking for us is a methodology to look at work processes and to extract the non-value-added from the value-added element and remove, of course, the non-value-added pieces, which in the Japanese term is called "Muda," we call it waste. For us, it's an approach, and that surfaces problems. In many organizations, problems might be subdued, they might be hidden; they might be covered. In our organization, the philosophy is we want those problems to surface, because those are opportunities and those become the next way for optimizing that value proposition to customers.

We typically categorized the waste, according to the Taiichi Ohno model, as you see here in these categories, these 8 categories. Now as we look at work, some of these are easy to find and discern. For example, rework, quality defects. Those tend to be fairly easy. Conveyance, picking up material and moving it around the factory. Some of them however, are much more hidden. For example, how much finished goods inventory might there be in the supply chain that compensate for either erratic or poor performance in service deliveries? Those are other types of Mudas that may exist in the supply chain.

Now I've had opportunity, much like this, to stand up and speak at industry conferences. And in those industry conferences, there's competitors. And I don't get too concerned about telling our story and about our journey of Lean. And part of the reason that I don't fear that we're giving away any secrets or competitive advantage here is because this is not easy to imitate. Lean is not a plug-and-play model. As you all know, there's been plenty of books written about Lean implementation, the application of Lean tools and concepts, and lots of people have read those books. But then going and taking that knowledge and trying to apply it into their environment, into their atmosphere can be very, very difficult.

One of the things that we know about Lean is you have to have a commitment for the longer term, and it has to start at the top. We were fortunate to have both. Traditional financial scrutiny, ROIs, payback models, those types of things, they won't necessarily give you the right answer that says you'll want to go invest in a transformational culture that comes from Lean thinking. As I said, imitating Lean is not easy. It's a system; it's not just the application of tools and not just practicing something.

Now having said that, we prefer practitioners over academics. What I mean by that is we want people who are willing to go out and try something as opposed to think about what the perfect ideal solution may be. We have a phrase we use at General Cable, it's called, "The work will teach us." And what means to us is we would rather be directionally correct in a solution set, thinking about how to take some waste out of the process and go try to do something with that directionally and correct idea, and then let the work teach us, knowing that tomorrow we can make that same improvement even better. So it's a belief that you can continuously improve the process day in and day out.

Now when we started our journey 14 years ago, there were really 2 key objectives that we had in mind. The first, if you look to the left, is that we wanted to make continuous improvement a part of everyone's job. Now back at that time, what we found was that we had about 7% of our associates who are the managers, who were the engineers, who were maybe even the supervisors, and their job responsibility was to make the business better. Conversely, you had about 93% of your associates whose job was to come in, in the morning, clock in, check their brain, go to a machine and use their back-end hand. What we want to, to do was upend that. Because what we were missing was that 93% of associates who could help us make the business better. And by the way, those were the people who happen to be closest to the problems, who understood where the issues were the best. Yet we had even kind of conditioned them, not make decisions. And many would actually have to go to the supervisors to make any kind of a decision to move forward. So the first thing that we were trying to do, the first objective was to change the culture by engaging operators and creating this empowerment mindset.

The second key objective for us was to, what I'd call, disrupt 50 years of traditional wire making habits. And disrupt really is the right word. When you walked into one of our factories 14 years ago, you would see something that looks like this pictorially. And you have groupings of like machines in different corners of the factory. And literally, you'd have pockets of just-in-case inventories, of materials tied up between all of these machine centers. And literally, you'd have lots of people, indirect people, who would move materials around and find the materials that were needed and do the transactions and do the finished goods inspections or the in-process inspection to keep that factory running.

So we wanted to basically disrupt that. And today, if you walked into one of our factories, you'd just see something entirely different. You would see, essentially, value streams that takes the different value-added processes to make a set of products. We will co-locate those, where it makes sense, into physical cells or virtual cells, where it doesn't make sense, because of monumental costs. You would see the inventory pockets ripped out of the factory. You would see flow that is fairly intuitive, from value-added step to value-added step. And you would see all of this managed in a very visual factory orientation through concepts, Lean concepts like com bonds [ph] or replenishment triggers, supermarket-type jumper boards and those types of things.

So we wanted to create this common tool set, this language and a set of principles to disrupt the way we made wire and cable. And as we did that, what we found us that we could then differentiate in the marketplace in something other than just the price of the product we sold. And in the commodity business, where we had commodity market segments, that was extremely valuable to us. We were now able to differentiate with things like service, quality of product and quality of the services that came with that product, and things like agility where our factory was very agile at making what the customer wanted it, when they wanted it in the right quantity that was needed while not ever forgetting the importance of also trying to be the low-cost producer status.

This slide refers to what I call the basics of our Lean journey, and I'll start in the upper left-hand quadrant. And what you see there is a picture from one of the early training sessions that we did in North America. We called it an experiential learning, and it was literally a 1-week training course that we delivered at the time to over 4,000 associates in North America. And the idea of the course, we actually set up a mock factory. And all of the associates were put into teams and they actually went through -- and they made Lego widgets, widgets made out of Lego bricks and actually applied Lean toolbox concepts and tools to convert this mock factory from a traditional to a highly Lean kind of environment. And we kept score and there were roles. And at the end of that simulation, what these associates learned was the power of these tools to change the way you could do business, because the transformation in the metrics was extremely powerful and enlightening. And what we got was a lot of people that came into that class as skeptics, thinking that Lean was about headcount reduction and labor force reduction, leaving that course knowing that Lean was a lot different than what they walked in into that classroom thinking.

If you move to the right, you see the introduction of the Lean toolbox. These are some of the tools that we used. I like to characterize this as kind of the top shelf, the basic tools. And these of the kind of things that we introduced not only in the experiential learning, the first class, but then through a series of subsequent classes that we still do today at the Green Belt, Black Belt and Lean Technician level.

One of the tenets of our Lean journey has been the basis of disciplined standard work. And if you look at that lower left picture, that's simply a preventive maintenance tool kit, okay. The standard work here is you're going to use those tools in a prescribed order and perform the preventive maintenance while the operator is doing some sort of a changeover. It's also a good way to create capacity while keeping the assets viable. But the standard work extends much more in our culture beyond this. For example, Greg mentioned our safety record. If an operator is prescribed to wear a Type II cut-resistant glove as part of their operation, that's the standard work. And in every location that you go into, when that operator does that particular task, guess what they're going to have on? That Type-II cut-resistant glove. Because any other glove is a deviation from the standard or at worst case, they don't wear the glove, which can lead to the safety incident. And we believe that, that discipline of the standard work that starts from safety and then moves into the housekeeping, what we call the 5S, was paramount for these operators and our team to carry that discipline forward into the more difficult concepts later on in our journey around make, just in time, replenish exactly only what the signal calls for, and perhaps even shut down the machine when the inventory buffer is full and the signal says to do so.

