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Executives

Michael Dickerson - VP, Finance and IR

Greg Kenny - President and CEO

Brian Robinson - CFO

Robert J. Siverd - General Counsel

Analysts

Jeff Beach - Stifel Nicolaus and Company, Inc.

Stuart Bush - RBC Capital Markets

Will Stein - Credit Suisse

Celeste Santangelo - Merrill Lynch

Joseph D. Gibney - Capital One Southcoast

Steven Nissan - Mindflow Capital Investments

Brett Levy - Jefferies & Company

Steven Gambuzza - Longbow Capital

Nat Kellogg - Next Generation

Darrel Norian - Blackrock

[Phillip Pacelli] - Goldman Sachs

Davis Paddock - AIM Investments

Tony Wong - Advent Capital

General Cable Corp. (BGC) Q4 2007 Earnings Call February 13, 2008 8:30 AM ET

Operator

Good morning. My name is [Shatina], and I will be your conference facilitator. I would like to welcome everyone to General Cable Corporation's fourth quarter 2007 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)

General Cable, you may begin your conference.

Michael Dickerson - VP, Finance and IR

Thank you, Shatina. Good morning, everyone, and welcome to General Cable's fourth quarter 2007 earnings conference call. I'm Mike Dickerson, Vice President of Finance and 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 FirstCall and on our web site at GeneralCable.com.

I want to call your attention to our safe harbor provision for forward-looking statements that can be found at the end of our press release. The safe harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward-looking statements. Our current Form 10K report on file with the SEC provides further detail with regard to risk factors related to our business.

During this call we may refer to adjusted operating income and adjusted EBITDA, which is defined as earnings before interest, taxes, depreciation, amortization, plant rationalizations and other restructuring items. These non-GAAP company defined measures are being provided because management believes it is useful in analysing the operating performance and cash flow before the impact of various reorganization and other charges. A reconciliation of adjusted operating income and EBITDA to GAAP net income was made available on the Investor Relations section of our web site at GeneralCable.com shortly after the earnings release yesterday afternoon.

The format for today's call will first be some discussion by Greg Kenny about the overall business environment and the performance of each of our reported business segments for the fourth quarter. Secondly, Brian Robinson will discuss overall financial results for the fourth quarter. And finally, Greg will provide some comments on the company's investment strategy and the first quarter 2008 outlook, followed by a question-and-answer period.

With that, I'll now turn the call over to Greg Kenny.

Greg Kenny - President and CEO

Thank you, Mike, and good morning.

First, let me thank the thousands of General Cable associates that have made 2007 such a success. Our business around the world delivered record levels of revenues and profitability. These results come from hard work every day to identify cost savings opportunities and having the motivation to see these ideas through. It comes from conviction around new products and markets like submarine power and submarine fiber optic communications systems. It comes from the ability to see through the geopolitical risks to important and expanding developing economies in Asia, African and Latin America.

While some of these actions can positively impact earnings in the short term, others are geared for the longer-term growth. It takes both to be a successful enterprise, and I look forward to 2008 with the expectation of another strong year for revenues and earnings for the company.

Over the last several quarters, we've seen many global developments that I believe will provide long-term opportunity for the company over the next decade. There are certainly too many projects related to new generating capacity and transmission links and the like to mention individually, but let me mention a few major themes playing out around the world.

First, alternative energy power is beginning to take center stage in the global arena and green jobs are now part of the U.S. political debate. Countries are identifying new sources of power generation in a world that has experienced tremendous increases in oil prices at a time when new deposits of fossil fuels are getting more difficult to find. There's building political pressure in countries around the world to improve energy security and to use cleaner fuels to lower carbon emissions.

Wind is a choice that's becoming increasing economically competitive according to the Global Wind Energy Council. In the U.K., for example, they have targeted the amount of electricity generated by renewable technologies to reach almost half the national demand in only 12 years. Given that terrestrial and offshore wind power is the most developed technology, it should receive a disproportionate amount of growth in this market.

Similar mandates are occurring all over the world, including Western Europe, Australia, New Zealand, North and South America. We see tremendous opportunity to participate in a meaningful way given our global footprint and experience.

Second, developing economies are beginning to focus resources on their own electricity needs. Nations with abundant natural resources are reinvesting in their own infrastructure to attract new business, grow their economies and take more active roles in the global economy.

Recently in South Africa we saw a major utility company resort to rolling blackouts within that country as well as to many of its neighbouring countries as they could not keep up with the demand due to strong economic development coupled with the energy needs of a growing middle class. According to an energy analyst at Frost & Sullivan, Africa's electricity supply industry is expected to require a total investment of $563 billion over the next 20 years to meet the growing demand. We see this type of trend occurring in South America, China, India, and the Middle East as well.

In short, our long-term thesis of global secular growth in energy exploration, production, generation, transmission and distribution remains well intact.

As you know, we announced the completion of the PDIC acquisition. When we did so, we also announced several management changes that would impact the way we report internal performance. With these changes to the way information is reported within the organization, it was necessary to change the reported segment information to align ourselves with the segment reporting requirements under U.S. GAAP.

The new segments are one, North America, which will principally include the operations in the United States and Canada, two, Europe and North Africa, and three, the rest of the world - or ROW - which includes the company's operations in Latin America, sub-Saharan Africa, the Middle East and Asia-Pacific. This latter group includes General Cable's historical operations in the Pacific Islands, New Zealand, Australia, India and China.

The company has provided historical information for these segments in the Investor Relations section of its web site. Additionally, the company plans to provide revenue data by major product family on a global basis.

The company is currently working on identifying product groupings that can be applied and consolidated on a global basis and that will have the most meaning to investors. When completed, I expect there'll be five or six product categories. This will be available to investors in connection with the filing of the company's 2007 annual 10K report later this month.

Now let's turn to the fourth quarter. On a consolidated basis, net sales in the fourth quarter of 2007 were $1.297 billion, an increase of $377 million or 41% compared to the fourth quarter of 2006 on a metal-adjusted basis.

Fourth quarter 2007 operating income before charges was $93 million compared to operating income of $57.5 million in the fourth quarter of 2006, an increase of $35.5 million or 61.7%.

Operating margin before charges was 7.2% in the fourth quarter of 2007, an increase of approximately 100 basis points from the operating margin of 6.2% in the fourth quarter of 2006 on a metal-adjusted basis.

And earnings per share for the fourth quarter before charges was $1.00, ahead of our guidance for the quarter of $0.80 to $0.85 and well ahead of the prior-year earnings per share of $0.67.

European electric utility and electrical infrastructure markets have remained strong with the exception of Spanish construction.

Operating earnings in the company's European business grew by 79.6% to $44 million in the fourth quarter of 2007 compared to the prior year.

Operating margin was 8.6% in the fourth quarter, an increase of 250 basis points from the 6.1% reported in the fourth quarter of 2006 on a metal-adjusted basis. Approximately 100 basis points of this improvement relate to the favorable resolution of customer project performance obligations during the fourth quarter.

Revenues were up 28.4% in the quarter on a metal-adjusted basis. Before the impact of acquired businesses, revenue growth was 19.8%.

The company's internal investment actions in Europe have focused on high-growth areas of the market such as submarine power cables, long-haul submarine fiber optic communications systems, high-voltage underground cable systems, and cabling for oil and gas applications. Demand for these products remains high and capacity tight in the market. The company has accelerated its investment plans in these high-growth areas of the market and expects solid returns over the next several years from these actions.

Recently the company was awarded its first submarine wind farm project, which is the first to be located in the North Sea, and we are working on a significant long-haul submarine fiber optic communication link which is currently in sea trials.

In North America, revenues increased 4.8% in the fourth quarter compared to 2006 on a metal-adjusted basis. During the quarter, demand for electrical infrastructure projects as well as electronics, networking and assemblies were strong.

Operating earnings before the impact of the telecommunications equipment write-off and a LIFO inventory charge increased $2.3 million as a result of continuing strength in the company's electrical infrastructure and electronic products, which was partially offset by lower volumes and pricing for certain utility cables.

