Superior Essex Inc.

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Superior Essex Inc.

150 Interstate North Parkway
Atlanta, Georgia 30339
U.S.A.
Telephone: (770) 657-6000
Toll Free: (800) 685-4887
Fax: (770) 303-8807
Web site: http://www.superioressex.com

Public Company
Incorporated: 1930
Employees: 4,100
Sales: $1.8 billion (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: SPSX
NAIC: 331528 Other Nonferrous Foundries

Headquartered in Atlanta, Georgia, Superior Essex Inc. is a leading manufacturer of cable and wire. The company is among the largest industry players in North America, and also has a significant global presence. Superior Essex operates 23 production facilities in the United States, Mexico, and Europe and has an established global distribution network. The company's customer base includes cable television and telephone companies, as well as distributors and manufacturers in a variety of industries. Superior Essex offers more than 500 magnet wire and winding wire products. In North America and China, these products are marketed through the Essex Group Inc. The company serves the European market through its EssexNexans joint venture. According to Superior Essex, its magnet wire products are critical components in millions of items, including automobiles, home appliances, generators, motors, transformers, and commercial machinery.

Superior Essex has several other business units that are devoted to specific end markets. As the world's largest producer of outside plant copper communications cables, Superior Essex Communications LP makes a range of different copper and fiber optic communications cables for multiple voice and data applications. Finally, Superior Essex serves original equipment manufacturers and the motor repair market via its Essex Brownell, Essex Express, and Active Industries units, which offer various electrical insulation products. The history of Superior Essex is really a tale of two companies: Essex Group Inc. and Superior TeleCom, which combined to form Superior Essex in 1998.

ESSEX GROUP INC.: 1930–1998

Superior Essex's deepest roots stretch back to Detroit, Michigan, where businessman Addison E. Holton established Essex Wire Corp. in 1930. Holton was a World War I veteran who served in the Navy and attended the University of Michigan. During its formative years, the company's work force produced battery cables, wiring harnesses, and other wire items for the Ford Model A, working from 125,000 square feet of leased space in Ford Motor Company's Highland Park plant.

Expansion happened rapidly at Essex during the 1930s. Shortly after it was founded the company acquired Logansport, Indiana-based RBM Manufacturing Company, a producer of electrical switches and automotive components. In 1932 Essex proceeded to buy a rubber insulation plant in Jonesboro, Indiana. According to the company, the facility was known for producing a brand of building wire called Paranite. Finally, in 1936 Essex acquired a vacant industrial facility in Fort Wayne, Indiana. The site had formerly housed the Dudlo Manufacturing Company, which was founded in 1912 and pioneered the process for enameling magnetic wire.

According to company literature, during the 1940s "Essex was producing enough magnet wire to build the millions of transformers used by America and its allies during World War II. Essex plants also produced thousands of miles of field telephone wire for the Army Signal Corps, as well as wiring harnesses for B-24 bombers. Later, Essex was awarded the highly prestigious 'E' Award by the Secretary of War."

Essex relocated its headquarters to Fort Wayne in 1954. Four years later, Walter F. Probst succeeded Addison Holton as the company's president. Holton retired altogether in 1962, at which time Probst assumed the additional role of board chairman.

By 1965 Essex's sales totaled $355 million. The company had seven divisions, 41 plants throughout North America, and 26 warehouses. It was that year that the company was first listed on the New York Stock Exchange, with 5 million shares. It also was in 1965 that Essex unveiled an $8 million expansion initiative, which included $3.2 million for its Essex Wire and Cable division, $2.5 million for its Essex Automotive division, and $2.3 million for the acquisition, expansion, and improvement of other facilities.

In early 1966 Paul W. O'Malley, who had been with Essex since 1952, was named company president. Probst continued to serve as chairman and CEO. O'Malley was a World War II veteran who earned a metallurgical engineering degree from Pennsylvania State University and a law degree from the University of Michigan Law School.

By 1968 Essex was in the process of building a new 30,000-square-foot facility in Fort Wayne for its Metal Products division. In all, the company had 67 plants in 30 states and Canada. That year, Essex also acquired Transport Motor Express Inc., one of the nation's largest trucking companies, in a stock deal valued at $12 million. Growth and expansion continued at a rapid pace in 1969, when Essex acquired 14 other companies.

Essex Wire Corporation was operating under the name Essex International Inc. by 1970, and the company's employee base numbered 25,700. While most of its workforce was in the midwestern United States and Canada, Essex also operated a facility in Northern Ireland. At the end of the decade, the company's divisions included: Magnet Wire; IWI; Wire and Cable; Controls; Metal Products and Plastics; Power Conductors; Communications and CATV; Industrial Laboratory Products; Wire Assembly; and Electro-Mechanical.

