HUNTSVILLE, Ala., Nov. 1, 2005 (PRIMEZONE) -- Wolverine Tube, Inc. (NYSE:WLV) today reported results for the third quarter and nine months ended October 2, 2005. The net loss for the third quarter of 2005 was $11.2 million, or $0.74 per diluted share. Included in the loss was $1.2 million of after-tax restructuring charges. Excluding these restructuring charges, the net loss would have been $10.0 million or $0.66 per diluted share. Also impacting financial results during the third quarter were a $6.2 million pre-tax hedge and metal valuation expense and a $0.9 million pre-tax currency translation loss. More specifically, the $1.2 million of after-tax restructuring charges related to a reduction in the Company's corporate headquarters' workforce, a reduction of certain support functions in its U.S. manufacturing operations, a reduction in leased facilities for corporate and administrative offices and the write-down of the Company's corporate aircraft that was subsequently sold in October. The $6.2 million pre-tax hedge and metal valuation expense reflects accounting-related timing differences of $5.4 million caused by the erratic changes in the spot and forward prices on the Company's hedge positions in copper and natural gas, and hedge losses of $0.8 million (associated with the copper hedge transactions of the Company's base inventory) caused by the copper spot price being greater than the forward price at the time these contracts were executed. Lastly, the $0.9 million pre-tax currency translation loss was related to the relative strengthening of the Canadian dollar versus the U.S. dollar. In the third quarter of 2004 the net loss from continuing operations was $2.5 million, or $0.17 per diluted share. Excluding $2.1 million of after-tax restructuring and non-recurring charges, the third quarter of 2004 net loss from continuing operations was $0.4 million, or $0.03 per diluted share.
Net sales for the third quarter of 2005 were $225.7 million, a 12.9 percent increase over the third quarter 2004 net sales of $200.0 million. The increase in net sales is attributable to a 32 percent year over year increase in copper prices. COMEX copper prices averaged $1.70 per pound in the third quarter of 2005 as compared to $1.29 per pound in the third quarter of 2004. Total pounds of product shipped were down slightly, with shipments of 82.8 million pounds in the third quarter of 2005 versus 84.5 million pounds in the same period a year ago. However, pounds produced in the quarter were down substantially as production was impacted by the Company's planned inventory reduction program and the utilization of China-sourced industrial tube product. Gross profit for the third quarter of 2005, including the aforementioned $6.2 million hedge and metal valuation expense, was a negative $1.9 million versus gross profit of $12.3 million in the third quarter of 2004. Results for the first nine months of 2005 are outlined in the accompanying tables.
"While our third quarter results are below expectations, it is important to understand underlying causes," said Dennis Horowitz, Chairman and Chief Executive Officer. "Valuation of our normal copper and natural gas hedging contracts, which are in place to protect Wolverine's copper inventories from price decreases and to lock-in natural gas expense, resulted in a $6.2 million negative impact on earnings. However, the ultimate net cash impact of these hedging transactions is $0.8 million, in total. Additionally in the quarter, the Company reduced inventories by over 9 million pounds. Given our desire to control cash during a period of record high copper prices and to reduce the amount of inventory to be hedged, this was the right decision for our Company. At the same time, the net reduction of inventory and pounds produced resulted in a significant unabsorbed period cost impact on our earnings. On an actual operating basis, a key earnings driver was that the months of July and August were lackluster, both in terms of normal seasonality, as well as having been impacted by continued low wholesale pricing, slow demand for industrial tube and the residual effects of the second quarter Montreal, Quebec strike. Further driving the quarterly loss was continued weakening of the U.S. dollar versus the Canadian dollar. On the positive side, in the second part of September, we began to see long expected reversals of many of these negative trends, which, thus far, have continued into the fourth quarter."
THIRD QUARTER RESULTS BY SEGMENT
Shipments of commercial products for the third quarter totaled 54.5 million pounds, a 6.7 percent decrease from 58.4 million pounds in the third quarter of 2004. Net sales of commercial products increased 7.8 percent to $158.4 million, from $147.0 million in the third quarter 2004. Gross profit for commercial products decreased to a negative $1.4 million from $11.3 million in the third quarter 2004. Gross profit for commercial products includes an allocation for a majority of the aforementioned $6.2 million impact of hedge and metal valuation expense. An allocation is also included in gross profit for both the wholesale and rod, bar and other product segments below.