During the quarter, the company further rationalized its outside plant telecommunications products manufacturing capacity due to the continuing declines in telecommunications cable demand, which now approaches maintenance levels and is 60% to 70% from its peak. As a result, the company has closed a portion of its telecommunications capacity at our Tetla, Mexico facility and has taken a pre-tax charge of $6.6 million to write-off certain production equipment that cannot be deployed elsewhere in the world - I'm sorry, elsewhere in General Cable. This action will free approximately 100,000 square feet of manufacturing space, which the company plans to utilize for other products for the wired cable markets in the Americas.

While exchange cable is only about 5% of the company's global revenues, it remains profitable and a core product line, one that we'll defend vigorously. From our very efficient Lawrenceburg, Kentucky facility, which makes high-end data and telephone cable, the company is able to comfortably respond to favorable changes in overall demand or customer requests to award General Cable a larger share. The company does maintain reserve telecommunications cable capacity in a number of locations around the world should the overall market opportunity improve in North America.

Brian will provide more detail on the LIFO inventory charge in a few minutes.

Markets in Latin America, sub-Saharan Africa, the Middle East and Asia Pacific are particularly strong. This includes the markets for the company's historical operations in the Pacific Islands, New Zealand, Australia, India and China.

Revenue in the segment was up $240 million, principally related to the acquisition of PDIC which was completed on October 31, 2007. Operating earnings, including purchase accounting costs associated with the stepup of tangible and intangible assets and the related increase in depreciation and amortization expense but without the impact of LIFO inventory related charges were $16.9 million, an increase of $14.3 million from the fourth quarter of 2006.

With the addition of PDIC and its outstanding platform of assets and management, the company is pushing deeper into developing economies as well as introducing the combined company to areas of the world where the company has not historically participated in a meaningful way. For instance, in the Middle East the company was recently awarded certain contracts that will more than double our presence in the region over the next year.

Let me spend a minute on the acquisition of PDIC, which we completed on October 31. The integration of the business has been seamless, and PDIC's history as a standalone division of a major U.S. company has been a significant benefit as it relates to integration efforts. Management teams from many of PDIC's locations have met with their General Cable counterparts around the world to begin sharing best practices in technology, manufacturing, sourcing of materials and equipment, and developing go-to-market strategies for new products and regions. In short, management on the whole has been able to devote the majority of its attention to more highly value added synergistic activities rather than integration efforts. We've been playing offense from day one and have had no negative surprises.

I will now turn the call over to Brian Robinson, who'll provide further details on our financial performance for the fourth quarter.

Brian?

Brian Robinson - CFO

Thanks, Greg. With respect to the fourth quarter, I will first walk you through the significant items impacting the company's results for the quarter.

On a consolidated basis, net sales for the fourth quarter of 2007 were $1.2978 billion, an increase of $377.1 million or 41% compared to the fourth quarter of 2006 on a metal-adjusted basis. This growth was principally due to the company's exposure to global electrical infrastructure markets and the acquisition of PDIC, as well as favorable foreign exchange translation.

Revenues from acquired businesses contributed $271.5 million in the fourth quarter. Without the benefit of revenues from acquired businesses, revenues would have increased 11.5% on a metal-adjusted basis.

Fourth quarter 2007 operating income before charges was $93 million compared to operating income of $57.5 million in the fourth quarter of 2006, an increase of $35.5 million or 61.7%.

Operating margin before charges was 7.2% in the fourth quarter of 2007, an increase of approximately 100 basis points from the operating margin percentage of 6.2% in the fourth quarter of 2006 on a metal-adjusted basis. This improvement was principally due to better price realization in many of the company's product lines, cost improvements from LEAN initiatives, and also the improved operating performance of the Silec, ECN and NSW businesses as well as the company's networking products.

In the fourth quarter, the company recorded one-time charges related to the write-off of certain telecommunications equipment as discussed by Greg earlier. This totalled $6.6 million on a pre-tax basis or approximately $0.08 per share.

Additionally, the company recorded a pre-tax LIFO inventory related charge of $6.7 million or also approximately $0.08 per share.

As has been our practice in the past, we have always called out non-operating inventory gains and losses for investors. Overall, our inventory accounting practice is to charge our income statement with the current cost of metals consistent with the LIFO principle.

The inventory charge is the result of two items - first, is the recapture of estimated LIFO gains for the year, which are booked in the 2007 year-to-date period. Throughout the year, the company must estimate the full year impact on its LIFO accounting of decreases in inventory quantities and record those estimates during the year. This is similar to recording estimates of effective tax rates. Based on actual inventory quantities at the end of the year, the calculation is trued up. The net impact for the quarter was an unfavorable charge of $2.2 million and approximately zero for the full year.

The second component of the charge relates to the timing of the acquisition of PDIC and the change in copper market prices from October 31, 2007 to the end of the year. Under U.S. GAAP LIFO accounting rules, the company was required to record the value of inventory on the books at October 31, 2007 for PDIC at the then-market value of copper, which was $3.52 per pound. The change in copper to the end of the year results in a lower-of-cost-or-market adjustment for this portion of inventory totalling $4.5 million as the per pound value of copper fell to $3.03 on December 31, 2007.

Our net interest expense for the fourth quarter of 2007 was $11.9 million compared to $6.8 million of net expense in the same quarter last year. The increase resulted from the issuance of $475 million of convertible notes at a 1% coupon on October 2, 2007 and fees associated with the expanded ABL and the unused secured bridge financing arranged in anticipation of the PDIC transaction, partially offset by the net interest rate benefit of $325 million high-yield note bonds issued in March, which allowed us to call our $285 million in high-yield bonds at a net interest savings of about 200 basis points.

With regard to taxes, the company continues to maintain an effective tax rate well below the U.S. statutory rate due to its tax planning strategies and the continuing effect of tax rate benefit from recent acquisitions as a result of the increased relative mix of income from lower-rate jurisdictions. The resulting full year 2007 effective tax rate is 32.3% and 30.1% for the fourth quarter. For 2008, we are estimating an effective tax rate of approximately 35%.

Total debt for the corporation was approximately $1.3988 billion at the end of the fourth quarter of 2007. Net debt at the end of the fourth quarter was $1.085 billion. This is up by about $655 million from the prior year, due principally to the borrowings related to the acquisition of PDIC, the increased net borrowing from the company's refinancing of its high-yield facility, capital expenditures of $153.6 million throughout the year, and the termination of a Euro-based cross currency swap.

Adjusted EBITDA was $113.8 million for the fourth quarter of 2007, resulting in $440.8 million of EBITDA for the trailing 12 months and a leverage ratio of 2.5 times on a net debt basis. This calculation only includes two months of trailing EBITDA for PDIC and would result in a much lower leverage ratio on a pro forma basis assuming a full year of PDIC performance.

Capital spending in the fourth quarter was $79.7 million, while depreciation and amortization was $20.6 million. For the year, the company has invested $153.6 million. This spending is overweighted internationally, specifically for the electrical infrastructure in electric utility markets as well as new investments for submarine power and submarine fiber optic communications systems. Greg will talk more about our investment strategies in a minute.

With those comments, I'll turn the call back to Greg for some final remarks.

Greg?

Greg Kenny - President and CEO

Thanks, Brian.

General Cable has always been a patient investor. Sometimes our ideas take years to develop. Many of the acquisitions we've made over the last decade have been outside the auction process and are based on long-term strategies, persistence, and often unique circumstances - for instance, the turnaround for a complex set of assets.

While we remain active in the market looking for opportunities, particularly in the developing world, price expectations have been going up and it may be cheaper to build rather than acquire in some cases.

With this in mind, we are expanding our internal investment program in the short term to position the company to fully participate in the higher growth areas of the market from both product and geographic standpoints.

We expect 2008 will be a peak year for capital expenditures, so let me give you some color around that.

I would characterize the company's internal investment plans in several buckets  one, normal capability maintenance and ongoing environmental health and safety, including that required for PDIC, two, LEAN-driven cost savings opportunities, three, capital for new products, and four, greenfield activities.

In 2008, the company estimates it will spend around $200 million for these initiatives. This amount would be broken down approximately 25% for normal capacity maintenance, asset replacements, environmental health and safety, 25% for cost improvement projects with very short cycle payback periods, 25% for greenfield opportunities, and about 25% for new products and capabilities for high and extra-high voltage cables and systems, submarine power, submarine fiber optic, as well as specialty compounding.

