General Cable Management Discusses Q3 2013 Results - Earnings Call Transcript

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 |  About: General Cable Corporation (BGC)
by: SA Transcripts

Operator

Good morning. My name is Will, and I will be your conference facilitator. I would like to welcome everyone to General Cable Corporation's Third Quarter 2013 Earnings Conference Call. This call is being recorded at the request of General Cable. Should you have any objections, you may disconnect at this time. [Operator Instructions] Thank you. General Cable, you may begin your conference.

Len Texter

Good morning, everyone, and welcome to General Cable's Third Quarter 2013 Earnings Conference Call. I'm Len Texter, Vice President Investor Relations at General Cable. Joining me this morning are Greg Kenny, our President and Chief Executive Officer; and Brian Robinson, our Chief Financial Officer.

Many of you have already seen a copy of our press release issued last night. For those of you who have not, it is available on First Call and on our website at generalcable.com. Today's call will be accompanied by a slide presentation, also available on our website. If you've not downloaded a copy, we recommend that you do so, as we will refer to the presentation throughout our prepared remarks today.

The format of today's call will first be an overview by Brian Robinson of our third quarter estimated results. Secondly, Greg Kenny will provide comments on the company's fourth quarter outlook and early view on demand trends heading into 2014, followed by a question-and-answer period.

Before we get started, I wanted to call your attention to our Safe Harbor provisions regarding forward-looking statements and company-defined non-GAAP financial measures as defined on Slide #2, as we may refer to adjusted operating income in today's call. Also, please note the financial results discussed today are preliminary estimates due to the timing and ongoing preparation of the company's restated financial statements as described in the press release issued last night.

To begin, please turn to Slide #5, where we have included a reconciliation of our previously communicated outlook. With that, I'll turn the call over to Brian Robinson. Brian?

Brian J. Robinson

Thank you, Len. Good morning. We continue to build the long-term foundation of many parts of our business despite the continuing difficult operating environment, which is characterized by heightened uncertainty, limited visibility and uneven demand patterns. Our third quarter estimated results in Europe and ROW were an early reflection of this progress. Both segments were generally in line with our expectations, which reflects the consistent day-to-day execution of our business teams, as well as the momentum of key initiatives implemented over the past several years and months. We were also pleased with the performance of our recent acquisitions, which continued to exceed our expectations.

Despite this progress, our estimated results for the third quarter fell short of our expectations, principally due to certain of our businesses in North America. Seasonal demand as it relates to grid reinforcement and maintenance activities were lower than anticipated. Delivery schedules for aerial transmission products shipments shifted from Q3 into Q4 in early 2014, and construction activity, while stable, fell short of expectations.

Next on Slide 6, we provided a reconciliation of our estimated reported to estimated adjusted operating income for the third quarter. The company recorded $4.9 million of expenses, principally related to legal and tax assessments in certain Latin American operating units. The company also incurred restatement related cost of $1 million and further severance charges in Europe of $700,000.

Moving to Slide 7, we have provided a bridge of our previously communicated third quarter outlook for global unit volume. Overall, unit volume fell short of expectations by just over 3%, principally due to results in North America. In North America, stable demand for copper-based electrical infrastructure products and specialty cables was more than offset by lower-than-expected aluminum-based Electric Utility product shipments, including aerial transmission as well as construction cables and rod and strip products.

In Europe, seasonally lower unit volume was generally in line with expectations across most major end markets throughout the region. In ROW, unit volume was in line with expectations due to continuing stability in Latin America and Asia Pacific, specifically construction spending in China and the Philippines continue to drive demand for the company's products.

In Brazil, we continue to benefit from aerial transmission product shipments, as well as traction gained in our new specialty industrial and communications cable businesses.