Shipments of wholesale products totaled 22.8 million pounds, as compared to 20.5 million pounds in the third quarter of 2004, an increase of 11.2 percent. Net sales were $51.0 million in the third quarter of 2005 and $38.2 million in the third quarter of 2004, a 33.5 percent increase. Gross profit was a negative $1.4 million in the third quarter of 2005 as compared to $0.2 million in the third quarter of 2004.
Shipments of rod, bar and other totaled 5.5 million pounds, a 1.8 percent decrease from the third quarter of 2004 of 5.6 million pounds. Net sales in the third quarter of 2005 were $16.3 million, as compared to $14.8 million in the same period in 2004, a 10.1 percent increase. Gross profit increased to $0.9 million in the third quarter 2005 from $0.8 million in the third quarter of 2004.
LIQUIDITY
Addressing liquidity, Tom Sabol, Senior Vice President and Chief Financial Officer stated, "While copper prices continue to reach all-time highs, the Company has been able to mitigate the impact on working capital by significantly reducing inventory levels and focusing on cash management. Our net working capital position at the end of the third quarter totaled $196.0 million, versus $193.7 million for the same quarter a year ago. The utilization of our receivables sale facility at the end of the third quarter was $18.5 million. The Company also had no outstanding borrowings under its secured revolving credit facility. The combined additional availability under these agreements totals approximately $37 million. We also took steps to provide the Company with improved financial flexibility. Working with our commercial bank, we amended our secured revolving credit facility and our receivables sale facility. These amendments eliminated the EBITDA financial covenant until the quarter ending June 30, 2007. With these amendments the Company is currently in compliance with all financial covenants."
OUTLOOK
Commenting on the outlook for the Company, Horowitz said, "In terms of operations, we are encouraged by strengthening demand and price in our wholesale products segment, a return to more normal productivity levels at our Montreal facility, and a marked increase in demand for our industrial tube used in unitary air conditioning units. Our cost containment actions, started in the third quarter will continue. We are beginning to enter the 2006 contract negotiation period and have already begun to see contract wins, both for existing business and also for new business. By way of caution, the copper market still remains volatile, and while impossible to predict, hedge timing losses or gains will remain a challenge for all companies that hedge copper, at least until the market returns to a more stable condition."
THIRD QUARTER CONFERENCE CALL
The Company will hold a conference call November 1 at 9:30 a.m. Central Time (10:30 a.m. Eastern Time) to discuss the contents of this release. Dial in to the conference call line at (800) 311-9402 (Access Code: Wolverine), ten minutes prior to the scheduled start time. A link to the broadcast can be found on the Company's website at http://www.wlv.com, in the Investor Relations section under the "Conference Calls" link. If you are unable to participate at this time, a replay will be available through December 1, 2005 on our website or by calling (877) 919-4059 (U.S.) or (334) 323-7226 (International) (pass code: 89825822). Should you have any problems accessing the call or the replay, please contact the Company at (256) 890-0460.
The tables following the text of this press release provide financial details that are included in this press release and that will be discussed on the conference call. This includes a reconciliation of income from continuing operations to earnings before interest, taxes, depreciation and amortization. This press release, including these financial details, is now available on the Wolverine website at http://www.wlv.com in the Investor Relations section under the heading Press Releases.
ABOUT WOLVERINE TUBE, INC.