Sales reached approximately $845 million in 1973, at which time Essex operated about 100 plants. In 1974 the company merged with East Hartford, Connecticut-based United Aircraft Corporation (United Technologies Corporation). The merger of Essex and United created the nation's 30th largest company, with combined 1973 sales of $3.13 billion.

When Walter Probst retired as chairman and CEO in 1974, he was succeeded by Essex President Paul O'Malley. Following the United Technologies merger, O'Malley was elected as Essex group vice president and director. He held this post until 1981, at which time he retired and was succeeded by James A. O'Connor, a 31-year Essex veteran.

During the late 1970s Essex faced criticism from labor leaders for being one of the most anti-labor companies in the industrial north. The AFL-CIO criticized the company for encouraging the presence of multiple unions in order to keep labor decentralized and weak, scattering production to diffuse strikes, paying low wages, and providing no or poor benefits packages to workers. Another black mark on the company came in September of 1978 when the U.S. Justice Department charged Essex and five other wire manufacturers with price fixing. According to the September 27, 1978, issue of the Fort Wayne Journal Gazette, while the company denied any wrongdoing, the agency charged that Essex and its counterparts "exchanged information about prices and conspired to restrain trade."

COMPANY PERSPECTIVES

With a 75-year heritage, Superior Essex has been built on a foundation of experience, innovation and integrity that continues to deliver market-leading customer solutions and corporate value.

Although a new decade began in 1980, this year also signified the end of an era when Essex founder Addison Holton died at the age of 83. In 1982 Essex Group announced plans to invest $3 million in its Fort Wayne facility, which would become the company's world headquarters. The improvements were scheduled for completion in 1984. By 1983 Essex employed 8,982 workers worldwide, with an annual payroll of $26.8 million.

Essex became a privately owned firm in 1988 when MS/Essex Holdings, an investment group that included members of Essex's management team and the New York securities firm Morgan Stanley Leveraged Equity Fund II LP, bought the company from United Technologies. At this time, John M. Bruce was president and CEO of Essex Group. The buyout came at a time when U.S. wire companies faced growing competition from foreign imports. Essex changed hands again in 1992 when it was purchased by Bessemer Holdings, but remained privately owned. However, in 1997 Essex became a publicly traded firm once again.

During the 1990s, Essex acquired a number of other firms, including magnet wire and electrical motor distributor Brownell in 1995. After being merged into Essex's distribution arm, the new business was named Essex Brownell. The acquisition of Active Industries, a converter/fabricator of electrical insulation products, followed in 1998.

In September 1998 Essex announced that it was being acquired by Superior Telecom Inc. in a deal valued at $1.4 billion in cash, stock, and debt. Finalized in 1999, the acquisition made Essex a subsidiary of Superior and created what then was North America's largest cable and wire manufacturer. Essex Chairman, President, and CEO Steven Abbott became Superior's president and chief operating officer following the deal.

SUPERIOR TELECOM: 1954–1998

Superior Telecom got its start in 1954—the same year that Essex relocated from Detroit to Fort Wayne, Indiana. Established in Hickory, North Carolina, as the Superior Cable Corporation, the firm produced plastic insulated, twisted pair cable and wire. Production took place in a new 32,000-square-foot plant, the construction of which was authorized by the Hickory Development Corp. at a cost of $160,000. Manufacturing equipment was installed in May, and the company produced its first reel of cable in August, delivering it to the Hickory Telephone Company.

Attorney Walker Geitner was Superior's first president. While most of Superior's cable was used for the telephone industry, Geitner explained that it had broader applications. In the July 26, 1956, issue of the Hickory Daily Record, he explained: "The cables which our company manufactures differ from other cables in that all of our cables are concerned with a transfer of intelligence from one point to another point. This intelligence may be in the form of a telephone conversation. It may be an electrical pulse from a fire alarm system, or a traffic control system, or it may be a pulse on a pipe line control system which opens or closes a valve."

In 1959 Geitner was named Superior's chairman. Succeeding him as president was James L. Robb, who had been with the firm since its inception. The following year Superior established a second manufacturing plant in Rocky Mount, North Carolina. By 1962 the company had expanded its headquarters plant three times, reaching a size of 150,000 square feet. Production had expanded to include coaxial cables, as well as wire for use in missile, aircraft, and industrial applications.

In 1963 Superior played a pioneering role in the telephone sector with the roll-out of the industry's first all-plastic drop wire. In order to more effectively serve the southwestern United States, a new cable plant was erected in Brownwood, Texas, in 1964.

By 1965 additional growth had increased the size of Superior's home plant even further, giving the firm 125,000 square feet of manufacturing space, about 35,000 square feet of office space, and a 35,000-square-foot building for warehousing and shipping. The company's annual sales reached nearly $20 million that year. Looking to the future, Superior had plans to construct a separate facility devoted to research and development.