Many of these initiatives are strategic, one-time investments. I would expect capital requirements in 2009 to fall considerably from this 2008 peak level. Nevertheless, we'll remain opportunity driven in this regard.

The company continues to benefit from its strategic investments in new products and geographies, more than offsetting the ongoing weakness in certain product lines in the developed economies.

For the first quarter, the company expects to report earnings per share of $1.05 or more compared to adjusted earnings per share of $1.01 in the fourth quarter of 2007 on revenues of approximately $1.5 billion.

That concludes our prepared remarks. I'll now turn the call back 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 Jeff Beach with Stifel Nicolaus.

Jeff Beach - Stifel Nicolaus and Company, Inc.

Yes. Good morning, Greg, and great quarter.

Greg Kenny - President and CEO

Thanks, Jeff.

Jeff Beach - Stifel Nicolaus and Company, Inc.

PDI, can you talk a little bit, expand a little bit on some of the strategies you expect to take at PDI in Asia Pacific? Is there any thoughts yet on expanding and attacking the India market more with new products? Before I've heard about the overcapacity and unfavorable pricing and China as being somewhat of a hindrance.

I'd like to hear a little bit about plans in Latin America. Can you just talk a little bit about opportunities you see?

Greg Kenny - President and CEO

Yeah. You know, Jeff, again, the important thing for PDIC was a great management team, very well-run company, very good at working in difficult environments, tremendous skills in both metal working as well as in equipment and organized as one company.

And I guess I would say that the team is exceptional, which we expected and anticipated. They're as good or better than I thought possible. It's really a first-rate team and we're launching offensive opportunities in a lot of areas that we've been wanting to get at but really lack the manpower and the understanding to accomplish.

So to the first question, India, we acquired a small position in India last year, and with Phelps Dodge, who was doing about $100 million on the ground in India principally from its Thai manufacturing base, they brought tremendous understanding experience that's coupled with our team on the ground. So we have a team hired and a business going, and we remain on track and probably are accelerating our thinking around a greenfield that would represent our combined activities in the region but would be on the ground in India. And that would be something that I would hope would be running before the year's out, and that would be a meaningful - and part of our capital spending - a meaningful investment.

But we already are selling there, both on the ground products made in India as well as products coming in from around the world, particularly Thailand, into that country.

So we see that as full of opportunity. They've made tremendous progress in the last six weeks in developing the ongoing investment case, and we will be launching, I believe, very shortly. So that's on course.

I would say in Asia, Jeff, the PDIC does bring long experience in China. They have minority investments in the power cable side which gives us a tremendous window as to what's going on in that market and perhaps when we would see the conditions right for us to actually enter in a more aggressive way the power cable business.

We do have an OEM business which is aimed at international companies that need a secure supply of high-quality products, and that is progressing nicely. And I would say next year we'll see our OEM business build out and our India business substantially accelerate - our OEM business in China - but probably not a broader entry into power cable next year.

We're seeing very strong opportunity around the region and everyone talks about China and India, but there's countries of 70 to 100 million throughout that region that we're doing very well in. Phelps Dodge has investments, either majority or minority positions, in the Philippines and in Thailand. And then we also have seen tremendous synergy between the Phelps Dodge assets in the region and our historical assets in the Pacific Islands and Australia, New Zealand.

So I think those teams are working today as we speak on a whole series of projects to reduce our costs in the region as well as think about a regional strategy of where we manufacture product and where we distribute it. So I like our hand very much in the region, and we're right where we want to be.

In Latin America, clearly a lot of change. Nexen's announced the intention to acquire Medaco, which is a leader in the region, of course. And Phelps Dodge has a long, long history - more than 50 years - in that region trading from Mexico all the way down to Tierra del Fuego.

So we see lots of opportunity there. The markets are consolidating, and we are seeing very good growth as well on the ground. So I like our hand very much, and again, we're very strong really in every country in the region and intend to continue to build our position there.

Africa is another part of the Phelps Dodge and General Cable world. We have an asset in Angola which is expanding nicely which has just joined OPEC, and we're producing cable out of Zambia, which is near the mines. We're very good at it and distributing that product throughout the sub-Saharan African region.

And of course you've seen increasingly the kinds of issues they're having around electrical infrastructures as well as a nice expansion in those economies, so we feel very, very good about that. I think you'll see us continue to build and invest in that region as well.

The integration of General Cable's asset in Brazil with Phelps Dodge in Brazil has already been completed and is rolling and contributing, so we feel real good about those things.

I'm not going to get into really specific areas that we're going to invest because I think we need to go ahead and do it and then enter the market without obviously writing our strategic plan publicly, so we feel good about the opportunity.

That was a key driver of Phelps Dodge acquisition and they're going to deliver, and I feel great about that team as well as how well they've integrated with the General Cable team. As you know, there's an operating committee of five people driving our activities globally. They're from many countries, and it's a company that really has a global face today.

Jeff Beach - Stifel Nicolaus and Company, Inc.

As a follow up, can you give just a rough estimate of what the organic growth is pro forma with PDI in rest of the world? Do you have a rough guess?

Greg Kenny - President and CEO

Well, you know, Jeff, you know, we've talked about the energy infrastructure probably needing over time to grow at a higher rate than global GNP or GDP, and you've seen a whole series of estimates come out with people showing much slower growth in North America or the United States and Europe offset by, you know, 5%, 6%, 7% kind of growth rates, which is down slightly from last year 100 or 200 basis points based on the slowdown in the developed world.

You know, I feel good about what those countries are doing. A lot of those countries, as you know, have positive surpluses and can invest. They have very healthy balance sheets.

So, you know, I think this is going to - clearly, the growth rates are well above what we see broadly in the developed world. But again, PDIC, as you remember, is about half energy infrastructure oriented and then again, a lot of it is construction, but we're seeing construction there of a different type. It's construction for the first time.

So I think it's going to be nicely above the North American growth rates. Europe, we're benefiting - as you know, North America, there's been very little acquisition activity - in Europe, we're benefiting by the tremendous opportunity that Silec and NSW has created as well as ECN. So Europe is, while it's slowing, as North America has, the actions we've taken and the investments we've made have really provided a lot of the pop coming from Europe.

So Europe's growth rates, again, are somewhat tied to our ability to invest over the last couple of years and improve these assets and judge markets that are just about to take off, which they are, in fact, doing if you look at the undersea world or the high voltage or extra-high voltage.

Jeff Beach - Stifel Nicolaus and Company, Inc.

All right. Thanks, Greg.

Greg Kenny - President and CEO

Okay, Jeff.

Operator

Thank you. Your next question comes from the line of Stuart Bush with RBC Capital Markets.

Stuart Bush - RBC Capital Markets

Hi. Good morning, Greg. Congratulations on the quarter and the year.

Greg Kenny - President and CEO

Thanks, Stuart.

Stuart Bush - RBC Capital Markets

My first question is I know you didn't want to give any details on capital spending on the PDIC side. Is there a way you can give some more clarity on what segments will be the focus for the greenfield Capex program? I'm especially interested in if that includes any new capacity for high-voltage power cable in the U.S.

And, you know, to that end, have you seen other players invest in that segment as well?

Greg Kenny - President and CEO

Yeah. Well, what I want to do is be prepared to meet the U.S. demand with our customers for high voltage and extra-high voltage and that can be aerial or underground. We're bringing in the aerial product from Europe or conceivably  I'm sorry - the underground product will come from Europe or Asia. We have not put high voltage capacity on the ground in the U.S. We think [Prisme] is intending to put a line up.

The market is primarily an aerial market historically, and we are prepared to meet what we think over time will be projects getting released and a strong period of reinvestment.

I think, Stuart, you know, these calls are not privileged and I think if I go through where we're thinking of investing, we probably are telling competitors too much if they happen to be able to come in on this call.

So, you know, we see opportunities primarily around the Phelps Dodge world, and Phelps Dodge itself is in very good shape, so I guess if a question is have we bought something that needs investment, no, Phelps Dodge is in superb shape and they're actually a year and a half into a nice modernization. They're very, very clever with equipment. The investment would really be opportunities that are spotted by our teams in the regions, and we'll be investing behind that.