Wolverine Tube, Inc. is a world-class quality partner, providing its customers with copper and copper alloy tube, fabricated products, metal joining products as well as copper and copper alloy rod, bar and other products. Internet addresses http://www.wlv.com and http://www.silvaloy.com.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this press release are made pursuant to the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements use such words as "may", "should", "will", "expect", "believe", "plan", "anticipate" and other similar terminologies. This press release contains forward-looking statements regarding factors affecting the Company's expectations of future sales, earnings and cash flows and other matters concerning the Company's business, operating results and financial condition. Such statements are based on current expectations, estimates and projections about the industry and markets in which the Company operates, as well as management's beliefs and assumptions about the Company's business and other information currently available. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements. The Company undertakes no obligation to publicly release any revision of any forward-looking statements contained herein to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. With respect to expectations of future sales, earnings and cash flows and other matters concerning the Company's business, operating results and financial condition, factors that could affect actual results include, without limitation, the effect of currency fluctuation; energy and raw material costs and our ability to effectively hedge these costs; fluctuation in the COMEX copper price; the levels of North American commercial construction activity; continuation of historical trends in customer inventory levels and expected demand for our products; unanticipated weather conditions and its effect on product demand; unanticipated cost or delays in the continued ramp-up of production and the return of business at our Montreal facility; outsourcing levels of OEMs; the effect of the 13 SEER regulations on product demand and the seasonality of our business; unanticipated costs or delays in the continued ramp-up of production and the ability to sustain cost efficiencies at our Monterrey, Mexico facility; the level of customer demand in the Mexican market; competitive products and pricing; environmental contingencies; regulatory matters; changes in technology and our ability to maintain technologically competitive products; the mix of geographic and product revenues; pension and healthcare costs; the success of our product and process development activities, productivity and efficiency initiatives, global expansion activities, market share penetration efforts, working capital management programs and capital spending initiatives and our ability to continue de-levering our balance sheet. A discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements can be found in the Company's Annual Report on Form 10-K for the most recently ended fiscal year and reports filed from time to time with the Securities and Exchange Commission.
WOLVERINE TUBE, INC. FINANCIAL DATA
Consolidated Statements of Operations (Unaudited)
In thousands, except per share data
Three-month period ended Nine-month period ended
10/2/2005 10/3/2004 10/2/2005 10/3/2004
--------- --------- --------- ---------
Total pounds
shipped 82,796 84,477 240,537 269,181
================== ========= ========= ========= =========
Net sales $ 225,704 $ 200,038 $ 635,507 $ 619,923
Cost of goods sold 227,615 187,713 621,704 568,532
------------------ --------- --------- --------- ---------
Gross profit (1,911) 12,325 13,803 51,391
Selling, general
and
administrative
expenses 8,795 9,195 25,747 28,694
Restructuring
charges 1,849 862 1,903 1,727
------------------ --------- --------- --------- ---------
Operating income
(loss) from
continuing
operations (12,555) 2,268 (13,847) 20,970
Interest expense,
net 5,235 4,922 15,801 15,752
Amortization and
other, net 323 (22) 765 1,115
Loss on
extinguishment of
debt -- 2,372 -- 3,009
------------------ --------- --------- --------- ---------
Income (loss) from
continuing
operations before
income taxes (18,113) (5,004) (30,413) 1,094
Income tax
provision
(benefits) (6,915) (2,492) (11,051) (1,062)
------------------ --------- --------- --------- ---------
Income (loss) from
continuing
operations (11,198) (2,512) (19,362) 2,156
Earnings (loss)
from discontinued
operations, net
of income tax -- (73) -- (325)
------------------ --------- --------- --------- ---------
Net income (loss) $ (11,198) $ (2,585) $ (19,362) $ 1,831
================== ========= ========= ========= =========