Superior was acquired by Continental Telephone in 1967. As a Continental subsidiary, the firm was renamed Superior Continental Corp. Growth continued under its new owner, with annual sales reaching $90 million in 1969 and approximately $125 million in 1971.

KEY DATES

1930:: Addison E. Holton establishes Essex Wire Corporation in Detroit.
1954:: The Superior Cable Corporation is formed in Hickory, North Carolina.
1999:: Superior acquires Essex in a deal valued at $1.4 billion, creating North America's largest cable and wire manufacturer.

In 1971 Superior Continental announced plans to build an eight-story corporate office facility in Hickory for $3 million. By this time J. L. Robb had become president of manufacturing for Continental Telephone, and Warner T. Smith served as Superior Continental's president. The company's manufacturing plant in Hickory had continued to grow exponentially, reaching 600,000 square feet.

Continental Telephone divested Superior in 1976. In a cash and stock deal, Robert C. Pittman and A. L. Viles purchased the company for $17.1 million. Superior Cable Corporation was reincorporated and became the parent company of the Superior Cable facilities located in Hickory and Rocky Mount, North Carolina, as well as the Brownwood, Texas, plant. Also included in the deal were Hickory Brand Telephone Cords; Keller, Texas-based Communication Apparatus Company; and a non-operating plant in Angier, North Carolina.

Superior was acquired by optical fiber and cable manufacturer Siecor Corporation in 1980. In 1981 Siecor relocated from Horseheads, New York to Hickory. Five years later, Superior changed hands once again when it was divested by Siecor. As an independent firm, Superior went on to market its own line of fiber optic cable. In 1987 Siecor played a pioneering role on the international trade front when, after five years of negotiating, it convinced Japan to purchase some of its fiber optical cable.

The Alpine Group Inc. acquired Superior in 1993. Following this development, the company added premises data cables to its product lineup and proceeded to acquire other firms. A public offering soon followed, and Superior TeleCom Inc. went public in 1996 with a listing on the New York Stock Exchange. Superior's annual sales reached $500 million in 1997. Following the acquisition of Essex International in 1999, Superior changed its name to Superior Essex.

SUPERIOR ESSEX: 1999 AND BEYOND

Superior Essex held about 30 percent of the market for copper building wire by August 1999. At that time, the company announced that it would close three wire manufacturing plants and lay off 469 employees in order to optimize its financial returns in a highly competitive market that was suffering from oversupply. The company closed plants in Glendale, Arizona; Pauline, Kansas; and Tiffin, Ohio. It continued to produce wire at sites in Sikeston, Missouri; Florence, Alabama; Anaheim, California; Lafayette, Indiana; and Columbia City, Indiana.

In 2000 Superior Essex was awarded a three-year contract to supply cable and wire to Alltel Communications Products Inc., which served 8.5 million customers in 25 states with both wireless and wired communication services. The deal was significant because it involved Superior Essex supplying Alltel with all of its cable and wire.

In late 2000 Superior Essex launched an e-commerce Web site in an effort to boost sales in a market that continued to suffer from high competition and oversupply. In addition to order entry, the site allowed the company's customers to track shipments, estimate shipment arrival times, and read industry news feeds. By December 2001 Superior Essex occupied a 228,000-square-foot warehousing and distribution facility in northeast Indiana previously occupied by defense giant Raytheon.

During the early 2000s industry observers took notice of Superior Essex's performance in the human resources realm. The company, which maintained a workforce of 5,000 in 2003, was able to give employees better benefits without increasing their out-of-pocket contributions—despite the national trend of skyrocketing healthcare costs. It accomplished this by streamlining its benefit packages and renegotiating contracts with healthcare providers.

As of early 2004 Stephen M. Carter was CEO of Superior Essex. An important development occurred in April of that year when the company announced its plans to acquire the North American outside plant communications cable and wire operations of Belden Inc. The purchase price of approximately $95 million freed Belden from a market where it had not been able to turn a profit for several years.

Commenting on the deal in the April 2004 issue of Electrical Wholesaling, Carter said: "This acquisition will more appropriately align capacity in the outside plant copper communications cable industry with demand, which has declined 50 percent in North America since 2000. We have responded to this decline by consolidating our manufacturing facilities and reducing capacity, but the need to serve our customers with the most efficient production now requires us to look beyond internal solutions. We are confident that we will be able to smoothly transition Belden's customer base, which last year generated approximately $200 million in revenues, and meet their ongoing needs without disruption."

In February 2006, Superior Essex announced that its revenues reached $1.8 billion in 2005, up from $1.4 billion the previous year. Commenting on the company's performance in a news release, Carter said the company was "successful in generating organic growth" in its main North American markets. Carter attributed the firm's increased revenues to consolidating acquisitions. In addition, he pointed to increased earnings despite the burden of skyrocketing energy costs. As the company moved into the second half of the 2000s, it did so from a fortunate position of market leadership.