But that could be a new factory in a location and, you know, a start up on the ground, though we may be serving that market already from other locations. India would be sort of a classic case in point. But I'd rather not get into some of the other things we're thinking about.

Stuart Bush - RBC Capital Markets

Yeah, I understand. Similarly, have you thought about or what color can you give us on what is the likely use of that freed-up manufacturing space in Mexico?

Greg Kenny - President and CEO

Yeah. Again, we're seeing - Phelps Dodge is very strong from Mexico on down. General Cable is also in Mexico, and we're developing a regional manufacturing strategy, but what we have is a highly, highly skilled work force there that is busy making certain types of telecommunications products, service wire. They had historically made exchange cable as well. We'll keep in the service wire business, and we're looking at the, you know, the growth rates that we see regionally and considering how to meet them from the envelopes we have.

And I think with the kind of team we have there - which, as you know, has been named by Industry Week as a best plant in North America, not just cable plants, all manufacturing plants - they are really good. And again, PDIC brings tremendous knowledge in the region that General Cable lacked. They also have superb, obviously, Spanish language skills and 50 years of operating there, so they know as much about the region as, say, the old General Cable knows about North America and we'll leverage that.

So I don't want to be more specific than that, but it's a very fine opportunity and I would look at it as a way of redeploying skill set knowledge and certain equipment, but some equipment clearly we don't need to use. As you may remember, there's - some equipment is interchangeable and some is unique to products, so the $6.6 million charge was equipment that would be surplus in the system. Others will be put to work, globally and in Mexico.

Stuart Bush - RBC Capital Markets

Okay, great. And the last question is for Brian. Why is the tax assumption higher for 2008 than 2007 is? Is that just being conservative or is there some other element going on?

Brian Robinson - CFO

Yeah. No, I think that's being somewhat conservative, Stuart. I think if you go back both fourth quarter this year relative to the fourth quarter prior year and the full year of last year, there's various different items in there. So we've got, I would say, a large opportunity to continue to bring it down, it's just a little bit difficult. A lot of these judgments on the tax relate to the expiration of time and how the business performs, and so we'll continue to, you know, work on those opportunities.

Stuart Bush - RBC Capital Markets

Okay, great. Congratulations, again, guys. Thanks.

Greg Kenny - President and CEO

Thanks, Stuart.

Operator

Thank you. Your next question comes from the line of Will Stein with Credit Suisse.

Will Stein - Credit Suisse

Thanks, guys. Good morning.

Greg Kenny - President and CEO

Good morning, Will.

Will Stein - Credit Suisse

I'm wondering if you can give us an update on the PDIC accretion? I think the last estimate was $0.40 to $0.50. Do I have that right? And is there an update for the estimate of the PDIC accretion in 2008?

Greg Kenny - President and CEO

Will, as we said in our last conference call, we're not going to track Phelps Dodge because we have now merged all General Cable's assets and products are moving inter-plant, et cetera, but I would say - so we won't talk about Phelps Dodge stand-alone because they're now operating hundreds of millions of dollars of General Cable assets and product is, again, crossing between borders. And we've developed transfer pricing schemes, et cetera.

But broadly, Will, I think we're right on track with them and continue to see upside in those regions as well as we talked - when we did the acquisition - that there're synergies that we're going after, all of which I think are positives given, you know, the slower conditions that we've seen in the developed world.

Will Stein - Credit Suisse

Okay, fair enough. I'm wondering if you can give us any thoughts on total revenue or earning growth rate in 2008?

Greg Kenny - President and CEO

Will, we don't do an annual guidance, but what we've said is that we felt that the energy side, energy infrastructure side, which is 40% to 50% of the company would grow at above GNP levels, maybe 2X, that it would be lumpy in that a lot of these projects require state, local or inter-country approvals, and we also have talked about the growth rates in the developing world which is, you know, as we said in our press release, the U.S. is in the 30% to 35% of our overall revenues.

But I think we'll continue to take it a quarter at a time other than talking about the broad macro things that we're seeing.

Will Stein - Credit Suisse

And then just one final one. Can you give us an idea as to the effect of FX in the quarter?

Brian Robinson - CFO

Yeah, Will, it was about $67 million on the top-line.

Will Stein - Credit Suisse

And on the earnings per share?

Brian Robinson - CFO

On the operating income I believe it was about $4 million.

Will Stein - Credit Suisse

Great. That's helpful. Thanks very much.

Greg Kenny - President and CEO

Okay, Will.

Operator

(Operator Instructions) Your next question comes from the line of Celeste Santangelo with Merrill Lynch.

Celeste Santangelo - Merrill Lynch

Good morning.

Greg Kenny - President and CEO

Hi, Celeste.

Celeste Santangelo - Merrill Lynch

Hi. Just a quick question. You mentioned better price realization on some products. Were those price increases, and can you talk about in what products they were implemented and any plans to roll that out to further product lines in the future?

Greg Kenny - President and CEO

Well, you know, Celeste, I would say broadly, as we've talked about now for a number of quarters is that we've seen the high voltage business, the underground high voltage business, continue to tighten. And again, part of that, it's the performance is so strictly watched by the utilities that they want to - just because people have equipment doesn't mean that product will necessarily have the record and history to be reliable.

So we are well known with the Silec brand. We have the Thai asset as well as assets elsewhere in the world, including Spain and South America, that are all tied to high and extra-high voltage.

I would say pricing continues to strengthen there. I think the same thing is beginning to happen in the submarine cable business as that tightens. Products that are used in the oil fields are in short supply and for major infrastructure projects.

So it would be around that. And I wouldn't say that we're seeing broadly, you know, overall price improvement except in some product lines. We had a major increase in raw materials in the first quarter from the petrochemical people because of high oil and ethylene prices which we have to go ahead and get from the market, meaning we have to go price that into the spot market business or the short cycle business we talked about, it will be recovered formulaically over time with our utility type contracts which have those escalators and de-escalators.

We're also in the first quarter, Celeste, needing to - we've seen copper continue to tick up and, as you know, we're processing probably 200-ish million pounds of copper a quarter. And if half of it's short cycle that you have to go price and recover, the other half is formulaic, you know, we're in this quarter, say, unlike prior year, we're chasing metals going up and we're having to recover a strong petrochemical increase that we've received because of the elevated oil levels.

But I would say the strongest places really are in the specialized infrastructure products, Celeste. And as you know, we're constantly working on taking costs out of the company, but that's something that we do as part of our mantra, so to speak.

Celeste Santangelo - Merrill Lynch

Okay. Baked into your Q1 outlook, what kind of sequential headwind do you have in there for both the plastics and the copper?

Greg Kenny - President and CEO

Well, you know, there's been substantial increases announced and implemented by the - and it's in the millions, and I don't have it off the top of my head - from the petrochemical people, particularly in North America. As well as we're chasing copper that ended the year at $3.03 December 31, and in six weeks we're at $3.56. And again, at processing 200 million pounds, Celeste, and if half of that is formulaic and the other half's not, I've got 100 million pounds at a $0.50 increase. So I've got a $50 million pricing issue just from copper movement, which we have to go ahead and price up.

We have a lot of moving things, so when we try to bring the symphony together, it's tough because we have raw materials moving, particularly metals, and we're pricing our business short cycle for about 40% of the company, which means you're pricing it daily, weekly or monthly, but it's short cycle.

So it's a complex equation, but I would say we've got headwinds and we believe we can do - when I think about all of that, we believe we can do $1.05 or better in this quarter.

Celeste Santangelo - Merrill Lynch

Great.

Greg Kenny - President and CEO

Prior year we had copper softening, as you may recall, so we sort of had the opposite scenario.

Celeste Santangelo - Merrill Lynch

Okay. And then the submarine project that's in trial right now?

Greg Kenny - President and CEO

Yeah.

Celeste Santangelo - Merrill Lynch

Quantify that?