On the lower right-hand side, you see a picture. This is a value stream map of the process back in 2002 that it took to make the data cable that Bob Kenny just talked about, a very simple 4-pair Category 5e cable. Now what you can see is all the details. But hopefully, what you can see is that, that's a mess. That's a spaghetti flow. And in fact, when we did this value stream map of this particular process by example, what we found was that there's 27 inventory points. There were 67 different transactions that it took to make this data cable. By the way, every one of those transactions took some labor, i.e., cost to perform and introduced some aspect of a quality deviation from transactional integrity. We found that 10 minutes of value-added time to make the product took on average 3 weeks from start to finish, not very agile, long lead times extended. And it was a great example early on in our journey of how powerful this tool could be to let operators, to let salary folks, to let whomever, the associates, map some sort of aspect of the work they do. And in fact, what we started doing was, at the end of this experiential learning, this week 1 training course, we taught the value stream mapping and then we asked everybody who went through the course to do a value stream map for some aspect of their work, to identify the waste or Muda then go embark on a project to find Lean toolbox to fix some aspect of their work. It was extremely powerful. Now sometimes the savings came in $100 bills, sometimes it came in $100,000 bills. But what you have was you had 4,000 people suddenly engaged in something that was important to them. The what's-in-it-for-me-aspect was there. Because these were typically things that have bugged them or frustrated them for years in their job, at their machines or at their office desks. And now they had the tools and the empowerment to go fix something about it. So it was an extremely powerful basic element of our journey.

Now as you might imagine, as we continue to end this road with Lean, we made some progress. And one of the early progress aspects that's common, really, with any Lean journey, is you begin to strip out the inventory. It's a very common outcome of applying the Lean concept. So you take out the raw, the work in process, perhaps the finished goods inventory, and what happens is you lower that level of inventory depicted here by the water level as you actually expose some new problems, you exposed the rocks. And as I showed you in that earlier picture, we had all kinds of pockets of just-in-case inventory that was compensating for other issues that were hidden throughout the processes and in the factories. For example, when you no longer maintain a buffer of work in process between machine A and machine B, it suddenly becomes real important when machine B needs that part, that machine A is knocked down because of maintenance issues, that the product coming off of machine A is right the first time in terms of quality, that machine A is ready to produce exactly what machine B needs and is not tied up in a long run because the standard cost side is better to apply the fixed overhead over 1,000 units versus over 100.

So these were all concepts and rocks that surfaced, that we then to had -- had to go tackle with a new set of tools. And it was at this point in our journey that we brought in the Six Sigma toolset. And this was really the evolution phase in our journey that brought Lean and Six Sigma together, to create our Lean Sigma culture today. With the Six Sigma toolset, we also embraced the DMAIC approach, which is really a very well-known, publicized formulaic methodology for tackling problems and then improving those problems and putting controls in places.

With Six Sigma and DMAIC, we also learned a lot about process capability. We learned a lot about how to understand what a process was able to do and to anticipate what variation that process would deliver from the expected outcomes. Now, a lot of the quality aspects of what we make are in terms of physical dimension, and they typically fall along the lines of min. So if you think about a wire and cable product that we may make in the factory, you can think about minimum diameter of the copper conductor. You can think about minimum overall thickness. You can think about minimum wall diameter of the insulation that goes over the copper. And what we learned through these process capability studies and this new toolset was that we had 2 huge opportunities to go after cost reduction, while improving the quality of the product. The first is we found that no one ever got fired for running fat. What do I mean by that? Well, the engineers prescribe where you dial in your machine and what color or what thickness or diameter or physical property that wire should be made at. Well, guess what? Machines don't always perform the way they should. Raw materials aren't always exactly right. And over time, there's been these little pockets where operators have turned up a dial, reset the standard. And over time, we find that we're now making those cables and those products with much more material than is prescribed or is made. And these process capability charts, these studies, showed us exactly where we could go out and shift the dial-in points to capitalize or take advantage of material usage that we were giving away unnecessarily. That was number one.

The second opportunity was it really pinpointed for us where it made sense to go invest in resources, time and effort, try and improve the process capability. And if you look at that curve in the dashed line for example, that will be an outcome of where we go and reduce the amount of variation that's inherent to the process. And again, if we can do that and control it, we can shift the dial-in point even further. So it drove the next level work around our usage savings in that regard.

And then the last bullet I've shown here is really where schematic color as well [ph]. Through this way of thinking, through this toolset, we actually were able to put the control of the process into the hands of the operator. And in so doing, what we found was, it gave the operator the information and the tools he needed to know when to intervene with the process when it's going out of control, maybe from tool wear or something of that nature. But more importantly, it also told the operator when not to intervene. And what we found was that most of the process variation was actually coming from what we call pampering, where the operator was adjusting the dials and knobs, the potentiometers on the machine, over time, and actually invoking more variation into that process and this process inherent. So a very powerful toolset.

And as you might imagine, the outcomes were significant. Greg shared a few of these in his earlier presentation. Again, it's worth noting that our safety record is measured by the [indiscernible] recordable rate is less than 1. And that is much better than the industry average of 5.2. Our product quality, when converted, is about a 4.1 Sigma. That's against a theoretical best of Six Sigma quality. Our inventory reduction over the years has been in excess of $100 million, and that's a combination of raw materials, work in process and finished goods as well.

Our service improvements are much better, and through much tougher lenses of how we measure service. Originally, our service metric was, when do we commit to give you the product, and do we meet our commitment. Today, our measure of service is, when did the customer request it, or is it on the shelf because it's a stock product and we say we would have it available within 24 to 48 hours. That's a much tougher bar to measure against. And service to us is not just about that delivery commitment. Service is also about crashing lead times, becoming more competitive in the marketplace by having lead times that are less than our competitors, or being more agile to a demand variation that's seen from our customer base.

Greg touched on this a bit early. I'm going to expand on it just a bit. Entitlement capacity, this was a huge outcome of our Lean journey. And really, what it was a way to go and find capacity with assets, that on the surface looked like they were fully utilized. Through a whole host of tools and different lenses, we can look at machines and we could find ways to improve the uptime of those machines, or improve the speed of those machines, or improve the yield of those machines. And in fact, I'll give you one example. We have a process in one of our plants called a irradiation. And it's actually an electronic beam, a radiation, if you will, e-beam, of a jacket-compound secure. And these things happen in these large concrete vaults. And as you can imagine, these vaults are very expensive. They take long lead times measured in years, kind of putting new capacity in place and are highly regulated, because it's gamma irradiation.

We were able to, over time, release 50% additional capacity for our series of vaults in these plants by applying these tools, and in one vault in particular, we had over a 400% increase, which truly eliminated that process as the bottleneck or the constraint of producing more products in that particular market set. So very powerful.

And then lastly, we always keep an eye on cost. That's what keeps us in the game. If you look at that lower left graph, that shows production cost savings measured as a percentage of cost of goods sold for over a 10-year time frame. Now, below the 0 line is what we call economic headwind. These are the cost increases that we face each and every year. So that in our vernacular, in our set of metrics, how we measure ourselves, we have to overcome those first before we can claim the first dollar of cost-reduction savings. These will be things like your general wage increases, perhaps increases in depreciation, rising healthcare costs, those kinds of things. We have to offset all of that, and then we can start to claim what we call controllable cost-reductions above the 0 line. Now again, this excludes the effect of fixed overhead absorption. That's a given [ph], as demand goes up. This excludes the effect of purchase price experience, the job owning on the price of our raw materials. This is the old-fashioned way of taking cost out of the business, of reducing the basket of goods cost year-over-year, rolling up the sleeves and focusing on the controllable elements of a factory cost. So this is going to be waste, usage, spending, MRO [ph] items, that kind of stuff, labor efficiency, so on and so forth.

And approximately over that timeframe, the cumulative effect of that is about a 20% cost down and I turn you in the graph on the right, the focus of where our project efforts have been, generally speaking. And it happens to mirror, generally speaking, the different elements of our cost of goods sold. The key point here that I've used in many, many presentations, including with lots of our associates in the factories is, that Lean is not about taking cost out through headcount reduction. In fact, the labor portion of that pie is the smallest component. And it's a very powerful message when you're looking at a group of very skeptical workers saying, what will this mean to me and my job.