On Slide 8, we've provided a bridge of our previously communicated third quarter outlook for adjusted operating income. Estimated adjusted operating income for the third quarter of 2013 reflects stability in Europe and ROW. In Europe, we, again, benefit from the consistent execution in the third quarter in our submarine turnkey project business. The company's land and submarine turnkey project backlog was approximately $540 million at the end of the third quarter. Estimated adjusted operating results in ROW were buoyed by stronger-than-expected results in Venezuela and stable results in China and the Philippines. However, these positive trends were more than offset by the impact of lower-than-expected unit volume in North America and continued pricing pressure.

Moving to Slide 9. Estimated net debt was just under $1 billion at the end of the third quarter of 2013, a decrease of $90 million from the end of the second quarter of 2013. The decrease in net debt is principally due to reductions in working capital as a result of normal seasonal trends.

On Slide 10, we have provided summarized comments on our expected operating cash flow over the second half of 2013. We now expect to generate operating cash flow over the second half of 2013 in the range of $120 million to $140 million, which is lower than previously expected. Estimated operating cash flow for the third quarter of $120 million was generally in line with our expectations. However, in the fourth quarter, we anticipate less of a reduction of inventory due to the softening demand environment and the building of inventory in certain key businesses in Latin America in order to better capture market opportunities. In Europe, the company is utilizing its asset-based loan to fund a portion of its working capital needs. While there's a negative impact on operating cash flow expected in the fourth quarter, there is no impact on the overall cash flow. The implementation and usage of the asset-based loan to fund working capital in Europe is a more stable source of funding over the long-term for our businesses in the region. As a result of these items, the company now expects to generate operating cash flow in the range of $0 million to $20 million during the fourth quarter.

The company continues to maintain adequate liquidity to fund operations, internal growth and continuing product and geographic expansion opportunities, as well as its stock repurchase program and quarterly dividend and redemption of its $355 million of convertible notes due this month.

Before turning the call over to Greg to provide some comments on the company's fourth quarter outlook and business trends heading into 2014, I would like to briefly update you on the timing of our restated financial statements as described in the Other Matters section of our press release issued last night and the Form 8-K filed with the SEC on October 15, 2013. The restatement process involves many workstreams, which are being conducted by the company with the support of external advisers and in parallel with the external audit process. We're making solid progress as we push to finalize the restated financial statements and related documentation and are targeting to file the restated financial statements before the end of the year.

Finally, as noted in the press release, we determined that an indicator of potential asset impairment is present in our Mexican business due to a history of losses and the continuing difficult local market environment. The company is in the process of preparing its internal forward business plans in the 2014 outlook, which will be used to finalize the assessment of the carrying value of the company's assets in Mexico. Based on the history of losses and preliminary estimates of the undiscounted future cash flows of its operating unit in Mexico, we may be required to record a non-cash impairment charge for the carrying value of the operating unit in Mexico. The asset balance that is subject to such assessment of impairment is approximately $29 million at September 27, 2013. We currently anticipate completing this analysis in November 2013.

The non-cash impairment charge, if any, would not impact the adjusted non-GAAP financial information presented by the company.

With those comments, I'll turn the call over to Greg. Greg?

Gregory B. Kenny

Thank you, Brian, and good morning, everyone. As you can see on Slides 12 and 13, we've provided our fourth quarter outlook and a view of expected demand trends heading into the early part of 2014. In the fourth quarter, we are expecting typical seasonal volume declines to be partially offset by project-related activity globally. In North America, orders that were delayed in the third quarter for aerial transmission cables are expected to ship in part in the fourth quarter as well as in the early part of next year. In Europe, the company's land-based and submarine turnkey project businesses are expected to deliver a number of projects in the fourth quarter. In addition, in Brazil, deliveries of aerial transmission projects are expected to continue at a stable rate over the final months of the year.

We are expecting adjusted operating income to be flat sequentially in North America and Europe, principally due to the benefit of project activity. In ROW, however, ongoing stability in Asia Pacific and the benefit of project activity in Brazil is expected to be more than offset by lower contributions from Venezuela during the fourth quarter.