Greg Kenny - President and CEO

You know, we can't. We're careful folks and again, these are very - you probably have read in - well, the Wall Street Journal, I think, last Friday had a - I think it was last Friday - had a cover story on the submarine cable business and some of these links being cut by boat anchors and too little capacity coming from places.

But we will announce - if we pass the trials, which we believe we will, we'll announce it. What's important about it - it's big. What's important is that it's a repeater system. Where NSW was known for its shorter links, non-repeater, which are, say, I think a 400-mile kind of run, we can now go and re-boost the signal and regenerate it working with an [active] device manufacturer, so this is important stuff from really a market that we think has a lot of work to do. And if you looked at that article, it's not the U.S.-European links. It's the build outs with all these countries that have become so data hungry and that have really very little link.

So there's projects going on around the world. There's probably not enough capacity. And as you know, when we bought NSW we saw telecommunications, which was their core skill, as something that probably had reached rock bottom, and we saw upside. I guess I expected this to improve, but it's improving quickly.

And then separately we were redirecting them sort of heavy investment last year and this year into a second and third leg being the offshore wind power and also the offshore oil and gas, which we also call umbilicals, and these are medium-voltage cables that have to do lots of things like carry signals and power.

So we really like what is going on there and again, it's an investment, but I think we're catching this probably correctly.

But we should be able to have an announcement I would hope in the months to come. I wouldn't say from an operating income standpoint it's as important as it is to really announce our arrival as a major global player in long-haul submarine links.

Celeste Santangelo - Merrill Lynch

Great. Thank you.

Greg Kenny - President and CEO

Okay, Celeste.

Operator

Thank you. Your next question comes from the line of Joe Gibney with Capital One Southcoast.

Joseph D. Gibney - Capital One Southcoast

Good morning, everybody.

Greg Kenny - President and CEO

Morning, Joe.

Brian Robinson - CFO

Morning, Joe.

Joseph D. Gibney - Capital One Southcoast

This is a quick question. You mentioned the alternative energy wind farm project that we've seen hit the tape here. Just curious again on the conventional crude and net gas side, when you brought on PDIC, certainly some very strong down well cabling applications. You mentioned the energy cable contract today; obviously, the presence in offshore field development in Middle East and West Africa.

Could you give a little bit of additional color here on some of the specialty cable operations that PDIC has, whether or not this sort of provides some incremental margin growth for you going forward?

Greg Kenny - President and CEO

Yeah. I said that we were pleased with the Phelps Dodge, both from the quality of the management, their systems, the ability to work well with their General Cable associates.

I think because of their well-established skills trading in these regions - as one company, they were touching 75 or 80 countries - and then when you couple that with some of the specialty designs that are coming out of Spain and Nordenham, Germany as well as a tremendous U.S. know-how that really is linked to Houston, which is obviously the base for a lot of the infrastructure projects, this is really coming together, I think, as a symphony. We have a person, Roddy Macdonald, who is one of the five EVPs that is helping coordinate that effort because it involves complicated logistics, et cetera.

But I think being on the ground in as many countries as we are gives these big project operators and installers confidence. We have continued to win projects heavily in the Gulf, offshore in West Africa, and again, even in the Pacific region.

So, you know, I think we're seeing a nice synergy there and very complementary products. We have one of the most ranges in the world of these products. I'll be down in the Houston oil and gas show again, and we keep getting stronger in that arena. And there's fairly high barriers to entry to doing the cabling well. You both need years of approvals and field tests as well as a fairly complicated range, so it really stretches our analytical chemistry and engineering. But when you add all the pieces we've got, it's a tremendous package.

So I feel good about it. I think it does continue to provide some of the uplift that's been plowing through, you know, now a year's worth of slowdown in the overall construction markets in some countries.

So we'll keep working that, and when we have major projects to announce, we will. But I don't want to get into, for competitive reasons, what we're working on, where and why.

Joseph D. Gibney - Capital One Southcoast

Sure. That's helpful. A little bit of clarity, I guess, if you could provide it on China and the minority investments in the high and medium-voltage cable side for PDIC? Any sense or just color on that market in general would be appreciated. Thanks.

Greg Kenny - President and CEO

Yeah. We actually have an asset - are partners with a company called Keystone operating out of Hong Kong and in Southern China - very, very strong team; tremendous knowledge of China. And China's important, just watching everything from the change in export regulations and ability to access materials as China is both an exporter and importer of raw materials, so it's a great beacon to see into that market. And we have a minority position through Phelps Dodge that's been going for many, many years, and, you know, it's a tremendous relationship.

So I highly value that one, and again, that's aimed - they're a good barometer for overall China, particularly Hong Kong and the south, but very wise team, very good at equipment as well.

Up north, a JV called [Yen Tai], we are partnered with Keystone and Phelps Dodge and the utility up on the peninsula, which is way up north. Again, a minority position, but an interesting look into how the China market is developing. So we're actually partnered with a major customer there, and as we see the right conditions, we may get stronger into power cable in China, either doing something wholly owned or in partnership with someone.

But right now I would say that's not in our thinking in 2008. What is in our thinking is to build out our OEM business, which we now call General Cable China, which is growing nicely because of some of the quality concerns in China  multinational is one product to be exactly right and conform to global specs; no short cuts.

And, you know, I would say that our view that that market would grow, we're seeing it and we're seeing - '07 to '08 growth rates appear to be pretty good.

So I think China is a builder - our OEM position. The big push in that region will be more on India, then continuing to strengthen our logistics supply chain and investment portfolio in some of the other countries. As I mentioned, many of them are in the 100 million population class and they're very materials.

Joseph D. Gibney - Capital One Southcoast

All right. Thanks, guys. I appreciate it. I'll turn it back.

Greg Kenny - President and CEO

Okay.

Operator

Thank you. Your next question comes from the line of Steven Nissan with Mindflow Capital.

Steven Nissan - Mindflow Capital Investments

Yeah, thanks a lot, guys. Congratulations on a good quarter again.

Greg Kenny - President and CEO

Thanks, Steven.

Steven Nissan - Mindflow Capital Investments

A couple of things. Can you provide some more color on your operational [inaudible] revolving around LEAN and Six Sigma and the benefits you expect to see in throughput throughout your plant?

Greg Kenny - President and CEO

That's an interesting question. You know, it's something we've been at for, oh, I would say six years at General Cable North America. It was introduced in Europe maybe three years ago, and Phelps Dodge has been doing it for probably five or six years themselves, the old PDIC.

You know, it's aimed at constraints. It's aimed at elimination of waste, as you know, and there is probably capacity creep. The best form of capacity is the entitlement, so always in these exercises you look at if there was never a changeover, never scrap, never set-up time, and you ran 24 over 7, what is the theoretical capacity and then you work through those constraints around that.

I would say Phelps Dodge is probably, you know, leading in a lot of that thinking, particularly around constraints interfacing against market opportunity. The U.S. has - we've broken that up, and so we look at it from profitability, which is volume based, which you get free, sort of, with volume. If you can add more volume and not add more fixed, you're looking at the inflation, if you have it, in wage economics, medical costs. You're looking at raw material inflation and deflation, and you're looking at proficiency, which is really this entitlement measure. That's making one unit production with less waste around it.

I mean, globally we continue to target internally cost savings of proficiency alone  again, putting aside economics and inflation and volume - in the tens of millions and, you know, it's something that we go after. We get measured. We go after the Industry Week annual competition, and I was - I think last week or the week before - in Indianapolis, our compounding facility, which was named the best plant in the United States - or North America, I should say - and we won that before out of Tetla, Mexico.

So I think we're pretty good. We see lots of opportunity to keep getting better. We've got hundreds of black belts and green belts, and there's work now underway to really take the best of the European thinking around this with the rest of the world, Phelps Dodge and North America.

But we believe we have to be the low cost producer long term to dictate our own destiny, and that's something that we do every day.

It also extends, as you know, into the backrooms of order payment cycles, et cetera, et cetera.

Steven Nissan - Mindflow Capital Investments

Exactly. What metrics are you guys using in your manufacturing process to determine your success? Are you looking at RONA or OE? How are you guys judging yourself and make sure you stay number one ahead of your peers?