Our approach is pretty diverse, pretty broad-based to cost competitiveness. I talked about the economic headwind. The other point I'll make on this slide is that we like to go after lots of singles and doubles, instead of a few home runs. In fact, last year in North America, we delivered our cost improvement plan across the plants, in excess of 2,100 individual projects. These are very discrete projects. They have charters. They have owners. They have measurable outcome, and we track them each and every month through something we called the Lean Sigma Council. And a Lean Sigma Council exists in every one of our facilities. The other role of the Lean Sigma Council is to ensure that we're constantly feeding new ideas into the hopper and managing the marriage of the idea, prioritize with the resource, and making sure we get the best benefit using our army of problem solvers focused on the most critical opportunities.

The other point I'll make here is that our plans, our cost reduction efforts, they are mostly bottoms-up driven as opposed to top-down. When we set the budget every year, I don't come out and say, we're going to have 4% cost reduction. What we come out and do is we look at -- we put a filter over that hopper of ideas and we roll it up and we say, that's going to be about a whatever-percent cost reduction, and then we might put some managerial structure in that, to be fair. But the important thing is, that these projects and these plans and these outcomes, they are owned by the plant. This wasn't Mark Thackeray or somebody at corporate saying, thou shalt do; these are the plant thing we can do. And as a result of that, we find that we have year-over-year confidence level and success in achieving these cost reduction efforts.

As I mentioned from the outset, my other responsibility, is to lead the global manufacturing council. And the global manufacturing council, as you saw earlier, is 1 of 7 that exist. And really, the purpose is there's 2 main purposes of what we call the GMC. The first one is we respond to the pull for accelerating the Lean Sigma journey in all of the regions around globe. We were the first. We got the early start. We have a lot of experience. We have a lot of resources, and we have a lot of lessons learned. And through this council, as that pull comes in, we then go provide that to the other countries and other regions as they continue their Lean Sigma efforts as well. And obviously, the idea there is to accelerate their journey.

The second thing we do is, we're a form to identify resource and then go execute on big ideas. These are the best practices of the best-in-class ideas in manufacturing. And typically, to make this agenda, the ideas have to be worth multimillions of dollars in terms of savings across the globe. And we've had no lack of agenda against that criteria. I've shown a couple of examples here. One of the things that we do a lot of is insulating, extruding compounds. And we are able to find some very innovative ways to use color extrusion technologies, to optimize the physical and electrical performance of a cable while minimizing the cost through the recipe of the different ingredients that go into these chemical compositions. And we've taken that idea across the globe. The other big cost element of what we do is in the conductors, whether that be copper or aluminum or to a lesser extent, in terms of fiber, glass. One of the things we looked at was the best-in-class designs for our copper strands, our aluminum strands, and then applied that across the globe, again having impacts of multimillions of dollars of metal cost-out. And then to the far right, you see some pictures we've come up with innovative ways to shape conductors. Again, reducing the diameters and/or the metal content while delivering the electrical performance of different cable designs. And that's another example of something that we've done through the global manufacturing council as a best practice.

We also hold something called global symposiums. And basically, these are around selective process and product technology, where we think there's a lot of meat on the bone. The first one we did is in building wire and really, we had, I think it was over 32 different plants that were represented down in Brazil for a three-day symposium, where we simply shared best-in-class ideas on building wire production methods. And I can tell you, it's been over 1 year, they are still working on the ideation and the commitment that came out of that building wire symposium today, and that's had tremendous impact in that arena.

The next one we're going to do is around aluminum wire processing. We have 10 rod mills in 7 locations, and then probably another 20 plants that actually take that rod and process it further. And that will be the focus of our next symposium, which is coming up in about 1 month or 2. We also promote these SWAT teams. The SWAT team is a collection of experts around certain processes, and they are pooled together and deployed into our most target-rich sites. Okay, so the sites that have the most opportunity to take advantage of experts. One of the recent SWAT team deployment was in Colombia with the Procables acquisition. And they had profound effect in what was really, essentially, 4 weeks of work over some time. We were able to increase production output by 2x without capital investment. We were able to take scrap reductions down significantly and of course, improve the total labor efficiency of that plant in a meaningful way.

And the other thing we do is we try to promote, facilitate and then come up with a toolset, by which if there's a great idea, and I think Greg mentioned in Portugal and Thailand, that we can have that idea in every other location around the world in 10 minutes or less. And one of the things that we came up with to do that is this concept of Wirepedia. And Wirepedia is essentially a portal-base forum that really promotes peer interaction across all the facilities. And within the Wirepedia, within the portal, there's some key functionality. Number one is we have best practice sharing. The sites can go in and they can post blogs or best practices that can be seen by all the users. And of course, they're categorized and you can search on keywords, and that kind of stuff, across the globe. And because we operate in so many areas, we actually put language translation capability in as well. And I think it operates in over 40 different languages today.

We created the ability to ask the expert. So if you're out on a wireline in Barranquilla, and you don't know what the angle of the finishing dye should be for a Falcon product, you can go on the Wirepedia, and in 2 seconds, you can type in your request. And within 10 minutes, you'll have 3 [ph] answers from experts who make that same product around the world. Tremendous functionality.

We've incorporated the wire and cable university where we have lots of training materials. Today, we're mostly using this for new hires, for people in new roles, to get the benefit of the best practices, but we envisioned using that in a more advanced way going forward. And we also maintain global asset sharing capacities and capabilities through the Wirepedia as well.

So as I conclude, kind of, in our journey, 14 years later, it's very clear that we started within the 4 walls of the factory. That's where all the money was spent, that's where all the people were, that's where the biggest bang for the buck was at the time. But we had extended our Lean thinking, our Lean Sigma thinking now throughout in the organization, think about that vertically. We have Black Belts and Green Belts who apply these tools in transactional processes, backroom kind of activities within IT, within the finance organization, through customer selling and that kind of stuff. But we've also now expanded our influence across the supply chain, horizontally in this picture. We've had suppliers who have partnered with us in training, coming to our training classes. We've done joint projects together. We've thought about, with our key suppliers, partnering together in how we apply Lean thinking through their organization, to reduce the cost in the supply chain that flows to us. And at the same time, we've looked up the supply chain through our distribution partners, our transportation partners, and with our customers. And in fact, I think it was about 2 years ago, and we actually went in with a major energy utility customer, and we conducted Green Belt and Black Belt training for their employees. And we facilitated a project work that benefited them and benefited us. And it was a great example of how this powerful way of thinking can be extended further than just within your [indiscernible] of the factory.

So I always tell my folks that the well is deep and it's certainly not dry. We have tremendous opportunity to continue our journey after 14 years of some success thus far. Thank you.

Brian J. Robinson

To bring all this together and wrap it up from a financial perspective, let me give you a little overview. I'll go through just sort of a preview, a little bit around our financial strategies. Just for context setting, a little reminder around our outlook for the -- or the guidance we gave and the outlook for the quarter and for the year. We'll talk a little bit around the future and the potential that we see in the business, and then we'll talk some about the -- we'll talk about the capital structure and resources of -- and uses of our capital.

