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Executives

Len Texter -

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

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

Analysts

Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division

Matthew S. McCall - BB&T Capital Markets, Research Division

Shawn M. Harrison - Longbow Research LLC

Richard Wesolowski - Sidoti & Company, LLC

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

General Cable (BGC) Q1 2012 Earnings Call May 1, 2012 8:30 AM ET

Operator

Good morning, my name is Sarah, and I will be your conference facilitator. I would like to welcome everyone to General Cable Corporation's First Quarter 2012 Earnings Conference Call. This conference 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 first quarter 2012 earnings conference call. I'm Len Texter, Manager, Investor Relations at General Cable.

Joining me this morning are Greg Kenny, our President and Chief Executive Officer; Brian Robinson, our Chief Financial Officer; and Bob Siverd, our General Counsel.

Many of you have already seen a copy of our press release from 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 have 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 first quarter. Secondly, Greg Kenny will provide comments on the company's second quarter 2012 outlook and full-year business trends followed by a question-and-answer period.

Before we get started, I wanted to call your attention to our Safe Harbor provision regarding forward-looking statements and company-defined non-GAAP financial measures as defined on Slide #2, as we may refer to adjusted operating income and adjusted EBITDA in today's call.

To begin, please turn to Slide 5, where we have included a reconciliation of our previously communicated outlook provided on February 9.

With that, I will turn the call over to Brian Robinson.

Brian J. Robinson

Thank you, Len. Good morning. Overall, our first quarter operating results were above our expectations as metal cost headwinds subsided during the quarter and volumes improved in most North American and European businesses. Market metal prices increased during the quarter and were closer to inventory book values by the latter portion of the quarter, helping to mitigate the burden of selling higher average cost inventory into a lower metal price environment, which was so strongly evident in the [indiscernible]. Otherwise, as you can see on Slide 5, net sales inventory climbed [ph] movements and the effective tax rate were generally consistent with our expectation for the first quarter.

On Slide #6, we've provided commentary explaining our first quarter results compared to the fourth quarter of 2011 with Q4 net sales presented on a metals adjusted basis. The top line was flat despite the sequential increase in unit volume of 6% experienced during the quarter. Metal pounds sold in the first quarter included improved volume in Spain, which was captured at very low pricing levels. Gross profit and operating income in the first quarter reflects the impact of rising metal prices that helped to mitigate the burden of selling higher average cost inventory as we move through the quarter.

Also our first quarter results reflect the benefit of increased demand in many North American and European businesses as well as improving conditions in Thailand. Other income for the first quarter of $6.8 million reflects a net impact of $8.2 million of accounting gains on economic hedges, which are used to manage currency and commodity risk on our project businesses globally, partially offset by $1.4 million of transactional currency losses. This level of transactional currency losses is consistent with historical norms given the numerous currencies in which we transact business around the world. Our adjusted EPS increased 60% sequentially from the fourth quarter. On the next 3 slides, 7, 8, and 9, we have provided segment information for your reference.

First in North America, sequentially, demand improved across most business units including our utility businesses, which benefited from a relatively mild winter and demand for cables used in wind farm applications. Specialty cables, particularly those used in natural resource extraction and transportation applications, continued to be a source of strength. Sequentially, first quarter operating income of $30.4 million was above our expectation as metal cost headwind subsided and demand improved sequentially 10%. In ROW, sequentially, demand driven by construction-related activity in Venezuela and the Philippines and normalizing conditions in Thailand was more than offset by a typical and seasonally slower start to the year in many Latin American countries. Also the fourth quarter of 2011 included elevated copper rod shipments in sub-Saharan Africa following the rapid decline of copper prices at the end of the third quarter as well as strong demand for electric utility products in Mexico. Sequentially, first quarter operating income of $18.5 million was above our expectation as metal cost headwind subsided and conditions in Thailand improved.

In Europe and Mediterranean, sequentially, demand improved for medium and high-voltage cables in France along with the supply of offshore specialty cables in Germany. Also, metal pounds shipped out of our Spanish facilities increased in the first quarter as compared to the significant decline experienced in the fourth quarter. Sequentially, first quarter operating income of $4.5 million was above our expectation as metal cost headwind subsided and the benefit of higher volume in most European countries helped to partially offset the ongoing weak pricing environment in Spain and a seasonally slower submarine and land turnkey project business.

At the end of the first quarter, the company maintained a $650 million backlog for submarine and land-based high-voltage and extra-high voltage cable projects.