Greg Kenny - President and CEO

Well, we're constantly looking at return on capital employed as one. We look at working capital as a percentage of revenues. We look at - OE is a huge metric. We're looking at DPMUs or statistically looking at the number of failures we're having in either product or all the other aspects of delivery to a customer.

So I think the tools that you've mentioned is clearly there. We're proud of our return on capital, but I'd like it to be as high as possible.

Steven Nissan - Mindflow Capital Investments

Are there certain plants around the world that you have more concern with throughput than others, like in Asia or certain areas of the world, and what do you plan to do about that in '08?

Greg Kenny - President and CEO

Well, in prior conference calls we've talked about a great opportunity in Silec, which is a large operation that is our global crown jewel, if you will, in extra-high voltage underground cables, and it was a division of a large French industrial champion called SAFRAN, which was rolled up through [Sijem].

Under managed, great technology, and a lot of the improvements you're seeing in Europe are coming from improvements in Silec which we had to go do a systems conversion as well as introduce LEAN on the shop floor.

I was there a couple weeks ago, and this is a large campus with focused factories, if you will, on it, and I would say the whole operation is really beginning to move. You're seeing in the workers' faces almost when can we do our first [ties on] or project. A couple of the facilities, three of the six, are really well along.

So a lot of the improvement is in Silec. I think that journey is early. We're seeing also the acquisition of ECN, which is up near Bilbao, Spain. Tremendous improvement there, very good workforce, but again, leveraged learning. Our Thai facility is superb, but I think we can continue to - Phelps Dodge, when they rolled out LEAN, started in Latin America and are now pushing it into Africa hard and in Asia-Pac. I think we've got opportunity in the old General Cable facility in Christchurch, New Zealand. And, you know, also some of the big opportunity - there's huge amounts of costs on the cable in the big energy cable operations in North America.

You know, you begin to see some get closer and closer to the theoretical perfection, if you will, and some diminishing returns. I think there's plenty of opportunity, so it's not for lack of opportunity. But that's broadly where we're working.

Brian Robinson - CFO

It certainly hits on one of the key themes of the acquisition as well, if you think about - we at General Cable have been successful as far as exporting this to Silec, as Greg indicated, and now, as we talked about, when we were doing our M&A [inaudible] related to PDIC, we said we would learn as much from them as they would learn from us.

And so it's just - it also sort of further underlines the things that are going on in the integration today as we speak.

Steven Nissan - Mindflow Capital Investments

Okay. And final question, Greg, for 2008, what systems and solutions would you like to put in place to accelerate your CI - continuously improving initiative - to let the shareholders know we're number one in the market, we're going to stay number one. We have the right people in the right place for the right jobs to stay number one in the market.

Greg Kenny - President and CEO

You know, I didn't quite hear it. Your opened and said what's -

Steven Nissan - Mindflow Capital Investments

Yeah, like in - for the remainder of 2008, as we enter a very challenging year for a lot of manufacturers - systems and solutions would you like to put in place or are you planning on putting in place to accelerate your continuous improve initiative to let all the shareholders on the call know we're the right people for the job, we have the right men on the job, and we plan to have the right ideas to keep shareholder value at the top of the line.

Greg Kenny - President and CEO

Yeah. Well, you know, as I said earlier, I'm thinking about short-term and long-term and some of the actions that we're investing on behalf of the shareholders are things that we believe will have returns in '09 and '10 and beyond. I think it's the right thing to do for the shareholders, and I think our track record speaks for itself.

You know, we watch very carefully our SG&A as a percentage of revenues, our working capital as a percentage of revenues, our return on capital by many, many business units. I worry about the LEAN journey. Are we still strong on it and focused and disciplined.

And I don't - you know, I don't know that I'm the kind of CEO that says oh, now that it's tougher out there, we're going to do things that we didn't do in the past. My view is we better be doing them in good times or we'll be in trouble when tough times get tougher.

So I think a lot of the results you're getting from the company is the kind of decisions we took over time, but I'm watching, you know, we're a very frugal company in every way. We're watching everything from scrap and waste to headcount to employee effectiveness. We invest tremendously in training, which is a huge piece of - and this isn't just training for the sake of training, but very focused training.

So I don't, you know, you'll have to look at our results comparatively, both short and long term in our business, but I wouldn't say that I have a view that there's something we should be doing that we haven't been doing.

There's lots of things that we're underway with, for example, linking the systems of Silec with the rest of Europe and investing appropriately and carefully the money we're putting in in 2008 that will pull cost back as well as create niche product opportunities for profits going forward. The cost out, we've got to keep hitting it.

And, you know, I guess that's how I see it, but I don't see something like oh, gosh, I've had a realization that I haven't been doing something or the team hasn't and now we're having this epiphany. I think we just have to keep doing what we're doing.

Steven Nissan - Mindflow Capital Investments

Okay. All right. Thank you very much. Continued success in 2008.

Greg Kenny - President and CEO

Thanks.

Operator

Thank you. Your next question comes from the line of Brett Levy with Jefferies & Company.

Brett Levy - Jefferies & Company

Hey, guys. Can I ask for some balance sheet data? I don't know if there's somewhere that it's published. It's not on Bloomberg. But just looking to get some balance sheet data from you guys as of the end of the year?

The other question is: Can you guys just define a little bit about the wind power opportunity? You know, what do you see as the overall growth rate there? I've heard like, you know, like a doubling between '07 and 2010 in the number of wind plants out there. Just give a rough size and sort of what you see the revenue opportunity as being there.

Greg Kenny - President and CEO

Yeah. Again, we've been part of that growth, and it's both offshore - shallow water and some talk around deep water - as well as on the land, and we did win the first wind farm in the North Sea.

We're seeing that business, it's now measured in the $100-plus million for us. It was a small business a couple years ago. I would agree that, you know, as we look at things being cited and thought about and invested in that your numbers are well within what we're reading and seeing out there.

Again, these projects are complex and they need to get funded and done, but it's strong and it seems getting stronger. So I think it's in the hundreds of millions of dollars as an opportunity for the company.

Brian Robinson - CFO

And Brett, it's fine with respect to the balance sheet.

We did not put out a balance sheet. We'll put out a balance sheet when we file the 10K in a couple of weeks. We're still working through a number of different items.

And again, it's been a little more complicated this year with the acquisition of Phelps Dodge, so we wanted to take the time to make sure that it was the most accurate balance sheet when we filed the K.

Brett Levy - Jefferies & Company

All right. I mean, can I ask you in round numbers for cash, debt and availability as of the end of the year?

Brian Robinson - CFO

Sure. Well, if you actually look in the script text, Brett, the debt - let's recap here. Total debt at the end of the year was $1.3988 billion.

Brett Levy - Jefferies & Company

Okay, got it.

Brian Robinson - CFO

Okay. Net debt was $1.085 billion. So cash was about $313 million. Availability is well in excess of $500 to $600 million. In the U.S., remember we have a $400 million facility. We had about $60 million drawn, and when you cut through some of the [inaudible] reserves, in the end we had about $260-some odd million of availability. In Europe we have over $100 million of various availability. And then within PDIC, PDIC brought us some facilities as well, which are north of $250 million.

So the combination of all of those, you know, leave us in - we think in a very good place to continue to act on opportunities.

Brett Levy - Jefferies & Company

All right. So basically add up 263, 100 and 215?

Brian Robinson - CFO

That's correct.

Brett Levy - Jefferies & Company

Okay. Thanks very much, guys.

Brian Robinson - CFO

You're welcome.

Operator

Thank you. Your next question comes from the line of Steven Gambuzza with Longbow Capital.

Steven Gambuzza - Longbow Capital

Morning.

Brian Robinson - CFO

Hi, Steve.

Greg Kenny - President and CEO

Good morning.

Steven Gambuzza - Longbow Capital

On the last call you mentioned that the telecom business was a pretty substantial drag on North American growth. I was wondering, given the 5% organic metal-adjusted growth you put up in North America this quarter if you could comment on, you know, what drag if any the telecom operations had on that growth rate in the quarter.

Greg Kenny - President and CEO

The telecom, you know, continues to be difficult, and I think we had a weaker prior year in the fourth quarter but we also, I think, were weaker again. But it depends on what the comparables are, but if it's '07 versus '06, the units were down again.