------------------ --------- --------- --------- ---------
Basic earnings per
share:
Income (loss) from
continuing
operations $ (0.74) $ (0.17) $ (1.29) $ 0.16
Loss from
discontinued
operations -- (0.00) -- (0.02)
------------------ --------- --------- --------- ---------
Net income (loss) $ (0.74) $ (0.17) $ (1.29) $ 0.14
Diluted earnings
per share:
Income (loss) from
continuing
operations $ (0.74) $ (0.17) $ (1.28) $ 0.16
Loss from
discontinued
operations $ -- $ (0.00) $ -- $ (0.02)
------------------ --------- --------- --------- ---------
Net income (loss) $ (0.74) $ (0.17) $ (1.28) $ 0.13
------------------ --------- --------- --------- ---------
------------------ --------- --------- --------- ---------
Basic shares 15,034 14,835 15,015 13,246
Diluted shares 15,166 15,293 15,184 13,577
------------------ --------- --------- --------- ---------
Segment Information (Unaudited)
Three-month period ended Nine-month period ended
In thousands 10/2/2005 10/3/2004 10/2/2005 10/3/2004
--------- --------- --------- ---------
Pounds Shipped:
Commercial 54,452 58,404 162,174 181,776
Wholesale 22,846 20,510 65,628 69,327
Rod, bar, and
other 5,498 5,563 12,735 18,078
------------------ --------- --------- --------- ---------
Total pounds
shipped 82,796 84,477 240,537 269,181
================== ========= ========= ========= =========
Net sales:
Commercial $ 158,424 $ 147,020 $ 458,375 $ 446,971
Wholesale 51,017 38,231 135,044 126,914
Rod, bar, and
other 16,263 14,787 42,088 46,038
------------------ --------- --------- --------- ---------
Total net sales $ 225,704 $ 200,038 $ 635,507 $ 619,923
================== ========= ========= ========= =========
Gross Profit:
Commercial $ (1,429) $ 11,292 $ 13,662 $ 42,290
Wholesale (1,425) 198 (1,727) 5,446
Rod, bar, and
other 942 835 1,867 3,655
------------------ --------- --------- --------- ---------
Total gross
profit $ (1,912) $ 12,325 $ 13,802 $ 51,391
================== ========= ========= ========= =========
WOLVERINE TUBE, INC.
Condensed Consolidated Balance Sheet (Unaudited)
In thousands 10/2/2005 10/3/2004 12/31/2004
------------------------- --------- --------- ---------
Assets
Cash and cash equivalents $ 25,467 $ 34,827 $ 35,017
Accounts receivable 109,475 108,555 93,964
Inventory 132,479 126,572 151,979
Other current assets 27,244 12,702 14,612
Property, plant and
equipment, net 187,096 192,992 194,966
Other assets 100,429 97,508 96,920
------------------------- -------- -------- --------
Total assets $582,190 $573,156 $587,458
========================= ======== ======== ========
Liabilities and Stockholders' Equity
Accounts payables and
other accrued expenses $ 98,512 $ 88,327 $ 92,388
Short-term borrowings 170 659 1,219
Deferred income taxes -- -- --
Pension liabilities 31,399 24,968 27,915
Long-term debt 235,192 235,970 237,022
Other liabilities 20,278 18,678 19,412
------------------------- -------- -------- --------
Total liabilities 385,551 368,602 377,956
------------------------- -------- -------- --------
Stockholders' equity 196,639 204,554 209,502
------------------------- -------- -------- --------
Total liabilities and
stockholders' equity $582,190 $573,156 $587,458
========================= ======== ======== ========
This press release contains, and our conference call will include,
references to earning's before interest, taxes, depreciation and
amortization (EBITDA), a non-GAAP financial measure. The following
table provides a reconciliation of EBITDA to income from continuing
operations. Management believes EBITDA is a meaningful measure of
liquidity and the Company's ability to service debt because it
provides a measure of cash available for such purposes. Additionally,
management provides an EBITDA measure so that investors will have the
same financial information that management uses with the belief that
it will assist investors in properly assessing the Company's
performance on a year-over-year and quarter-over-quarter basis.
Reconciliation of Income from Continuing Operations to Earnings
Before Interest, Taxes, Depreciation and Amortization (Unaudited)
Three-month period ended Nine-month period ended
In thousands 10/2/2005 10/3/2004 10/2/2005 10/3/2004
--------------------- ----------------------
Income/(loss) from
continuing operations ($11,198) ($ 2,512) ($19,362) $ 2,156
Depreciation and
amortization 4,258 4,122 12,803 13,155
Interest expense, net 5,235 4,922 15,801 15,752
Income tax provision/
(benefit) (6,915) (2,492) (11,051) (1,062)
--------------------------------------------- ---------------------
Earnings before
interest, taxes,
depreciation and
amortization ($ 8,620) $ 4,040 ($ 1,809) $ 30,001
============================================ =====================