Overall, our second half volume is expected to be weaker than we anticipated. Utility, mining and construction-driven spending has been generally below expectation. While the macroenvironment for infrastructure products has been uneven, we are making progress in a number of areas. In Europe, over the last several years, we've removed significant costs and are improving the cross-utilization of our 7 plants. Our NSW team has made significant progress in delivering complex offshore wind projects, which are among the first in the world. Our European-based oil and gas as well as communications cable businesses are growing quite nicely. In North America, we expect our Prestolite Wire and Alcan Cable acquisitions to perform above our investment case for 2013.

We're equally pleased with our focus on new products and innovation. Over 15% of the products sold today have been refreshed or launched over the past 3 years. We continue to look for ways to reduce manufacturing and logistics costs.

In Latin America, we are accelerating the use of our Lean toolset with a focus on ways to entitlement capacity and customer service. Higher value-added products have been identified and are arriving through cross-selling initiatives. Our greenfields in partnership with Colombia are showing progress.

In Asia Pacific, we have seen strong performance in China, which was part of the Alcan Cable acquisition. The Stabiloy brand is well-recognized and preferred. Our partnership in the Philippines is thriving, and we're looking for ways to improve our return on assets in Oceana.

While underperforming our expectations, our African operations are improving and represent a strong channel for our European-produced specialty products.

Finally, over the last year, we've made significant progress building our company culture and reinforcing our values. Our global councils and newly created global roles in talent management, manufacturing, technology, supply chain, sales and communications products are facilitating the sharing of best practices, while improving daily execution and working capital management.

Over the last 10 years, we have transformed the company through more than 20 acquisitions from a U.S. and Canadian-centric player, primarily dependent on copper telephone cable. The wait for renewed infrastructure spending has been a long one. In the meantime, we've returned cash to shareholders and strengthened our global operating and talent management systems. Overall, our view of the intermediate and long-term demand growth drivers in the company's key end markets in North America and ROW is unchanged. We are well-positioned to capitalize in a late cycle recovery from the growth trends in energy, infrastructure and other related investments, as well as construction activities in our end markets around the world.

That concludes our prepared remarks. I'll now turn the call over to the operator, who will assist us in taking your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Shawn Harrison.

Shawn M. Harrison - Longbow Research LLC

First question I had was just the commentary on early 2014 looks, relative stability. I know we haven't seen typical seasonality for a while, but I mean, how does that flattish trend compare to what you would expect just typical seasonality say, into the first part of the normal year?

Gregory B. Kenny

That's a great question. We were talking macro and prudent planning would say that we see the early part of next year sort of as a macro standpoint similar to the, what we're seeing in the second half year. From a seasonal standpoint and a performance standpoint, we clearly have holidays in the fourth quarter of this year that we don't have in the first quarter of next year, as well as, again, there is a -- that's the peak building season that we're moving towards through the first quarter and into the second. So we're generally having to stay more busy in the manufacturing floor to meet the anticipated demand. So broadly, yes, it's -- utility has been a bit weak in the third quarter and the other businesses are sort of a little behind where we thought, at least the construction-related ones, from driving a pickup. But we should see in the first quarter, generally, that we have to get busier and there are less holidays. So we're actually running more through our factories and we're preparing for the selling season.

Shawn M. Harrison - Longbow Research LLC

I guess, the follow-on to that is do you feel that the tide is beginning to turn in your favor or is it just more similar, kind of, what you've seen over the past 4 quarters in terms of just some ups, some puts and some takes?

Gregory B. Kenny

I think, internally and operationally, I think we continue to see our ability to improve from this year going into next. From a demand standpoint, I think we're looking at a world that is similar, perhaps a bit up with some weakness maybe, on say, U.S. mining. The U.S. utility was weaker than we anticipated in the third quarter. But broadly, while it's choppy, I don't see a big change. We're getting better in Europe and I think we're also getting better in Latin America, and in terms of just opportunity and our executions on some of these greenfields as well as our North Sea. So I'm cautiously optimistic, but I don't see a macroenvironment that's stepping up materially. We'd love that to happen and are prepared for it, but we're not planning on it, at least in the early part of the year.