Brian Robinson - CFO

I guess, Steven, also, again, to take a step back, telecom is a pretty small piece of the puzzle now. It's about 5% of the company.

Steven Gambuzza - Longbow Capital

Could you comment on what the organic growth rate in North America would have been excluding telecom?

Brian Robinson - CFO

We don't have it at our fingertips and we can come back to you, Steven, but it's not significant.

Steven Gambuzza - Longbow Capital

Okay.

Brian Robinson - CFO

It doesn't move a ton. In fact, it was a relatively I would suggest decent quarter on the telecom side relative to the historical trend of the last couple of years.

Steven Gambuzza - Longbow Capital

Okay. And then on the last call you also mentioned that you had been experiencing some weakness in the North American low-voltage utility products, but that the medium-voltage side - which is the majority of your franchise in North America - was still experiencing relatively strong volumes and tight pricing.

I was just wondering if that is still the case. There was some weakness in volumes and pricing in certain utility products. Is that weakness still confined to low-voltage products and you're still seeing strong conditions in the medium-voltage area or has some of that weakness bled into medium voltage?

Greg Kenny - President and CEO

I think what we said last time was what we were seeing. Low voltage utilization was coming down. It's tied more broadly to construction. We saw price pressure. We also said that the small gauge medium voltage - which sort of brings the power from the neighborhood was also weaker. The larger size, which is really the reinforcement, the heavy part of the infrastructure, had remained strong, and I would say that remains the case.

Transmission, we have said, is a project-driven business, and we had said that we had seen fewer projects released but there's lots of work to be done.

But I would say the North American utility is feeling the pressure of and continued to feel the pressure of a slower construction market in the U.S. which impacts, you know, a chunk of the business. It's not just low voltage, as I said in the other conference call, it's also the small gauge medium voltage, so we're having to plow through that.

Steven Gambuzza - Longbow Capital

Can you comment on, I mean, it seems like the business overall is still putting up, you know, good growth. I'm just wondering in the areas that are weak, like these lower voltage products, what type of volume declines did you experience in the quarter or year-over-year? Is this kind of single-digit line declines or is it greater than that?

Greg Kenny - President and CEO

Well, it's pretty big numbers. In the 10% and 20% range in some of those products that we've talked about And while we have other parts, you know, it's not dissimilar from what we've said before, which is sort of 10% to 20%. It depends on the comp and what we're looking at, but it's, you know, construction is down and the need to wire new developments is reduced.

Steven Gambuzza - Longbow Capital

Have you taken any managerial actions to, you know, reduce capacity, reduce shift time or any other actions that might -

Greg Kenny - President and CEO

Yeah. You know, I'm not going to - back to the stewardship of shareholder assets, we're not going to - we're going to try to adjust as precisely as we can to the demand. So, you know, you look for other uses of the capacity. You certainly reduce your throughput.

And, you know, the same thing is going on, has been going on in Spain. In Spain, as you know, we are both - we make the cable to go inside the house, these are high value cables, because of the zero allergen nature, the flame retardancy, as well as we make the cables to link neighbourhoods.

So we're coping through all of that and trying to find either export markets or, when we can, simply reduce it. So this is ongoing, and is a drag on the company's performance.

Steven Gambuzza - Longbow Capital

Okay. And then finally, with Spain you've been calling out weakness in that segment for several quarters now. I think, you know, going back to the second quarter, you indicated that that, in total, the kind of international products that go inside a house is around $250 million, the majority of that in Spain. But now that we've seen several quarters of decline, I'm wondering if you could just say for 2007 how much, given the declines you've experienced, what the remaining exposure is to this product area?

Greg Kenny - President and CEO

Well, there's two pieces. We were saying that the wire that goes into a house - this is prior to PDIC - was in the quarter of a billion dollar range. We also said that there were second and third-level effects of slower construction. And a secondlevel effect would be if you don't have a neighbourhood, you don't need the low-voltage cable to hook up the neighbourhood and so on.

So we expect this to continue to be tough in 2008 and to be weak. So we don't foresee this recovering, and as you know, we will trail by a bit the actual housing start, that is, you know, the pulling the wire - the neighbourhood may be done early or late - certainly the electrical package into a house is some months after the foundation's poured, if you're talking about our cable that goes inside.

So we're not calling a recovery in construction, certainly, this year.

Steven Gambuzza - Longbow Capital

It seems, though, that the 250 kind of going forward should be something less because, you know, if it was 250 in the middle of last year, given two consecutive quarters of significantly weak trends, that the drag going - you know, in terms of the revenues at risk here, it should something less in '08. Is that a fair statement.

Greg Kenny - President and CEO

Well - sure.

Steven Gambuzza - Longbow Capital

If the run rate - the run rate is no longer 250, it's something less than that.

Greg Kenny - President and CEO

Well, yeah, if you take 250 and take 10% off, it's 225 or something, so yeah.

Again, be careful not to say it's only wire inside a house. Again, we've said for a year now that if you don't have houses, you don't have other things, too.

Steven Gambuzza - Longbow Capital

Okay.

Greg Kenny - President and CEO

And of course we watch non-resi as all of you do as well.

Steven Gambuzza - Longbow Capital

Thank you very much.

Greg Kenny - President and CEO

Yeah.

Operator

Thank you. Your next question comes from the line of Nat Kellogg with Next Generation.

Nat Kellogg - Next Generation

Hi, guys. Just a couple of quick questions. First of all, obviously there's a fair amount of Capex spending this year, but sort of after the big capital requirements are sort of - your first priority, where do you sort of see extra cash flow going? I mean, will you guys continue to look at acquisitions or is it paying down or debt or would you think about buying back stock? I mean, where does that sort of fall on your priority list?

Greg Kenny - President and CEO

I think we've remained opportunity driven, and to the extent that we see opportunity to invest and get good returns on our investor's capital, we'll keep doing that.

So I continue to see more opportunity than - particularly after Phelps Dodge, where we now have the ability to seek additional opportunity and to act on it. It's amplified General Cable's capability.

So I love to have open credit lines, and we treasure that flexibility. And, you know, as on the earlier question, I would always prefer to get free entitlement capacity than add capacity.

But I would say we remain offensively minded, but if we begin to see lack of opportunity, we'll end up, you know, continuing to pay down debt such as it is.

Brian Robinson - CFO

Yeah. Yeah, I would add I think the state of the credit markets today underline the importance of having the flexibility which we've created, and I would agree with everything Greg said, that we still see - it will likely create better opportunities for us, I think, on the M&A side. PDIC brings us a whole new set of ideas.

And so if at some point we don't feel that way, then we'll look at the debt, we'll look at some of these other things.

Greg Kenny - President and CEO

Flexibility today is a tremendous weapon, and I think also our record of agreeing to do something, finishing something complex quickly, would tell a potential seller that we're serious people that know how to do these things. And I think our reputation as being a globally minded company rather than parochial, a lot of sellers due diligence and talk to our employees or recent acquired companies, and I think that broadly has been an area of strength for General Cable.

So I really like our hand in the environment that we're in.

Nat Kellogg - Next Generation

And just on that, I mean, are you guys seeing, given the environment, are you guys seeing any sort of multiples coming down at all? And do you guys see more deals or less deals?

Greg Kenny - President and CEO

I think you have some people maybe saying, as you know, if you run the wire and cable universe, we're down, I don't know, 30% to 70%, depending on the company, from the peak. I think you have sellers who are saying I want the multiple implicit in peak valuation for the industry, and I think we're in a position where there maybe are fewer qualified buyers that can act.

And, you know, this industry is a tough one, and you've got to be good at it. And I think we'll see opportunity, but we'll wait out - it's always a value proposition. What does it cost to build it? What does it cost to acquire it? If I acquire it, how much do I have to put into it in systems and capital?

But, you know, we've been doing this starting in 1999 with BICC and actually prior to that, so again, I think we've got a lot of experience and we will - I think we'll see these values pull in in part because the public comps have pulled in dramatically and part there's less people - you've lost really the private equity community for these assets.

And frankly, you know, this is where there's a test of  when you have a slowdown in certain businesses, you know, our global and diverse nature is a huge source of strength as opposed to, say, being strictly a few product families in North America, which is where we were 10 years ago.