Finally, moving to Slide 10. Our credit profile remains strong with the financial flexibility to fund our working capital requirements and capitalize on global opportunities. At the end of the first quarter, the company had over $1.2 billion of excess liquidity across the globe. In addition, the company has approximately half of its $125 million share repurchase program authorization outstanding following the $62.5 million, or 5% of common shares outstanding in purchase during the fourth quarter of 2011. Those shares were purchased in the first quarter.

With these comments, I'll turn the call over to Greg for a recap of our Q2 expectations and full-year business trends, which are summarized on slides 12 through 15. Greg?

Gregory B. Kenny

Thank you, Brian. And good morning, everyone. Revenues for the second quarter of 2012 are expected to be in the range of $1.6 billion to $1.65 billion on high-single digit global volume growth sequentially. Adjusted operating income is expected to be in the range of $75 million to $85 million, excluding the impact of a one-time, non-cash pre-tax charge of $6 million for the termination of a legacy pension plan in the United Kingdom. Excluding items, adjusted earnings per share is expected to be in the range of $0.65 to $0.75. Our second quarter outlook reflects a seasonally stronger quarter with improved demand in operating results in each of our reportable segments despite the ongoing weak operating environment in Spain.

As summarized on Slide 13, we expect the positive momentum built in the full-year 2011 and the first quarter of 2012 to continue into the remainder of this year as we head into the seasonally stronger quarters. Consistent with our viewpoint, one quarter ago, we continue to expect unit volume to grow in 2012 in the range of 3% to 7% year-over-year. This expected improvement is based on a stable to somewhat improving markets in North America, in ROW and the European-based global turnkey project business that is gaining traction and growing, more than offsetting the ongoing market pressure in Iberia.

Assuming the current metal pricing and economic environment, we expect the adjusted operating income for the full year of 2012 to be in the range of $270 million to $300 million, an increase of 9% to 21% as compared to 2011. The global pricing environment remains broadly unchanged as compared to 2011 as industry capacity levels remain at relatively low levels. While we continue to experience pockets of pricing and demand improvement, we are cautious as our visibility remains limited and cost inputs and turnkey project timing continues to be volatile.

With volume and earnings growth expected in 2012, we expect operating cash flows to be in the range of $200 million to $300 million, assuming the current metal price environment. As you know, movements in metal prices and demand volatility can have a material impact on our working capital requirements and operating cash flows. Our annual capital spending for 2012 is expected to be in the range of $90 million to $110 million, in line or just below depreciation. This range is slightly higher than our previous communication, principally due to the timing of projects in ROW and for the purchase of equipment related to our European base turnkey project business.

Overall, our expectations for 2012 have not changed. As we've discussed in our previous call, we expect to benefit from strength in global aerial transmission projects, specialty cable for products using oil and gas and natural resource extraction as well as transportation applications, electrical infrastructure, mining and construction activities in Central and South America and recovery efforts in Thailand. Our European business should continue to show improvement during the summer months as warmer weather allows for cables to be installed in the Baltic and North seas. The company continues to look for ways to reduce costs in Europe generally, and in Iberia specifically, in order to allow the facilities to be globally competitive given the sustained weakness in the domestic market. Also, our recent investments in Mexico, South Africa, Peru and Brazil are maturing nicely. And last week, we announced another significant milestone as we inaugurated our manufacturing facility in India. At current installed capacity, our Indian plant is capable of generating annual revenues in the range of $100 million to $120 million, complementing our existing exports into the country. We are very focused on daily execution, working capital management and continuous improvement. We continue to be active in evaluating development opportunities in emerging markets as well as enhancing our product offerings and develop markets through both internal and external investments.

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

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Jeff Beach from Stifel, Nicolaus.

Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division

In view of the stronger than expected first quarter volume up almost 6% sequentially, you've given guidance for high-single digit growth in the second quarter. How does this compare historically, that seasonal climb, particularly in view of those strong first quarter volumes?

Gregory B. Kenny

Yes, it would probably be just a little bit sharper than historically or on the norm. Again, history has been bothered by 4 years or 3 plus of a financial crisis. And then of course, a booming 2005 to 2007, early 2008 timeframe. So normal has been a word that we wish we could use more. But I would say, Jeff, it's roughly in line with what we would expect. There might have been a little bit of pull forward. We don't think very much in the utility business due to the warm weather in North America. Projects move around, and we're trying to think maybe through a year rather than quarter-to-quarter because these turnkey projects, including the big transmission projects, can bounce around or be delayed a couple of weeks. But broadly, we would expect North America to be up in the high-single digits, a little bit less in Europe and Mediterranean principally because of the stress that we're seeing in Southern Europe. And then in the rest of the world, we would expect double-digit increases in the second quarter versus the first quarter. But I would say, pretty typical of what our modeling would tell us if nothing else is going on in the macro economy.

Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division

And then just as a follow-up. The inventories, on a carrying cost, went up in the quarter but on a metal adjusted basis, were they up more than you -- inventories you were looking for flat. Were they up more than expected because of the volume?

Brian J. Robinson

No, Jeff, I'd say they were flat. I think when you look in the balance sheet, there's some inflation with respect to just your average cost and some currency but on the quantity basis, well, pretty flat.

Operator

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

Matthew S. McCall - BB&T Capital Markets, Research Division

So, I guess following up on a previous question, you talked about 3% to 7% volume growth last quarter for the full year. You're doing a -- you did a little better than you anticipated in Q1. Looks like Q2 shows -- is still showing some strength, no change there. I understand that, that it's a somewhat wide range but just maybe talk about the assumptions that you're baking in for the back half that would cause that number not to tick a little bit higher.

Brian J. Robinson

Jim, Matt, I would say -- it's Brian, I would say, a meaningful piece of evidence [ph] is going to be around the seasonality in the business, right? So we're expecting typically that second quarter -- second to third quarters to be our strongest quarters with a maybe a little higher bias towards the second quarter. So, it's -- we've given the annual guidance on the volume -- from a volume perspective a quarter ago. This quarter we supplemented with the income, which is really not -- which isn't saying we really have better visibility in the business. It's really more a way of looking sort of from a full year sort of contextual perspective given some of the volatility we've seen on the -- and as we get moved around by copper prices as you've seen in the past. So we'll see, but I think when we think about '12 as we've said for quite some time, the things that we -- as we said, we're focused on the execution, we're focused on the working capital management. So we still feel pretty good in that 3% to 7%.

Gregory B. Kenny

The U.S. is -- the early cycle stuff picked up. We see a little bit of wind activity because with -- there's a question of -- does it get funding continue, so they're finishing projects and it looks like after the election, the extension of the wind tax credits will play. But the U.S., I would say, is broadly not accelerating. It's certainly been, over the last couple of years, a pleasant surprise and came up faster than other parts of the world. And it seems to be sort of moving sideways, though seasonally we will be up, but that's seasonal, not a broad break out. We continue to focus on execution and continuous improvement and that's -- so we expect to pull costs out of the business every year. In Europe, what's happening there is France seems to be okay. We are now one company in Europe. We're making some progress in European markets. As you know, Europe was built through acquisition. And we've been -- reluctant to really get -- to get real specific about our turnkey submarine business because we are really in the startup mode, winning contracts and then needing to execute them. The execution is always difficult and complex and timing moves around because these projects have many actors including governmental. But we do have that, largely buoying the continued weakness in Spain and, frankly, all the cost out we have in Spain gives -- has been given back to the markets as that demand has even stepped down in the second half of last year. So we're hoping is continuous cost out in Iberia, a stabilizing market domestically, exporting more out of Spain into European and regional markets, and then ROW is still a story of the Americas being the strongest, but we've seen nice activity in the Philippines and in Thailand as the Thais begin to recover from the natural disasters. But the Americas are probably our strongest market even without U.S. construction anywhere on the board yet. So net-net, I think this is a year of sort of that 3% to 7%. Some of it we're helping ourselves. So I wouldn't describe the markets as growing necessarily in those levels. We have some new plants coming on and then we're executing them on some of the investment we've made over the last couple of years. But that's sort of a broad travel through what we're seeing.

Matthew S. McCall - BB&T Capital Markets, Research Division

The other question I have is really about the assumptions in the guidance, I mean -- this is for you, Brian. You've seen SG&A kind of bump around a little bit '93, '96, back to '94. So the first question is, what's the SG&A assumption we should be making both in Q2 and for the full year? And then any commentary about items below the operating line we should keep in mind as we're viewing the quarter or the year?