Shawn M. Harrison - Longbow Research LLC

Okay. And then, Brian, I have a clarification and then a follow-up. What was the dollar amount of the noncash interest expense this quarter? And then second the question I'm getting from a lot of investors is, as you look into the accounting issues in Brazil, how do you know or will you know at the end of this that you're kind of finally at the end of everything and nothing pops up in another 3 to 6 months down the road?

Brian J. Robinson

Okay. Yes, Shawn, to your first question the noncash interest in the third quarter is $4.5 million.

Shawn M. Harrison - Longbow Research LLC

Okay.

Brian J. Robinson

And then from a Brazil perspective, so yes, taking a step back, the company has exercised and used a lot of resources to get to the bottom of all the issues in Brazil. As you know, this goes back to over 1 year ago starting with inventory theft. And then as we disclosed earlier this summer, a couple of months ago, we also then -- in our remediation work, so in remediating the control weaknesses that we had, we identified the VAT issue and the bill and hold issue. So, Shawn, as we said, because we're in a second restatement, our sensitivity and work that needs to get done here to be very, let's call it meticulous, in terms of our documentation and internal control is very high. And so we're -- we've made a lot of progress in Brazil in terms of changing systems, changing resources. And so that we feel like we're on a very good path to making sure we've got all this buttoned up and our arms around everything.

Operator

Your next question comes from the line of Noelle Dilts from Stifel.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

What I'm still struggling with a little bit here is just the sequential decline in profitability in North America. It looks like, if you look sequentially, again, of, it was about a $43 million decline in revenues or about a 6% sequential decline and that led to a $20 million reduction in operating profit, so essentially a 46% decremental margin. It just seems kind of high. I mean, were there some other factors -- just help me understand that. Were there some other factors that came in? Was there some inventory reduction? If you could just kind of walk me through -- more detail there would be helpful.

Gregory B. Kenny

The utility market was more -- was difficult in terms of pricing. We also had our shutdown, as you know, broadly and have historically had, is, the August in Europe and the July in the United States, and that obviously, facilities are down or working a very light schedule. So, Noelle, we know we have those shutdowns and we also saw a utility business that was weaker. Our aluminum building wire business was a bit weaker than we thought. We have known and had anticipated, there's been a new entrant in that business some quarters ago, but that business is still performing extremely well. But we didn't see the acceleration of that business that we thought we might see.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then could you just help us understand with some of these deferred aerial transmission shipments that have been pushed out to fourth quarter and first quarter, can you size those deferrals in some way, maybe in the terms of metal pounds sold, and then talk about how much of those shipments you expect to ship in the fourth quarter and how much you're expecting to see in the first quarter?

Len Texter

Noelle, this is Len. I guess I would describe it as if you look of the volume miss of the 11 million pounds in North America, I can probably describe roughly 1/2 of that would be around the aerial transmission projects that we expected to see that didn't happen. So I'd expect to see a portion of those into the fourth and into the first part of early 2014. Regarding timing, it's probably a little bit of tough to call. As you know, these projects can be called off and uneven from time to time, but certainly expect a solid fourth quarter from our aerial transmission business in North America.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And lastly, could you just try and give us a sense of, specifically, your expectations for Venezuela, maybe how much of a headwind you're expecting from the slowdown there in the fourth quarter?

Brian J. Robinson

Noelle, it's Brian. I think in the range of, say, about $5 million or so sequentially from third quarter to fourth quarter, with respect to Venezuela itself.

Operator

Your next question comes from the line of Matt McCall with BB&T Capital.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Maybe, Brian, can you talk about the assumed level of SG&A in the Q4 guidance?