So in moving here to the -- to financial objectives and strategy, as I mentioned, a lot of these you've seen and heard throughout the day, and I think that's partly, intentionally, how we structured the day. So you can see that the geographic and product diversification strategy, which is one, has been a business strategy and clearly, from a financial perspective, we're mirroring that. Maintaining the credit profile is important. I think we've been very good stewards of capital. We have really managed the maturities, supported the business growth. And we'll talk a little bit around the future uses of free cash flow. What you'll see in our numbers as we project forward. We see, within a couple of years, the potential in the business, really, to move to build that leverage to 1x. The growth through acquisition, as we said, has been really a cornerstone of our success. As I said, a significant part, more than 50% of our revenue and operating income over the past 3 years. As we said, we believe the acquisitions have been done very well with the intangibles on our books, principally related to the PDIC acquisition. And then, important local base, the growth in those markets as I mentioned, that was one of the really powerful, powerful aspects of the PDIC acquisition. So that local knowledge in a very locally-intense business.

The operational strategies, thank you, Mark, a tremendous piece on Lean, to give you better flavor. You've heard us talk about Lean for a number of years. Mark, really, I think fleshed that out. Managing the raw material, we'll talk a little bit about the copper on the -- on one of the -- the copper's impact on the earnings and the cash flow in the slide here. We talked about the strategic partnerships with global suppliers. We -- that was in one of our earlier slides. And we've talked about the management team. We gave you more color around the folks that are here, the folks that are on the operating committee. But a deep and passionate team and a deep passion for the business and the future of the company.

So just -- and again, taking a step back from a -- from just a more of a near-term outlook. So for the full year of 2013, this is exactly what we've provided, not long ago, a couple -- maybe a month ago, around our full year outlook for 2013. So as a global -- globally, we see 1 billion -- 1.4 billion to 1.5 billion pounds of volume, about 1/2 copper, 1/2 aluminum. You can see about 350 million to 400 million of that from the acquisitions that we completed in 2012. The operating income, including the acquisitions, at $300 million to $340 million, so midpoint at $320 million. So if I mention $320 million, as I move through here, it's really just narrowing the discussion to the midpoint of that range. But our range is the $300 million to $340 million. And effective tax rate at 36%, we see a little volatility in that through the quarters just depending upon how some of the statutory requirements fall with respect to some of our tax accounting, but for the full year, about 36%. Operating cash flow at $250 million to $300 million, which is indicative of what we've done over the last 3 years. You'll see, in a minute, a little about the volatility in the operating cash flow. But last year, we were right in the top -- last year, meaning 2012, we were in the high end of this range.

And CapEx at $80 million to $100 million. So continuing to focus at CapEx on the maintenance spend, which we estimate as maybe about half of this, say, $40 million to $50 million, and focusing CapEx on really narrowly focusing our CapEx spend.

An important point here in the takeaway back -- takeaway box, the operating cash flow is really sensitive -- very sensitive to movements in working capital, and I'll show you that here in a few slides.

On Slide 5, here, these are really -- this is a summary of how we see the different regions and the different markets within those regions. And this is really what underpins that guidance for 2013. I think, again, much of this is somewhat repetitive with what we saw earlier today. Certainly, as we start sort of left to right. So on the North American column, you can see, we've broken the -- each of the regions by the various end markets and we've talked a great deal around the North American business, and for that matter, the Americas business. But continue to be very pleased and optimistic around electrical utility, electrical infrastructure. The construction cycle, again, we think the Alcan acquisition is very well-timed in terms of capturing that part of the business, that's more levered to construction spending. The communications business you heard a lot about from Bob Kenny, and hopefully, you got a much better flavor for the communication systems, both in North America and the global opportunity.

Clearly, in the middle of the page, the Europe and Mediterranean's segment, continues to be our most challenged segment from a number of perspectives and certainly, from an end-market perspective. So as we said earlier, we've continued to really bring cost out of the Iberian business principally, the Spanish business. 70% of what we make today in the Spanish market goes outside of that country, typically into export markets. We also send cables into -- and our CLEC business and our NSW business, into some of the higher voltage cables. But clearly, again, macro-wise, the most challenged, as Bob mentioned, some pockets -- some meaningful pockets of opportunity, particularly, as Bob mentioned, the fiber optics side.

And then on the right side, the Rest of the World, again, characterized by many of the factors that we talked about, the higher growth rates, the investments and the infrastructure. Again, we've got really important leading positions in many of the key markets. We talked about the Latin American markets. We moved relatively quickly through Asia-Pacific and Sub-Saharan Africa, but really, important positions in Thailand, the Philippines. We're growing and we've invested in India, and a nice business in Oceania. So again, the trends that we see in the Rest of the World, continue to be encouraging. And you can see here, in fact, when we put this slide together, we had -- we were -- we basically said, we don't have much in terms of communications in these markets. And again, you hear from Bob, the opportunity on the communications side to actually grow into these markets. We mentioned Brazil, specifically.

From a more -- very short-term perspective, Slide 6. This is back to our first quarter outlook, again, which we issued now back in -- quite some time ago, back in February. So for those of you who are familiar with this, just hitting the highlights here. We -- in the first quarter, we talked about having slightly lower sequentially, metal pounds from the fourth quarter. You can see the top line at about $1.5 billion -- $1.55 billion to $1.6 billion. The adjusted operating income, stepping down a bit from the adjusted for Q4 of 2012, again, you can see principally around the Europe and Med constructions, some of the seasonal impacts on our business, both in Europe and Med, actually, in all of our segments to be fair, but principally in Europe and Med. And our first quarter is a typically slower season in ROW. In addition, the first quarter was exacerbated by the statutory leave [ph] requirements in Venezuela, which as many of you know, is a very profitable business for us.

So that's partly the movement sequentially. We -- I don't believe we have it in the deck, but we have said and we continue to believe, that the sequential step-up in the business, as you get the leverage in the North American business around the construction season, as you get into the North Sea business in Europe and Med, and as the ROW construction season grows, we really see the second quarter as a very strong quarter, 2x -- probably 2x or better than what we're seeing in the first quarter at this point. And then you can see the adjusted earnings per share there at 20 -- $0.22 to $0.32.

So transitioning here on Slide 7 to the -- to our forward-looking. You'll see on the next 2 slides, we've got some forward-looking information around the next couple of years. And we separated it into, say, sort of a near-term, like couple of years, 2 to 3 years, versus a potential in the business based on sort of a, I'll call it, sort of a mainstream set of assumptions around macroeconomic factors. But just to set the stage, you can see here, we've basically assumed -- when we forecast, again, given metal's volatility, we'll be wrong half the time if we try to embed some future look around metals or currencies, right? So we're trying to manage, obviously, the economic risk. So when we forecast we're holding metals and currency constant. You can see then copper at $3.60, aluminum at $1. And over time, again, copper trading below that level today for example, but over the planning horizon that we're talking about here, this is -- it's really at the noise [ph] level.

GDP rates, you can see on the right side, really sort of a low single -- certainly in the near-term outlook, low single-digits in North America, Europe and Med, as we talked about. We're quite sober around Europe and Med for -- as you might expect, why that would be. And in the Rest of the World we're talking -- or looking at mid-single-digits and with improvement, really growing in all the regions beginning in, say, in around the 2014 kind of timeframe.

We made foreign exchange, I talked about in terms of being constant. We assumed no acquisitions. That's for simplicity of the model. As I mentioned before, we talked before around our strategy and our long-term strategy hasn't changed at all. And then our mix, as we said here, volume-wise, about 1/2 copper, 1/2 aluminum.