Brian J. Robinson

I would say that from an assumption perspective, as you know, these things can be variable. But I'd say on the SG&A, the modeling or -- I think we've described it as to be helpful $95 million plus or minus. So I think that continues. We're watching every cost. Obviously, in Europe, we're focused really hard on reducing every cost. So that's what I'd say on SG&A side. Below the line, Matt, I'd say, as you can see on the mark-to-markets on the metals and the currencies for the large contracts, which we adjusted after the EPS, adjusted EPS purposes. Interestingly, the fourth quarter was $8 million loss and is mark-to-market and most of that came back in the first quarter. So again, we don't assume that in our -- we're still[ph] basically flat in our guidance. The other last piece would be on the interest expense. I would expect -- in the second quarter, we see interest expense maybe $2 million to $3 million higher, which is partly seasonal to support the working capital investment behind the higher volumes and also, in our operations outside of North America has more to do with some timing payments, timing of metal payments and paying for longer terms. But those would be the principal items.

Matthew S. McCall - BB&T Capital Markets, Research Division

And would that interest expense number then tick back low in the back half?

Brian J. Robinson

You know, I would say, our expectations is it will be in that 23 to 26 kind of range. Matt, I would expect that it would tick lower as we move to the seasonal working capital.

Operator

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

Shawn M. Harrison - Longbow Research LLC

First question I had was just trying to, I guess, triangulate the European profitability this quarter to make sure that I have everything correct. Volumes were up very nicely. But then you highlighted weakness within -- pricing within, I think, Spain. I don't know if any other regions -- was it just the fact that whatever volumes you ship out, it was a negative mix shift either because of pricing or was it a mix of product also a little bit weaker and how does that normalize into the second quarter?

Gregory B. Kenny

The mix is weaker because we didn't -- while we did more work, it was the oil and gas and submarine cables then we had anticipated, we would do in the winter where you can't install. So that was a bit better than we thought. But really, that business begins to contribute in the second quarter because of weather breaks. So yes, in Europe, the mix would be better in the second quarter because we are doing submarine projects in a much bigger way than we could in the first quarter. There really hasn't been a mix shift out of Spain. I would say Europe and North Africa is fairly a wash-in [ph] capacity. We're having to sell about 65% of what we make in Spain into regional markets. They're fiercely contested and Spain stepped down in terms of demand. So anything available in Spain was equally, fiercely contested. Clearly, that's causing a lot of stress for industrial enterprises, including competitors in Iberia. So we are blessed with having access to other markets, but we also need to keep driving our cost down because we're not anticipating that -- Spain will recover but it won't look like it did, obviously, for some years ago. France has been a nice story, and we continue to see pretty strong spending by the utilities in France, which our communications business in Europe is getting traction and that's a pretty nice business for us. We have some fine micro-sheet products that we refer to. So fiber and copper Datacom is strong. And then we're very busy generally in our oil and gas and specialty products principally out of Spain. We also make some of those products in France and also Germany. So I would say more of the same. We are working hard on one company in Europe, which was built through acquisition. So everything from best practices, lean manufacturing, safety, purchasing and I think that's -- that will help pull us through this time. But the mix is broadly the same just because of the winter, we couldn't do a lot of the higher value products. And we got into, I would say, a step-down in pricing into some of the export markets in Spain as those volumes broadly weakened. We are doing well. We're seeing a little bit of a pickup, not materially but we're executing in North Africa and we have -- we service also parts of Africa from Portugal. And I would say those businesses are enough. Would they might, we would hope, but I would say we're performing a bit better with Africa probably being the strongest piece of that mix.

Shawn M. Harrison - Longbow Research LLC

And then I guess just 2 brief follow-ups. Just on pricing within Europe, do you think we found the bottom and then moving to South America, maybe could you just talk about, I guess, the summertime outlook if you're seeing any volatility in projects?

Gregory B. Kenny

Yes, I think we're clearly around the cash cost of the least efficient producers in Spain. You need a balance sheet to get through it. You need financing. As you know the working capital is daunting in this business. So I would have to say that we are at a level where you can't imagine much more downside in copper or aluminum products out of Spain in terms of pricing. For some competitors, you're better not working and tying up capital at these levels. The -- and to answer Central and South America, there is projects that are out of Brazil, and there are projects, transmission projects, throughout the region. But be mindful that we've got -- a lot of our core activities are around the daily flow business of construction and specialty products. We continue to bring product designs from the Europe and the U.S. into the regions. We're expanding our capabilities in Brazil to make industrial and data cable products. Mexico continues to mature as an important market for us and we're well into that startup around field. And then of course, there's Central America and the [indiscernible] impact. But broadly, the Americas remain strong and -- I mean, that's -- in a relative sense, and we're -- we continue to push hard, really bringing new products into the region. But they do have a seasonal pickup in the second quarter, and that should be a low-double digits kind of improvement from the first quarter.

