45 Management evaluated the ef fectiveness of the Company's internal control over financial reporting as of December 31, 2012 using the framework established in "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Or ganizations of the T readway Commission (“COSO”). As a result of the reevaluation and based on the criteria in the COSO Framework, management concluded, based upon the material weaknesses described below , that the Company did not maintain ef fective internal control over financial reporting as of December 31, 2012. During 2012, the Company acquired the North American and Chinese businesses of Alcan Cable, and substantially all of the net assets of Prestolite W ire, LLC, as well as 60% of the shares of Productora de Cables Procables S.A.S.  (collectively , the “Acquired Businesses”). Management has excluded the Acquired Businesses from its evaluation of the ef fectiveness of the Company's internal control over financial reporting as of December 31, 2012.   The net revenues attributable to the Acquired Businesses aggregated approximately $269 million from the date of their respective acquisitions through December 31, 2012, representing approximately 4% of the Company's consolidated net revenues for the year ended December 31, 2012, and the aggregate total assets of the Acquired Businesses at December 31, 2012 were $552 million, representing approximately 1 1% of the Company's consolidated total assets as of December 31, 2012. A material weakness in internal control over financial reporting is a deficiency or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following control deficiencies in the processes and procedures related to (i) the computation of cost of sales and balances of finished goods and work-in-process inventory at two facilities located in Brazil within the Company's Rest of W orld (“ROW”) segment, and (ii) the ROW segment management oversight; these deficiencies, which prevented the timely detection of theft of a substantial quantity of inventory and the detection and internal reporting of accounting issues, collectively constituted a material weakness in inventory controls at Brazil and a material weakness in the controls related to ROW executive management. Inventory Contr ol Deficiencies in Brazil • Access to information technology (IT) systems in Brazil was not ef fectively controlled. Specifically , several Brazilian accounting employees were provided broad access to the systems, including the Brazilian cost accounting manager and cost analysts, who the Company believes exploited their access and colluded to facilitate theft of substantial quantities of copper and fraudulent adjustments to the systems. In addition, the inventory module in the Brazil IT systems was improperly decoupled so that it did not automatically update the general ledger , thereby enabling the cost accounting manager to more freely enter manual adjustments in the general ledger , which furthered the theft conspiracy . • Processes and control activities designed to support and reconcile inventory general ledger entries were not ef fected, were incorrectly applied or were overridden. Specifically , segregation of responsibilities for review and approval of journal entries either was not ef fected or was overridden by collusion. It appears that the Brazilian cost accounting manager was able to make numerous manual entries in the general ledger without required documentation and approval; in other instances, cost analysts, at the cost accounting manager's instruction, made manual entries to the general ledger , which the cost accounting manager then approved. Moreover , while quarterly inventory counts were reconciled to the inventory quantities in the perpetual inventory system, reconciliation of inventory values to the general ledger balances was not performed. • Physical security controls to protect assets at one of the Brazilian facilities were not suf ficient to prevent theft. Among other things, documentation was insuf ficient in some instances to enable confirmation of quantities of materials received at the facility , the facility lacked a truck scale to confirm that quantities in excess of amounts subject to customer orders or scrap sales were not being placed on trucks leaving the facility , and some security cameras on site were inoperative. Contr ol Deficiencies Related to ROW Executive Management • ROW executive management overrode controls, resulting in a delay in the reporting of inventory accounting issues and allegations of theft to the Company's executive management, and set an improper “tone at the top.” Specifically , ROW executive management did not report the inventory accounting issues to the Company's executive management until late September 2012, even though ROW executive management was aware of the issues no later than January 2012. In this regard, ROW executive management did not investigate the matter promptly , did not report findings in its belated inquiry on a timely basis, discouraged Brazilian personnel from disclosing the matters in their quarterly financial certifications, and failed to identify the matter in their own quarterly certifications that they provided to the Company's executive management. In addition, the tone of ROW executive management communications to employees was inappropriate. ROW executive management placed excessive emphasis on meeting business plan goals rather than on the integrity of the financial reporting process. T able of Contents