So what's that all equate to? So when we think about the company and the business that we've put together, this is how we see it over the, say let's call it, over the planning horizon. So I'll define -- as I said, I'll define the near term as a couple of years out, 2 to 3 years out depending upon, obviously, how things play out in terms of construction spending, for example, in this country, recovery in Europe, and some of our key markets in the Rest of the World. You can see, since the 2009 earnings, roughly a little more color around this in the North American slides. We steadily built the business back or improved the business from that trough point. On the back of so much of what you've heard today, the constant cost-out, we've had -- with new products, new product innovations, new technologies. We've obviously had volume creep back in, or not just creep, but in many of our markets continue to come back. What we haven't seen is widespread construction spending as a tailwind, and we certainly have not seen a robust housing market, for example, in the U.S. and Canadian -- U.S. principally, in the U.S. housing market.

So the other comment I want to make here and you'll see on a slide which comes later around the working capital, the copper and aluminum impact. Right? So we're under the average cost assumption, and really when -- where we get the most noise and you can -- you don't see it on this slide and there's a reason. So we saw, for example, in the fourth quarter of '11 and in the fourth quarter of '08, significant noise because we had copper move more than $1 a pound in a short timeframe. And that's where we get really -- we can get really short-term noise because we're trying to hold selling price -- in that example, trying to hold selling prices and then move the higher -- a higher-valued inventory on that business, that's part of our business -- principally, on that slow side of our business.

But when you take it across the full year, you can see, and then that's probably why we've evolved to this longer-term guidance, that over time, we believe we're getting paid for the metals and then we recover the metals. But it can take varying times, depending upon what the end markets are and the pricing dynamic in each market.

So again, so that lays out -- I guess the last point I want to make before we leave this slide is just going back to the 2006 peak. That $400 million of operating income, adjusted operating income in 2006, included a couple of really key items that I want to raise, which are a very strong U.S. housing market, obviously, and a very strong Spanish business for the company, which was order of magnitude in that timeframe, making $100 million a year. So strategically, what we've done, clearly, from a -- that the Spanish business will not be -- will never be what it once was. Obviously, that was a very special time for the Spanish market. Strategically, we've obviously rotated our assets into other markets. We've talked about those markets, and I'll give you a little more color on this here on -- in the next few slides.

So on Slide 9, putting a little more into the buckets around that path from, say, our 2013 midpoint to, say, that earnings power in the business. So in that first bucket, sort of me -- let me walk up the page, the continuous improvement, the driving cost out of the business. We really said it's not that -- we don't have the most exact precision to get to those numbers, but our estimate is that it's in the tens of millions of dollars. And so as we sort of buildup, we continue to -- under Mark's leadership and the Hill [ph] organization, the fabric of the company, is this Lean thinking. And so we think that's worth, say, $30 million to $40 million of that increase to that earnings power in the business.

The strategy execution, product innovation acquisition synergies. The strategy execution product innovation is really around getting those greenfields profitable and consistently profitable into the company average. And that includes the investment that we've made in our business in the North Sea and in NSW. So, as many of you know, we've gone into -- gone deeper into the -- into Mexico, Peru, India. We've invested further into South Africa and into Brazil. And these investments, we believe, will pay off in the long term. But they have been, in many cases, dilutive to breakeven, from a return perspective, in the last couple of years. And so that's probably the -- let's call it, 1/2 the 2/3 of the opportunity there. And then the acquisitions synergies related to the Alcan acquisition, the Prestolite acquisition, we continue to see a meaningful opportunity in terms of -- as we move those businesses forward, everything from the supply side, to commercial, to technology, we continue to see significant opportunity there.

And then the biggest piece and the largest piece is the operating leverage and the margin expansion possibility in the business. You can see here, we've ranged it at $100 million to $130 million or more. Those of you who know us know that we're conservative by nature. We really want to put something here that we thought was achievable under a reasonable set of assumptions over the next couple of years. So we've talked about having this $1 billion of upside revenue in the business. We've ranged this a little bit lower than that and I would say -- been conservative on the opportunity with respect to the margin improvement. And then we've add in a little bit of price. But, obviously, a point of price on even half our business is a pretty -- is a very significant upside driver to the business here. And I think as we continue to be do things that are in our control and then be ready to capture the market opportunity, we're already seeing the construction cycle turning in the U.S. and Canada. And then, obviously, we have got to be patient in Europe to, again, do the things that are in our control. This is the -- we wanted to give some sense of roadmap for what it looks like in a few years.

Transitioning to the balance sheet and the cash flow generation. As I said to the -- well, as I mentioned earlier, the impact on the volatile metals around the working capital is really a story that's not -- that's maybe not well understood. But you can really see it here, pictorially, in the upper left. So you can see, in 2009 we've generated 500 -- nearly $550 million of operating cash flow. As volumes came -- being late cyclical in the back end of the crisis, as volumes collapsed, basically, and metal prices collapsed. And then you see 2010, 2011 timeframe, as volumes returned in the business and with higher average metal prices, we need to invest in working capital. So this is partly, again, why we show the cash flow generation opportunity in the business over a cycle because you can -- we can really -- we do get, really, whipped around. And this is also why we show you the net leverage, the gross leverage in the business. Liquidity also matters. And being able to borrow against our asset base is a very important attribute of our success in being able to go through, and walk through a number of crisis, particularly the crisis of '09 and '10.

On the bottom right side, again, just highlighting the volatility of the metal prices, copper being the big one. You can see the volatility in '09 alone. The travel of over $2 a pound within the year. But our formula -- we think the business is capable of running at that $250 million to $325 million range. And that's the formula, it does require stable metal prices. I think we'll -- I believe we'll continue to get better on the working capital efficiencies, improving operating results and net of the working capital investment required to support the business. So, broadly, $1 increase in revenue requires about a $0.20 investment in working capital. So we've got to overcome the working capital required to support the growth in the business.

More color, again, on the working capital efficiency, the cash conversion cycle. We look at it both ways. We tend to -- both as a percent of revenue. You can see, to the right, we've improved the working capital efficiency there. We show that -- we also work it in a cash conversion cycle. I think it's easier for the business to understand from a cash conversion cycle perspective. So you can see we've made improvements, continue to improve from 2009. We took another couple -- or we brought another couple of days out from 2011 to 2012. And 2013, we think we can take another couple of days out, which is worth -- you can see, about 1 day is worth about $10 million. So, again, I don't think this in an area where we see sort of a game changer that is sort of a 2x equation. But I think it's back to the fabric of the company which is the continuous improvement of lean journey, I think we continue to do better, and our internal goals are far more ambitious in terms of continuing to hammer on the return on capital and the working capital cash conversion cycle.

And we'll get a natural benefit from Alcan, and Prestolite is a lot shorter working capital cycle for that so. That's also reflected in our guidance, but that will help us as well.

Moving to the capital structure. We're showing this here in more detail than maybe we've done in the past, but I think it's helpful to see this by region. So you can see here most of our public debt, or all of our public debt, is principally in North America. So you can see the net debt position there, the availability on our ABL, the $550 million. In Europe and Med, about $45 million of debt, $131 million of cash. So actually in a positive cash position with facilities.

And the Rest of the World. We I think it's important -- we talked a lot, and publicly and privately, in a number of discussions today around the business in Venezuela. So we want to show the Rest of the World, excluding Venezuela, because I think that's maybe a better way to show it, as you all know, the issues in terms of getting cash out of Venezuela and operating in Venezuela. But you can see significant firepower around the world, which is really needed to run the business, to fund the business in these various regions.