Brian J. Robinson

I would say it's maybe broadly consistent, maybe a little bit up from the third quarter, but in that, I don't know, call it $115,000, $120,000 sort of range.

Matthew Schon McCall - BB&T Capital Markets, Research Division

So if I use that, it appears that you have some incremental gross profit pressure baked in. So following up on previous question, what's the incremental source of pressure? It sounds like there's going to be maybe less inventory reduction. Is there a mix issue? Just what's the gross margin implications in the guidance?

Brian J. Robinson

I'd say there's obviously an element of seasonality in parts of the business. There's -- and we've talked in the third quarter while the business in parts of North America are what we call stable, the volumes were below expectations. And we further reduced that volume expectation for Q4. So I guess the other meaningful or important part of that, Matt, would be the general pricing pressure that we see in the marketplace would be the other piece of it.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. So --

Gregory B. Kenny

And the inventory, as we pointed out, the long [ph] and inventory is, again, it's primarily around the raw material. So it hasn't gone through the factory, and it relates to the complexity of some of the supply agreements in a relatively weaker aluminum business than it had looked to us in terms of some of the pushout of the transmission. So that's -- it's not -- it's less finished goods and more -- other than in some parts of ROW, we had to prepare for deliveries. But in North America, it's primarily raw material.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. Thank you, Greg. And, Greg, I think you answered on a previous question some of the areas that maybe are going to be better or you kind of gave some end market commentary. Can you -- one of the questions I get a lot from investors is, which geography is most important, which end markets are most important? So maybe, talk about any, maybe any one geography or any product segment that, a, is most important and, b, you're most optimistic about next year? And I'm not necessarily just talking about the top line, but from a profitability perspective, what, if there is one area that could get you excited as you move into the next year, and it could move the needle, what would it be?

Gregory B. Kenny

We're still doing our business planning and working through also refreshing strategic plans. But the biggest business today, it is North America. We continue to press on cost and logistics across the board there. The utility is the biggest driver of that business and we're watching, obviously, transmission, the utility spending on medium and low voltage products. It was weaker than we thought in the third quarter, but not getting worse into the fourth. So that's in our guidance. So we need the utilities to get a little firmer on the spending broadly, particularly for the medium voltage, low voltage. I feel like wind is, there will be projects coming in first half of next year. So we'll keep pushing hard on the cost side. We continue to do well in our data communications cable business. As I said, the North American mining is off, but transit is pushing up nicely. And then we're working very hard in our electronics cable business. So we are really drilling hard on the U.S. side and just looking at everything from our manufacturing cost to supply chain and see if we can find more, as well as I'm really proud of the product innovation that's occurring. Latin America, we've got the global team, particularly the U.S., really pouring it on there. I think we have not made money in a number of those greenfields. I see that burn rate coming down and I'm seeing in Mexico, Peru, the startup with new products in Brazil I'm seeing that come nicely underway, and I'm proud of the U.S. and global team as well as the local guys who got that done. So Latin America, while I don't expect a big breakout next year because it is somewhat natural resource-driven economies, I feel good about our hand there. We're making progress in sub-Sahara Africa, it's profitable. I think we can push up there. In Europe, we've taken, sadly, we've had a lot of associates go. We've taken the cost through that, and we're working on our business model there and have got a lot of strong talent joining that team there. So I see the Europe as one of upside, even though you wouldn't expect Europe to recover in a sharp way given the forward forecast. But I think we're doing a nice job, and I commend the team in Germany around the submarine business and getting those key projects through the cycle. We're pushing hard on the communications both submarine in Europe, as well as land. We are exporting hard out of Europe into regional markets and our costs, we keep working on. So we have 7 factories there, plus a small automotive plant that is actually an eighth, but it's really tied to our U.S. business. But 8, 7 factories, the stress is high there. It's been years of tough sweating, but I kind of like our hand. So I feel pretty good about our -- by that. In Asia Pacific, I think our team there has really put a Pan-Asian face on things. We're seeing some nice synergies, some strength in the Philippines. We expect Thailand to perform pretty well. And we're, obviously, also lowering the burn rate in India and I'm encouraged there. So I think helping ourselves and if we get any pushup from the U.S. construction market, which has -- which has begun to push, though you can see the numbers have slowed a bit recently. But that obviously drives through the whole business. So we're really planning to help ourselves, but I can see upside in Europe, I see upside in Latin America, and south, sub-Saharan Africa. And frankly, I think we can do better in the U.S. But we'll communicate our forward view in due time. But we've made some nice progress. So I'm encouraged, broadly, on what I see but no, we're not getting a huge pushup from a macro standpoint but that will come someday and we'll be ready for it.