Brian J. Robinson

This is Brian. I just want to come back on one of the previous questions from Matt, which is on below the line items -- on the mark-to-market adjustments, we assume that those are 0 going forward, I may have used the word flat but it was -- but I -- my intention was that we assume they're 0, which is how we describe it in the release and in the slide presentation.

Operator

Your next question comes from the line of Rich Wesolowski from Sidoti & Co.

Richard Wesolowski - Sidoti & Company, LLC

In the past couple of months, we've seen Nexans acquire AmerCable and then launched a plan to build a high-voltage plant in South Carolina. General Cable, as you've could expanded your footprint, it's focused less and less of your spending in North America. Could you comment on whether you'll need to invest in North America in a larger way than we've seen in recent years? Or if not, remind us of why you would expect to maintain share in the market?

Gregory B. Kenny

Yes. Well, Rich -- as -- and I think as our investors know, we've talked about the high-voltage, extra-high voltage business in North America. We hope it grows quickly and well in terms of underground projects. We have historically supplied that from France. When we built our facility in Mexico, we built a capability to sell high-voltage products underground from Mexico throughout the region, including up to Mexico -- up to Canada and down through the Central America and South. So we have that capability. I would say that we hope Nexans is right in terms of the demand. We can service it. But we did not feel we needed to make a facility in the U.S. to go beyond basically 132 in some sizes up to 220-kilovolt. ABB, Nexans and Prysmian have announced plans in that area, and I think our combination with CLEC, Thailand and Mexico, in combination, contests well from a cost basis in technology. We have always felt that the developed markets would go ahead and rebuild the networks, and we're positioned to do that. We aren't shy -- while we have had a view of taking products into the developing world, products in inter markets. We have invested in Europe. You saw us get into the broadcast cable business in the U.S. And under the right conditions, we would certainly look at investing in the U.S. and Canada. We think our share is strong, but we're always looking at other product lines in the market. So we continue to see opportunity in the Americas and frankly, it's been one of the quickest snapbacks globally of the developed world from the financial crisis. So we're very careful towards [ph] the capital and with lean manufacturing. You're continuing to look at what could you theoretically run with these machines if you had one-second changeovers and no scrap, no waste, nothing, and we call that entitlement capacity. So we really are -- well, we're really focused on return on capital employed broadly as well as being critical to our customer we often talk about the power of one. We talked about it so the strength of the large and nimbleness of the small and that remains our model. So I feel very good about our position in the U.S. and Canada. And we certainly have maintained our prominence, and we're always looking for fresh opportunity, whether internal development, we also -- be the last year, as I think you remember, we entered some of the specialty oil and gas markets to internal investment.

Shawn M. Harrison - Longbow Research LLC

And secondly, there's limited value in the inventory statistics that outside has been compiled, and I'm curious as to by the metrics that you measure internally, how your volume turnover has changed during the past year or 2, if at all?

Gregory B. Kenny

In the U.S. and Canada?

Shawn M. Harrison - Longbow Research LLC

No. Specifically your inventory as a company, as a whole?

Brian J. Robinson

Overall, yes. I would say, Rich -- I think, in the -- back in the crisis years late '08, '09, we saw a deterioration in the turnover of the inventory and since that time, we've steadily continued to improve the turnover. It's an area, it's part of our working capital management, it's part of our metrics that we are held accountable for. And internally, we use lots of different ways to measure that including -- actually, on a volume business, as you know, and I appreciate that your comment outside the company is a little harder to measure it that way, but it's -- I would say, it's improved and it continues to be an area of focus.

Gregory B. Kenny

We get it -- we can get -- we need cycle time. We need visibility forward. So you're trying to avoid building the stock. We have trials going on with distributors. So we're seeing into their inventory and doing a replenishment much like you might see in an OEM or retail area. We're doing some of that with utilities so as you'll get better visibility, you should be able to get to improve that management, and this has continued to be an area of focus or else we would want to get the networking capital to support our dollar revenues down and also get our fill rates, which are already very good, up. And those are key metrics that we look at. How many shipments? What's the size of the shipment? And that -- all of that comes back to your capabilities to forecast and then have the right goods on the shelf. We would rather have one day if we could because of the volatility of aluminum copper and to a lesser extent, petrochemicals and steel. Just circling back, Rich, just to be clear, AmerCable is a major competitor of ours. There are other competitors. So we already have all the capabilities in place that AmerCable has, which was acquired by Nexans. And that's been an area that came to us when we acquired the ICC back in 1999 and there are -- have become global businesses with global competitors, and we're selling all over the world and we also see competitors in this market. But certainly, our Brand Rex and Anaconda and other brands are every bit as sought after as the AmerCable, which is also well known. So we feel we're in a good position to compete well for those customers.