I think a point here, you can see the cash in North America and we'll show this on the next page, but remember, we did the $600 million bond issuance last year, and we -- where we paid off a $200 million senior note. We still have a $355 million convertible that's due later this year, which we principally prefunded. In the meantime, we paid down the acquisition debt from Alcan and Prestolite, which is why we have nothing drawn on the ABL and why we have $160 million of cash in North America. So in other words, if we paid off the convertibles tomorrow and 300 -- at $355 million in principal, we'd end up with $200 million drawn on the ABL. So that's -- and I'll show you that. You'll -- we can show a little better here on Slide 13. So I think the capital structure is in great shape and to -- it's almost -- working from right to left, we really tranched out significant parts of the structure, which gives, I think, tremendous flexibility. In 2009, we pushed out our -- we did a convertible exchange to push our part of our capital structure to 2029. The tall blue bar is clearly -- is obviously the high-yield note that we did last year and is due in 2022, at 5.75%. And to me, the anchor facility of the company is really is this 2017 ABL revolver, U.S. and Canadian facility, which we upsized with the Alcan acquisition and has been a tremendous asset for us.

So you can see then -- let me jump to the left, we have the short-term working capital line, the $205 million. Those around the world. As we continue to generate cash flow, we would expect to pay those down. We've got the 2013 convertible notes in face value turned of $355 million. They're due in November. We're still analyzing -- we were -- those were -- we were analyzing those, we went into the reinstatement process, we put pencils down until we became current on our public numbers, and now we'll pick that up again and conclude as to whether to take those out sooner or let those go to maturity. And then you see the other pieces of our profile there are very manageable in terms of our expectations around the business and the operating and free cash flow.

So from a capital allocation perspective -- sort of a classic chart here, and again, I think we've been very disciplined over the years. So maybe starting in the upper left quadrant, as I mentioned, we'll continue to be very narrow and focused on the capital spending in 2013 and forward. We expect to, obviously, focus it around maintenance and then be very selective in increasing capacity or investing in new products. We'll clearly invest in new products where it makes sense. It's been a recipe for success. The debt reduction is important, managing the capital structure. As I mentioned, we have the $355 million convert that still sits in the capital structure. We'll deal with that this year, and once we do that, we'll do -- we'll have a draw on the ABL. And again, if the business performs as we think we can, we generate the cash, a significant part of our operating cash flow will be in North America and that will reduce, further, that acquisition debt that will go back on to the ABL.

And then the lower sections here, really, between the share repurchase and the acquisitions. As I said, on the acquisition, it's been a critical part of success. We're not pulling our horns. We're still on the offensive but we also recognize that we also want to get the acquisition -- the 2012 acquisitions fully integrated. We want to get these greenfields profitable. We've really transformed the company over the last decade. So, in many ways, in the, I'll call it the short term, we want to run what we have. And I think, putting all that together, if the world plays out like we think it can and these -- and the set of expectations sort of come through, then from a capital allocation perspective, we've got the $125 million share repurchase program that we can deploy our capital to as well.

So this is -- I guess from a -- sort from an order priority, clearly funding of the business, managing working capital, the CapEx, the debt reduction, and then, really, the acquisitions and the share repurchases will be -- would be important. Clearly, share repurchase today would be accretive to 2013 immediately. We obviously look at it, as well, from a capital allocation perspective and from a return perspective.

And then lastly, before we close it down and open it up to questions, again we had -- in 2012 we had -- we did a lot to reposition the business. We added $1 billion of revenue. We redid a significant part of capital structure. But we also had a restatement stemming from a -- what, in the end, turned out to be, principally an inventory test in Brazil. So, in the end, we had an internal control weakness in Brazil. We also had a separate weakness around the executive management team in the ROW region. So we've really made a lot of changes. We've come through that period and I think in tremendous shape. The core of company was strong. We were able to walk right through it. But this slide here really highlights, when you look at our 10-K filings, our public filings, we -- as a management team, we own this. As a finance executive and principal accounting officer, I own this. We take it seriously and we're all over it. But these are the things we're working on. We've, obviously, already transitioned the regional leadership. We talked about that. We're enhancing the control oversight. We've really shrunk, I would argue, the decision-making of the company and the flow of information. I think Latin -- the Americas, the ability to move the talent and the technologies between Latin and North America, I think, is just going to pay dividends over time. We've used outside experts, accountants. We've done a lot of forensic work. I think we've done all the right things. As you remember, from our fourth quarter, we went through all of our balance sheets in our ROW unit and just made sure that we -- that there was -- that we're aware of what's in there, we were comfortable with everything. So lots of changes in place but I think they're all setting us up for, well, positioning for the future.

So, lastly, just bringing this all altogether. A leader in a $175 billion industry, globally diversified. As you can hear, diversity, a key theme today. Very important around a business that can be very economically -- economic sensitive. The lean manufacture, I'm pleased -- lean manufacturing. I'm pleased that we can get Mark out today to give you a real flavor for what we do on the lean side. The deep seasoned management team, we talked about. We just covered the financial performance and balance sheet. And the construction cycle is clearly in recovery. It's an important part of the story, it's an important part of the upside, I think it's important part of the future.

And with that, we are at Q&A.

Question-and-Answer Session

Brian K. Langenberg - Langenberg & Company, LLC

Question concerning the net debt of 1x over the long run. Is it safe to assume that, even though in the short run, acquisitions aren't maybe a high priority? That, ultimately, again they will be and so the reality is that net debt will creep higher as you're making acquisitions down the road?

Brian J. Robinson

Short answer is yes, Brian. I think we've assumed no acquisition. Also that 1x is really sort of more the near-term view. It's actually -- play forward, the 4, 5 year view. We're actually well beyond that.

Brian K. Langenberg - Langenberg & Company, LLC

Then just one other question. Given the valuation of the stock, at the very least, I would -- I think you've sort of made this clear, but I just want to clarify that, with the convertible, that there won't been a new convert issued to push out the maturity that you'll literally just pay down and use your credit lines, correct?

Brian J. Robinson

Craig -- that is correct, that is correct. Again, I always want to be careful to say we'll never do anything, but that our viewpoint is that we will -- again, when we did undertook the high yield, we really were ideally prefunding the $355 million. That is our plan and in think we're in great shape to do it.

Unknown Analyst

Can you give some -- just even a broad sense of where your capacity utilization, today, as a company, to get those 2 year and 4, 5 year target. Can you give some just broad sense of where the utilization would have to go to get there?

Brian J. Robinson

Yes. I think we talked a little bit -- again, capacity utilization, there's no overall measure. But I think we gave a little flavor around some of the businesses, say, transmission cable. So if you put on the high end, in the company, some of the -- where we're very busy in that 80% kind of range would be, say, transmission cable in the U.S. -- U.S. and Canada. Some of the Asian markets, so say a Philippine market or a Thai market. But then we've got -- and parts of the business which are more in that. So, on average, we're probably, let's say, in same as 70s. But in the 60s you're still going to have -- probably in the high 60 -- well, in the 60s you'll going to have, for example, parts of the Iberian business. Businesses that are more leveraged towards construction, And then probably in North America, around, let's say, the distribution utility cables, I don't know 70%, low 70%.

Gregory B. Kenny

If you factored [indiscernible] we're probably below U.S., which was like 78 or 80, I guess. If that's true, we're probably in the mid- or lower 70s, and as Brian said, we've covered the 50s and 60s at least partially [indiscernible] but we've got probably $1 billion of open capacity and Mark's finding more every day. So they've been put to work without more capital and then you can add more capital which is a step function [indiscernible] depreciation. But we always talked about net contribution margin. So you can run one more of the average product [indiscernible] product, $0.12 to $0.20 falls to the bottom line in terms of operating income. If you can do that. And then there's pricing power if we ever get into the high 80s, low 90s, where you begin to see a scarcity build around that product. Which you saw in '06, '07 with some products.