Matthew Schon McCall - BB&T Capital Markets, Research Division

That's very helpful, Greg. And so I guess, on the cost and logistics side, maybe tying that back into capacity, I'm assuming utilization rates are still hovering in the low 70s as you talked about in the past. But is there any plans -- are you happy with your capacity overall, and the utilization's going to come with better volume or do you have any candidates for maybe some capacity reduction?

Gregory B. Kenny

Matt, we always are looking for, with a Lean culture, more with less. And we -- as you know -- and these are never happy decisions but we've closed a small electronics cable plant in the Chicago area and moved that volume into others. You have to make those transfers well and seamless to your customers and then continue to grow the business. So I would -- these factories generally are focused on certain types of product lines so they're not interchangeable, as you well know. But we'll continue to look and say, can we retain the capacity through Lean to hit a market that we believe will recover over the planning cycle? And we want to be able to capture that volume. But you're always looking at envelopes and we'll keep doing that, and that's not been something that we've been shy about over the last 10 years. So I think we'll look hard in North America to just test that. When you get to the Rest of the World, the geographies are pretty far apart. There may be 1 or 2 small things that we'll study. But that's always part of our work and then it's complex because you have to make sure that you have the right dialogue with your associates and those who may represent them. But we're always doing that, Matt, and my first preference is to fill these and keep getting free entitlement capacity but we always are looking and have acted.

Matthew Schon McCall - BB&T Capital Markets, Research Division

Okay. And just one more for Brian. Other income, any help with modeling that in '14? There's a benefit this year. Any thoughts on '14 at this point?

Brian J. Robinson

Yes, I would say, Matt, I would model it the way we think about it, which is just to hold it constant. So I would assume it's broadly -- just assume that we assume constant metals and constant currency. So I would put -- and while obviously, as we move forward we'll continue to have the mark-to-markets on large projects but those are -- that volatility is really not -- we're not able to forecast that. So I would just assume it basically, is sort of 0...

Matthew Schon McCall - BB&T Capital Markets, Research Division

0. Got it.

Brian J. Robinson

As you move forward to '14.

Gregory B. Kenny

Because some of this year has been burdened, Matt, by, again, depends on the product, some of them are more metal-intensive than others, and we have shifted increasingly to aluminum. But we have, even with the more recent recovery in metals pricing, we have all year chased a market that has had a lower COMEX, and again, there's a global expression that COMEX is a surrogate for global metal prices. So with our inventory that has a tail on it that's been higher than the market, again, just there's maybe an inflection we're getting closer, but that's been a headwind both on the aluminum, which is obviously, percentage wise, it's 10% and 15% increments versus copper, which moves even more. But that's been a headwind. So we're planning on that to be as Brian said, to be not a headwind next year and we're getting close to that point. Though even in the third quarter, we still had our inventory valued at higher than the average market, which was a significant headwind even though it was somewhat less as the quarter got on, it was still a significant headwind.

Operator

Your next question comes from the line of Brent Thielman with D.A. Davidson.