Operator

Your next question comes from the line of Anthony Kure from KeyBanc.

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

Just a couple of quick questions. As we look at the full-year operating profit guidance, correct me if I'm wrong, but is this the first time you have issued full-year operating profit guidance? And if so, I mean, I know you have the volume out there but you mentioned the visibility is still generally limited, it doesn't seem like there's a change in tone there. So I guess, the question is, what's different about your model or mix? Or is it really these projects that are driving that confidence to go out with that full-year operating profit?

Gregory B. Kenny

Anthony, as you know, the markets in the 2005, '07, are rising rapidly and getting a handle on that rate of improvement was tricky. We also had acquired Phelps Dodge, and needed to get both comfortable with the business and see what it's capable of. And then for the last 3.5 years, we've dealt with both extraordinary external circumstances as well as a whole bunch of greenfields, brownfields and entering -- investing to enter the turnkey systems business. So we were really in a -- we were globalizing the company. We were integrating, we've done in 10 years, 20 or 25 acquisitions. So I think what we now have in metals, we obviously -- there's many, many things that we've said in terms of our view at this time. So we need to execute, we need the world to sort of look like it is today, which is a soft recovery sort of rolling sideways to slightly up in most markets. And what we felt as our investments have matured enough, that we have had enough diversity and I hate to use the word new normal because I'm not sure what that means, but given that we have some stability in the financial markets, we felt that we could range it but obviously, we don't operate other than the turnkey business with a material backlog. We typically have 2 to 3 weeks of backlog and then we have obviously rapid material changes historically. So this sort of assumes metals stay where they are. The world sort of is at this "new normal", which is a measured recovery and that Europe gets to continue to stabilize as the Central Bank operates there. But we felt that given all the investments in brownfields, greenfields and the Phelps Dodge integration and the world stabilizing that we could be able to at least look at it in those terms. But clearly, we picked a point in time and a set of conditions, and it didn't factor in for the problems in Europe or if metal dropped a dollar or went up a dollar.

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

I guess on a more near-term perspective, I think you've talked about a $10 million headwind was expected in the first quarter from the copper playing out here. Could you just estimate what that actually was? Was that probably a lot less in $10 million just based on your comments. But and if you were to guess maybe would you say it was 0 or still a little bit of a headwind?

Brian J. Robinson

Yes, Tony, I would say it's probably closer to that 0 to a little bit of a headwind. I think most of the being beyond our expectations from a range of operating income was around the metals and while the volumes were obviously much better, a lot of that was, as we said, in Spain, at pretty weak pricing.

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

And then for the second quarter guidance, I would assume that this is just a neutral factor altogether now, is that correct?

Brian J. Robinson

That's correct.

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

And then one last thing on the 2Q EPS, I mean, we touched on it a little bit with a higher interest expense, but if we add $2 million or $3 million to the first quarter interest expense, that gets to about, let's call it, $20 million. It's only about $0.04. Am I wrong with that $20-ish million interest expense? Is that expected to be bigger? Is that really driving the EPS at the midpoint of about $0.70 despite the high operating income?

Brian J. Robinson

Yes, and I think, Tony, your -- those numbers are on a non-GAAP basis, right?

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

Correct.

Brian J. Robinson

No, I would say -- and the biggest mover from Q1 to Q2, a couple of things, part of it is the seasonal nature of the business. As we talked about the improvements that we expect the -- with the warmer weather, more activity on the project side. But again, this goes a little bit back to some of our earlier discussions around our visibility. So there remains -- and you can see in our materials that a number of certain moving pieces, clearly, Iberia remains a wild part as we move throughout the year. So short answers, I don't -- you're not missing anything. I think the big items are around the volume, and we indicated the interest expense.

Operator

And there are no further questions in queue. I'll turn the call back over to General Cable for any closing remarks.

Len Texter

Thanks 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

And this concludes today's conference call. You may now disconnect.

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