Unknown Analyst

At the beginning of the presentation you spoke about [indiscernible] market share [indiscernible].

Gregory B. Kenny

No. This has been an interesting time. There's been a -- at the financial crisis, it's been now 5.5 years since anyone felt really good about it. We saw the U.S. begin to fall off, slightly, in August of '07. That was the beginning of the slowdown, when the other parts of the world -- so there's a lot of guys that built capacity, medium-sized companies, since '05, '06, '07, pretty tired of doing this. And then consider the ability -- keep getting better, and the gains where operating margins maybe 6% or something like that, 5%, 4%. It matters, in terms of both the balance sheet [indiscernible] get better. So I would say -- a lot of the key [ph], and then we're constantly in that debate, in that local market if you buy, do business the right way, [indiscernible] APAC [ph] , they make the product correctly [indiscernible] and then again the risk/reward. And so for us, the Americas were a very high kind of risk/reward where we understood it. But [indiscernible] far [indiscernible] there may be less synergies. So it may be a very [indiscernible]. But, yes, there's, I would say 10-plus opportunities that are in play at any one time, in this industry where there are many players. But there are ideas floating, and for us, we had the ability to do them, but then you get into, well, how do you feel about that, what is that -- is that strategic because we like the market or can we do something else with the capital [indiscernible] . But, yes, we could do more acquisitions, it gets really accounted [ph] . [indiscernible], we have people on the field that can go -- will take that on. And how do we feel about the probability of a good return to shareholders. We're not opportunity [indiscernible] more now than there has been. But there's certainly [indiscernible].

Len Texter

We got a question over here, on the mic, actually. And, Greg, can you move over to the mic for the webcast so everyone can hear. And if you've got a question let me know, I'll bring the mic to you so they can hear on the webcast.

Unknown Analyst

On topic of seeing more construction activity in North America. Is this what you're seeing in your business or is it that you're picking up form the newspapers?

Gregory B. Kenny

We can see projects being quoted. We are probably a short backlog business, other than some projects that have a forward look, most of our stuff is sort of a 14-day backlog. But, yes, no, I feel the U.S. is gathering after a softening second half of last year and a soft-ish first quarter. We see a little bit of pace to it. But I would say it's more the resi side taking up; the non-resi, looks like more of the same. But we don't know much more than the newspapers other than we are with channel partners quoting on projects, industrially, non-resi, et cetera, so we do get that view. Whether they get those projects is another issue, but we'll look at that fairly frequently, that sort of project pipeline, coming forward. We can do that, also, in transmission cable.

Unknown Analyst

Mark mentioned having gone into Procables and with the lean SWAT team, and improve the operation. I'm curious as to what opportunity, you saw, if any, initially, in Alcan, primarily North American soil.

Gregory B. Kenny

They were well-run facilities. They sort of invented these products, and with a very long history. Where we saw it, really, is flowing both ways. We thought there was some areas of purchasing that we had some advantage because we were bigger than Alcan. We thought that there was some, within the metallurgy area, they had some skills that we thought really quite interesting. There was some SG&A synergies. But it was really a merger of equals in terms of the aluminum skill set. But we were looking at, also, a bet on transmission. We feel good about that. Their construction-related products versus copper, and versus the whole fuse and resi and non-resi, where do we think were in that cycle. And then we got a sort position into China. But we saw, certainly, more than $10 million of synergies, collectively, with Alcan. And then you get almost into every facility. Alcan is also integrated, backward, into rod -- Mark is there anything else you want to add?

Mark Thackeray


Gregory B. Kenny

Alcan also has a facility that's mothballed, that if we see a breakaway kind of demand we could put to work, it's out west in Oregon.

Unknown Analyst

If I could, just one more. I was hoping -- we haven't spent too much time on Asia, but if you wouldn't mind reviewing how the Alcan China purchase circumvents the issues that prevented General Cable from investing in China in meaningful ways.

Gregory B. Kenny

Yes, thanks. No, China, as you're referring to, the 7,000 competitors, I think the Chinese are getting serious about standards and quality, and doing business the right way. We had some minority investments there. What Alcan did was really see opportunity around these aluminum products, introduce products that wasn't used in construction applications. So they created a category. And then they sold it, pretty deep, into the channels. Meaning close to the end users if not the end users. So they did a very interesting thing. They arbitraged copper aluminum equation, did something that no other Chinese competitors, at the time, were doing. There are some people now who knocked it off and then had a large selling organization. I think it's mainly 80 people. Which, as opposed to relying on sales to the state utility or to distributors. So we like the way they reach deep in the market. And there's a talented executive, Alex Tam, there who we're working with now to see -- can we, using his sales team, bringing in products that you can get paid for in China because they're hard to do, using his sales force. So that's the kind of discussion we have, as well as can we bring products from elsewhere in the network, behind his sales force, to round out a package. So it was just that they had an interesting idea, which didn't have the capability to do at the time or we didn't have the wisdom, really didn't have that product range. Which they went ahead and did, they spent a lot of money to get started. And the steel worked on the North American fundamentals with China, kind of being, kind of an option on whether we can make that successful, and so far it has been. Just about $100 million business and profitable.

Unknown Analyst

Quick question and clarification. The $400 million peak EBIT that you showed in that chart, is that pro forma for all the acquisitions?

Mark Thackeray

No. The $400 million, it's an actual, as reported, adjusted operating income number.

Unknown Analyst

So if I take that number, $400 million, Alcan probably is about $100 million, Procables and Prestolite $15 million. I'm not sure if it's a good estimate. You're at $550 million, let's say $520 million. The buckets you showed, of operating leverage, continues lean, it would seem $550 million -- and this assumes no pricing, $550 million seems low relative to the M&A activity.

Gregory B. Kenny

I'll be thrilled if we can do $100 million in Alcan They have done that before.

Unknown Analyst

Peak, right? So they have earnings power at Alcan of at least $100 million.

Mark Thackeray

Correct, correct.

Unknown Analyst

And the $550 million is an earnings power reflection, correct?

Mark Thackeray

Correct. Yes, that's right, that's right. Remember, as a base, that $400 million, as I said, includes the $100 million of the Spanish business [indiscernible] only one for us, right? So that creates a fair amount of headwind in terms of [indiscernible].

Gregory B. Kenny

We'd love to beat the number but we need to go do it.

Unknown Analyst

We just had a quick question. We heard a number of projects in Brazil around oil and gas, especially like one major E&P down there pushing out a couple of projects. What's your level of conviction in that 8% forecast for the Rest of the World, if give kind of a sense of that?

Gregory B. Kenny

Look, Brazil, we're really not a player in the offshore oil and gas in Brazil. We are a player in the transmission business in Brazil. And then we have all these new launches. But the transmission can move around, as we've talked about in some other conference calls. And, yes, Petrobras, I think, has maybe moved out a little bit, their CapEx. Again, we're not really serving that offshore marine market in Brazil. But, yes, Brazil is strong statism. Yes, a huge surge around the World Cup and the Olympics, but stuff has to happen and there's competitors, so it should work. We've got to get these new products launched and we need these transmission projects to go, to have the kind of numbers as we'd like. So we have plenty of effort on Brazil. But it's complicated and we're having to rebuild that business a bit, after some of the things that -- just a difficult time with the steps in improving the systems. There's actually a couple -- 2 facilities down there. So, yes, I think Brazil has all the potential in the world but we've got to go realize it. But that offshore is not a driver for our business, but transmission lines, if they don't go, we'll have a little headwind.