Nat Kellogg - Next Generation

Got you. Just sort of a last numbers one for Brian, but you guys said that you reported $10.8 million in profit in sort of the rest of the world or in emerging market category, and then you said $16.9 sort of without certain charges. And I think 4.5 of that was the PDIC inventory adjustment, but I was just wondering what the rest of that was? I mean, I think there's another $1.6 million in there that would be the delta. I was wondering if you guys -

Brian Robinson - CFO

Yeah, it was $2.2 million and essentially it's the LIFO accounting. Again, back to the - in total the LIFO charges are $6.7 million, so that's bifurcated into a $4.5 million component, which is the lower of cost of market. And the other piece of it is that concept around how you estimate the decrements of inventory quantities.

And the numbers, part of that goes into PDIC, and there's a smaller piece which goes into North America.

Nat Kellogg - Next Generation

Okay, but obviously the majority of that, you're saying, is in the PDIC side?

Brian Robinson - CFO

That's correct.

Nat Kellogg - Next Generation

Okay. All right. Now that's helpful. That's great. All right. That's all I've got, but congratulations, guys. Great quarter.

Greg Kenny - President and CEO

Thank you.

Operator

Thank you. Your next question comes from the line of Darrel Norian with Blackrock.

Darrel Norian - Blackrock

Hi. I just had a quick question. Do you guys have any specific expectations of seasonality throughout this year?

Greg Kenny - President and CEO

Well, Darrel, you know, historically we've seen typically the second quarter being the strongest followed by the third, and then the first and fourth somewhat similar. That seasonality has been fairly disturbed because of the volatility in raw materials, and as we've described in the past, we have certain customers who are distributors will watch the relative movement of copper and then try to - some of them may actually try to time the market. Not all of them. Some of them are in the business of logistics and try to, you know, buy on a just-in-time basis.

But broadly, we've seen some aberrations because if copper starts running up, you'll start to see people come buy in, and if it runs down, they'll wait until they see it bottoming.

And again, I'm talking about about 40% of our customer base, which are primarily distributors globally. And again, the behavior depends on the distributor.

So seasonality has not been an easy rule over the last three years because of relative movements of metals, but broadly second and third are stronger than first and fourth.

Darrel Norian - Blackrock

Great. That helps. Thank you.

Greg Kenny - President and CEO

We're also, I guess, working through Phelps Dodge for the first time, but I would say, again, it's primarily a Southern Hemisphere company, but because of holidays and other things, it appears they have approximately the same seasonal trends.

Darrel Norian - Blackrock

Okay. Thank you.

Operator

Thank you. Your next question comes from the line of [Phillip Pacelli] - Goldman Sachs

Phillip Pacelli - Goldman Sachs

Thank you very much, and good numbers.

With regard to acquisitions and your comfort level in terms of leverage, could you give us some idea of maybe how much you'd be willing to spend on acquisitions in 2008 or what level of pro forma lever you'd be willing to take the company up to if you were to find an attractive acquisition?

Greg Kenny - President and CEO

You know, I guess I take comfort in our geographic diversity and how strong a start we have from an integration standpoint with Phelps Dodge. I am not uncomfortable with leverage. I like the ability to move now. As you know, our trailing EBITDA to net debt will continue to improve because we only have the benefit of two months of Phelps Dodge in the number, but our trailing EBITDA with only two months of Phelps Dodge, the net debt, I think, is 2.5 times. I think pro forma it drops nicely below that.

And I'm not uncomfortable certainly looking at almost anything that we see out there. Again, targets bring their own EBITDA and we have to think through both the short cycle nature of this business as well as some of the long cycle things. But, you know, we've run this clearly with much higher net debt to EBITDA numbers, and, you know, it's not pleasant.

But I'm very comfortable where we are. I'm not afraid of going deeper. I think we have a history of doing that successfully and have gotten some very strong returns out of companies like BICC and Silec and others, and I think Phelps Dodge is going to be a marvellous acquisition. It is already.

So I think access to capital is always important and then flexibility, but again, given the number of geographies we have and the number of product lines, if you're a wire and cable maker, you kind of have to like the hand that we've created and then obviously the thrust to keep on getting better.

We've talked about maintenance Capex being 25% to 30% of depreciation, and depreciation is probably $100 million kind of number pro forma going forward so, you know, we can - you have lots of tools as you entertain leverage and it depends on what you're tackling.

But I wouldn't say we'd be on the sidelines and uncomfortable if we saw something to go deeper, as Phelps Dodge was. Phelps Dodge actually increased our leverage. We held our credit ratings, and I think it's going to be great for the shareholders.

Phillip Pacelli - Goldman Sachs

Great. Thanks for that color. And then with regard to the European marketplace, everything is robust, as you mentioned in your comments, except for Spanish construction. Could you just give us some details of what you're seeing down there. Is it residential? Is it non-residential? Is it a specific market?

Greg Kenny - President and CEO

Well, it's more resi - and again, the Spanish banks have probably done a better job working through some of the sort of knock on liquidity effects, but again, nonresi as opposed to industrial is, you know, broadly will follow at different times and cycles.

So we're anticipating a construction slowdown. You know, Spain's a little different because, oh, 30% or 40% of our output from that country - I'm doing this on the top of my head, so don't hold me to this - are going to other countries, so, you know, we're trading into the Middle East, North Africa, off into Eastern Europe.

I guess broadly in Europe I would say that the east of Europe is creating a very strong sort of knock on effect where you're getting a tremendous amount of work happening in, say, Russia, Ukraine, Poland and elsewhere, and that's tightening up manufacturers in the West.

But again, I'm not saying that Europe is decoupled from overall economic trends. We just happen to have, you know, both the recovery of the Silec business, the [inaudible] of the NSW, a good ECN acquisition, and a great, broad range of Spanish products that's allowing us to plow through, you know, tough conditions in Spain.

And, you know, broadly Europe is probably not as growing - you can see the numbers, but I think it's more the East is helping pull that along.

Phillip Pacelli - Goldman Sachs

Thank you very much. Good luck in '08.

Greg Kenny - President and CEO

Yeah, thanks.

Operator

Thank you. Your next question comes from the line of Davis Paddock with AIM Investments.

Davis Paddock - AIM Investments

Good morning.

Greg Kenny - President and CEO

Hi, Davis.

Brian Robinson - CFO

Good morning.

Davis Paddock - AIM Investments

Can you tell us a little bit about what the acquisition amortization charges were in Q4?

Brian Robinson - CFO

When you think about amortization, I believe you're referring to the step-up in the tangible and intangible assets. What we would say is from an annual perspective, Greg's point, the total company D&A will be about $100 million on a go forward basis, of which about $25 million will be related to the PDIC business. That's not just the step up. That's the total D&A. And that's our best estimate, as we said before, because we've integrated the business and amalgamated them with our existing businesses. The lines are getting more and more blurry.

Davis Paddock - AIM Investments

And can you isolate the factors of the $25 million that's only related to the step-up?

Brian Robinson - CFO

Yeah. I mean, you could broadly think about it as historically about $15 million and the step-up, both tangible and intangibles, about 10.

Davis Paddock - AIM Investments

The step-up part is 10?

Brian Robinson - CFO

About 10, that's correct.

Davis Paddock - AIM Investments

And that's an annual number?

Brian Robinson - CFO

That is an annual number, right.

Davis Paddock - AIM Investments

Okay.

Brian Robinson - CFO

That's correct.

Davis Paddock - AIM Investments

All right. Thank you very much.

Brian Robinson - CFO

Okay.

Operator

Thank you. (Operator Instructions) Your next question comes from the line of Tony Wong with Advent Capital.

Tony Wong - Advent Capital

Question just answered. Thank you.

Operator

At this time there are no further questions.

Michael Dickerson - VP, Finance and IR

Well, thank you for joining us this morning. That concludes our conference call. A replay of the call will be available on our web site later today. We appreciate your continued interest in General Cable. Have a nice day.

Operator

Thank you for participating in today's General Cable Corporation's fourth quarter 2007 earnings conference call. You may now disconnect.

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