62 GENERAL CABLE CORPORA TION AND SUBSIDIARIES Notes to Consolidated Financial Statements 1.  General General Cable Corporation (the Company) is a global leader in the development, design, manufacture, marketing and distribution of copper , aluminum and fiber optic wire and cable products for use in the ener gy , industrial, construction, specialty and communications markets. The Company sells copper , aluminum and fiber optic wire and cable products worldwide. The Company’ s operations are divided into three reportable segments: North America, Europe and Mediterranean and Rest of W orld (ROW) which consists of operations in Latin America, Sub-Saharan Africa, the Middle East and Asia Pacific. As of December 31, 2012 , General Cable operated 56 manufacturing facilities, which includes 4 facilities owned by companies in which the Company has an equity investment, in 25 countries with regional distribution centers around the world in addition to the corporate headquarters in Highland Heights, Kentucky . 2. Summary of Significant Accounting Policies Principles of Consolidation The Company’ s consolidated financial statements include the accounts of wholly-owned subsidiaries, majority-owned controlled subsidiaries and variable interest entities where the Company is the primary beneficiary . The Company records its investment in each unconsolidated af filiated Company (generally 20 - 50  percent ownership in which it has the ability to exercise significant influence) at its respective equity in net assets. Other investments (less than 20  percent ownership) are recorded at cost. All intercompany transactions and balances among the consolidated companies have been eliminated. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that af fect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on historical experience and information that is available to management about current events and actions the Company may take in the future. Significant items subject to estimates and assumptions include valuation allowances for accounts receivable and deferred income taxes; legal, environmental and asbestos liabilities; uncertain tax positions; assets and obligations related to pension and other postretirement benefits; business combination accounting and related purchase accounting valuations; goodwill and intangible valuations; financial instruments; self-insured workers’ compensation and health insurance reserves; and revenue recognized under the percentage-of-completion method. There can be no assurance that actual results will not dif fer from these estimates. Historically , the Company has not experienced material changes in estimates as it relates to the revenue recognized under the percentage of completion method. However , in the fourth quarter of 2012 changes in estimates across all submarine turnkey projects in the European segment resulted in a reduction to gross profit of $27.5 million , with $20.8 million of the reduction associated with one certain submarine turnkey project at the Company's German submarine power cable manufacturing facility . Equipment failure at the German facility resulted in costs, for this particular project, related to cable damage, equipment repairs and ship rental of $13.3 million . Further revision of this project's profitability , due to changes in estimates, resulted in a reduction of mar gin by $7.5 million . The project was approximately 40% complete as of December 31, 2012 . There was no material impacts to gross profit as a result of changes in estimates related to revenue recognition under the percentage of completion method in 201 1 or 2010. Revenue Recognition The majority of the Company’ s revenue is recognized when goods are shipped to the customer , title and risk of loss are transferred, pricing is fixed and determinable and collectability is reasonably assured. Most revenue transactions represent sales of inventory . A provision for payment discounts, product returns, warranty and customer rebates is estimated based upon historical experience and other relevant factors and is recorded within the same period that the revenue is recognized. A portion of the Company’ s revenue consists of long-term product installation contract revenue that is recognized based on the percentage-of-completion method generally based on the cost-to-cost method if there are reasonably reliable estimates of total revenue, total cost, and the extent of progress toward completion; and there is an enforceable agreement between parties who can fulfill their contractual obligations. The Company reviews contract price and cost estimates periodically as the work progresses and reflects adjustments proportionate to the percentage-of-completion to income in the period when those estimates are revised. For these contracts, if a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full in the period when determined. T able of Contents