Unknown Analyst

I was hoping you could just expand a little bit on Venezuela. Since your last reported results gave your guidance, obviously, some significant political risk has emerged. So could you just discuss -- when you gave your guidance incorporated that headwind from Brazil -- or I'm sorry, in Venezuela, from the devaluation, did you bake any kind a political uncertainty into that or is there another potential light down there?

Gregory B. Kenny

Without getting into the first quarter, specifically, there was a period of mourning. And, obviously, some election and I think the 14th. The polling has Maduro winning. They're also having, obviously, a dollar crisis there. But I would say that, again, something happens in Venezuela often. But right now, it was in our thinking, broadly, and we haven't got a different -- significantly different view. But we'll keep you informed as we see it. Again, extended vacation time, nationally, impacted us in the first quarter in a material way. And it's a somewhat distracted country today, but they're still buying cable and we're still producing it.

Unknown Analyst

On the topic of 1x leverage. Is that a goal or is that a byproduct of where you're headed? And if it's the latter, do you have a target that you think is most sufficient?

Brian J. Robinson

Yes, I would say it's more of a -- I wouldn't say it's a target, per se. It's more of a product of where we see the business going. I would say -- again, it comes back to -- we run the business at much higher levels of leverage. Over history you could see it. And I think, again, we'll focus on the strategic things. I think, again, on the capital allocation chart, we want to be -- we, obviously, want to keep the liquidity in the business. But, no, I wouldn't say we have a hard and fast goal, per se, of either that or gross leverage. It's more a byproduct of the strategy and the capital allocation.

Gregory B. Kenny

In some ways, just to go out and say you're go out and be acquisitive then sometimes times you can do a deal that's -- they're never perfect. And there's sometimes positive surprises, negative surprises. I would say, if we see opportunity, we'll act on it. We stay current, involved. The greenfields are hard. We'll get them to work. But I prefer to acquire than build. The reason we did the greenfields was the expectations were so high among the sellers because of this road of the sky [ph] around ROW that we felt, let's go ahead -- around the developing countries facilities, we'll go ahead and build these facilities. I those expectations have come down. It has been a sobering 5.5 years. So, broadly, what we're seeing today, even in the developing world, is a lot of companies for sale. And we'll just be careful about what we do in terms of both management time and talent, as well as the upside in this business. Any more questions?

Unknown Analyst

So, Greg, I think you did a good job of talking about how you're focused on return on invested capital and return on capital employed. But I think there's still obviously a lot of investors that look at the chart of General Cable, [indiscernible] copper and say this is the plan on copper. So can you address what you think the fallacy is or the error in that thinking? And then just touch on, at this point, following the Alcan acquisition, how much of your metal cost are kind of contractually passed through versus how much has to be priced into a slow [ph] market.

Gregory B. Kenny

My voice may not last this question. But, yes, as Brian said, in a cycle, we think we have this headwind within our inventory. And we build it, we're turning it 3 or 4, 5x, 6x, I think, in that part of the world. In the market, for about half of the business, this price short cycle meaning weekly or daily. Long cycle, you're paid in the value-added. So we have a tendency to think about -- if you took the metal out, with your margin on the work that you do in the cable, they're actually double-digit margins generally. Broadly, because copper has been so volatile, it's hard to explain it quarter-to-quarter. So, if we have inventory at $3.60, and today copper is $3.44 or $3.43, that's a headwind, short cycle. Long cycle, you sell through that inventory you make new inventory and if could get the whole thing that we can turn it in 1 day it'd be excellent if we can. But it's been a funny time because if copper is high, it should be that the world is getting stronger and yet we have this huge swings, and you saw the chart. But I don't know; if copper were going up, you could say you ought to feel good about derivative businesses because then it must be indicative of strong demand. We haven't seen that in a while. We saw that going through the '04 to '07 '08 timeframe and now we have dealt with this choppy, speculative kind of stuff ETFs which are being challenged. So I have the tendency to think that the margin we make on the value-added, which is generally the double digits and if copper were down, you'd still need to make $400 million on operating income or $300 million otherwise you don't have a business and you have much less working capital in the business because as Brian said, every dollar or pound, $150 million or something of release from the balance sheet. And I've operated this company when copper was $0.75. So we've seen it before. But I wish we would just stay a little in advance so could see the business perform. What happens if demand starts picking up and copper -- then suddenly people more come less sensitive [ph] it's more you get the product? And even if copper were down, you're selling something become increasingly scarce. We've had this odd thing for last 5 years of relatively weak demand and copper rolled over a lot, which economists don't see for long periods of time. But I don't think of it as a play on copper though, I think high copper would say that doing awfully good about infrastructure. Either that or the mines are getting harder to open, which people believe and you get a lot of discussion around copper supply demand imbalance. But it puts a lot of noise in the quarter-to-quarter stuff, which is why you saw us even when we talked about 2013 it's based on $3.60 a pound copper on average for the year. And when it's outside of that, we're trying the hold price continually. I haven't looked back but it's probably at least half our business has got some form of back to back around that level but it does matter, copper movement short cycle.

[Audio Gap]

Europe, good question. We can see a path where Europe is certainly better than it is today. I don't think we'd see Spain again but we already have parts of Europe that are making -- CLEC is highly contributory on investments that we made good with free [ph] Spanish cash that we hedged on some bet [ph] we make money in a number of place in Europe. So I would look for Europe in again we haven't really done it this way, but I would look for Europe in the $50 million to $100 million kind of contribution in the 3 year -- Europe will take a while. It's just got structural issues but it doesn't have that sort of bounce that the U.S. does. On the other hand, they use really technical cables and capacity creative disruption going on but in Europe, because it costs so much to shut a facility down, it takes a while. Some of our competitors have announced restructuring and some capacities is just simply mothballed I'm not sure that will work again. Europe is also interesting because there's Turkish, Polish, Egyptian, that market is reachable by a lot of players. So trouble in North Africa, meaning lack of investment because of the Arab Spring, translates into them looking for other markets. I think Europe is bottoming this year. I think that we won't see the kind of power in Europe for a while that we once saw, maybe never again, but we certainly have businesses Europe that perform more every day. We have the Spanish meltdown the issues in the North Sea. But demand is, I think, will bottom and come up and we expect it to be profitable and we spent a lot of time and efforts to take cost out. The Americas, I think are just coming into their time and Asia-Pacific has had a fair amount of capacity loose as people build capacity, looking for work but we had a pretty good markets. We've got to get India and some other places moving along. But I would say, certainly Asia-Pacific might be in the $50 million kind of contribution. Sub-Saharan Africa might be in the $10 million to $15 million contribution. Again, I'm saying this on the fly. So 3 years from now, be easy on me.

Unknown Executive

I would agree with that. I would say broadly, when you think there's so much operating leverage in the North America distribution side. So I think in broad buckets, I would say it's maybe half North America and the balance between the other couple of regions. Remember, on the ROW side, you also have that overweighting of Venezuela, which causes a little bit of noise. But I think I would agree [indiscernible] safe maybe my estimate would be about half.

Gregory B. Kenny

All right. Len, do we have any more questions or shut down here? Thank you for coming and spending the afternoon with us. Goodnight.

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