Brent Thielman - D.A. Davidson & Co., Research Division

Brian or Greg, it wasn't clear to me. The $8 million profit in Europe embedded this quarter is definitely an improvement from the last couple of quarters. How much of that is better execution in the submarine business versus sort of the rest of the platform there?

Gregory B. Kenny

Well, submarine is an important part there. And I'm actually encouraged by the submarine execution, as well as -- and it's moving into profitability in the submarine business. Again, this project completion accounting but I'm feeling better, though I take nothing for granted there. I'm also encouraged by just our positioning in Europe relative to opportunities in the market this year and going, and primarily through next year. But we're still seeing a profitable France, though France has got headwinds, and then Spain, hovering around that breakeven to slight, depending on the month, slight profitability, so it's all on an operating basis. And then some profitability in North Africa, which is obviously, a small part. But I'm -- our largest movement has been in NSW, but I would say broadly, we're headed in the right direction.

Brent Thielman - D.A. Davidson & Co., Research Division

Okay. And then in your commentary, you talked about continued pricing pressure scenarios in the business. Are there new product areas or geographies where pricing has become more challenging or is it much the same?

Gregory B. Kenny

The utility has been a bit sloppy. Again, I'm very proud of our aluminum construction cables business but that pricing has come off from where it was. But we're pushing, obviously, to maximize that and get as much as the market will bear. It's been an excellent product with a great legacy. But yes, I mean, broadly the world demand -- overall unit demand in the wire and cable industry has been kind of flattish. You can read the comments of both distributors and major competitors. Everyone's a bit different but it's sort of -- it depends on the geography, but relatively flattish or down some markets, up in a few others. But in that environment, we really haven't popped through broadly, the capacity utilizations that we have in the industry, which are -- no one keeps a record of it but we think it's in the 70s somewhere, and 60s and 80s in other places. But eventually, something has to give and we have to just keep taking cost out ourselves and be as Lean as we can possible be and also creative on the new product side. But it's about the same from a utilization standpoint.

Operator

Your next question comes from the line of Noelle Dilts from Stifel.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

The $4.9 million in legal and tax costs that you called out in the quarter, what are you -- I guess, first, how did that -- was that just proportionately in any of the geographies; and second, how much are you expecting in the fourth quarter on that side?

Brian J. Robinson

It was primarily in the Latin American countries, Noelle, and we're not expecting that in the fourth quarter. So we're not expecting a repeat in the fourth quarter.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Also, do you have any sense that there were some channel inventory reductions or essentially destocking in the quarter?

Gregory B. Kenny

I wouldn't say that I saw that. We read and I know you read what other cable makers are saying, as well as key channel partners. And other than some disappointment in demand, I didn't sense that it was a destocking, per se.

Operator

Your next question comes from the line of Shawn Harrison with Longbow Research.

Shawn M. Harrison - Longbow Research LLC

Just 2 brief modeling questions. Brian, what was copper and aluminum for you guys in the third quarter? And then also, I know the tax rate stepped up this year. Would you expect it to normalize in the next year, if so, to kind of what rate?

Brian J. Robinson

Copper, in the third quarter was, this is COMEX 321 and aluminum was $0.93. Those are per pound. And on the tax rate, I would consistent with what we said in the past, the 45% on an adjusted basis is influenced by the mix of earnings, as well as the lack of -- or the tax losses in certain jurisdictions. So I think as we move into 2014, we would, as Greg said earlier, we're doing our work for 2014. But I think our ability to improve those businesses will helped drive down the tax rate. So I would say -- I think that we've said is, assume the tax rate somewhere in the 36% to 40% for next year. And again, part of that will be predicated on continuing to improve the performance -- or getting a broader base of earnings across the company.

Operator

There are no further questions at this time. I'll turn the call back over to the presenters.

Len Texter

Thank you for joining us this morning. That concludes our conference call. A replay of this call will be available on our website later today. We appreciate your continued interest in General Cable.

Operator

You may now disconnect.

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