Operating Income Significantly Improved
HUNTSVILLE, Ala., Nov. 1, 2006 (PRIMEZONE) -- Wolverine Tube, Inc. (NYSE:WLV), today reported its results for the third quarter of 2006. Net loss for the quarter ended October 1, 2006 was $49.5 million, or $3.29 per share, as compared to a net loss of $11.2 million, or $0.74 per share, in the third quarter of 2005. Included in the net loss for the third quarter of 2006 is $44.3 million of after-tax restructuring and other nonrecurring charges. Of these charges, $42.5 million relates to the planned closure of our manufacturing facilities located in Jackson, Tennessee and Montreal, Quebec and the consolidation of our U.S. wholesale distribution facility into the Decatur, Alabama plant as announced on September 13, 2006. The remaining $1.8 million was attributed to nonrecurring professional advisory fees incurred in conjunction with our strategic planning and balance sheet restructuring efforts. In the third quarter of 2005, we recorded an after-tax restructuring charge of $1.2 million. Comparatively, excluding these charges, the net loss would have been $5.2 million, or $0.35 per share, for the third quarter of 2006 and a loss of $10.0 million, or $0.66 per share in the third quarter of 2005.
Net sales for the third quarter of 2006 were $396.1 million as compared to $225.7 million in the third quarter of 2005. The increase in net sales is primarily due to the increased price of copper which is generally passed through to customers. The higher sales reflect the average COMEX copper price of $3.54 per pound compared to $1.70 per pound in the prior year, a 108 percent increase. Total pounds of product shipped were 84.9 million, an increase of 2.5 percent from last year's third quarter pounds of 82.8 million. Operating income, excluding the above mentioned restructuring and other nonrecurring charges, was $3.2 million in the third quarter of 2006 compared to an operating loss of $10.7 million in the same period of the prior year. Earnings before interest, taxes, depreciation and amortization (EBITDA), which was impacted by the restructuring charges noted above, were a loss of $49.0 million as compared to a loss of $8.6 million in the same period of the prior year. Excluding the restructuring and nonrecurring charges, EBITDA would have been $7.4 million in the third quarter 2006 as compared to a negative EBITDA of $6.8 million in the same period of 2005.
Commenting on the results, Chip Manning, President and Chief Executive Officer said, "Our third quarter results reflect the anticipated softening in demand in the wholesale market from the unusually strong second quarter." Manning continued, "As we compare to the prior year, our financial performance in the third quarter showed improvement in gross profit and income from operations over the same period in 2005. The restructuring charges related to the closure of our manufacturing facilities had a negative impact on current quarter results. However, these closures are in line with our strategic planning process and will rationalize our North American manufacturing facilities and product offering and consolidate operations, all designed to improve our future financial performance. The plant closings are proceeding as planned and should be completed by the end of the year. It is not anticipated that these actions will have a negative impact on our near-term liquidity."
THIRD QUARTER RESULTS BY SEGMENT
Commercial products gross profit was $12.0 million compared to the prior year's third quarter loss of $1.4 million. The gross profit improvement was a result of higher demand and lower unit manufacturing costs which were partially offset by lower unit fabrication revenues. Shipments increased 20.0 percent to 65.4 million pounds. Net sales were $301.2 million as compared to $158.4 million in the prior year. These results reflect the higher copper prices and improved demand in our major product groups.
Gross profit in wholesale products was a loss of $2.4 million in 2006 compared to a loss of $1.4 million in the third quarter of 2005. This change is due to significantly lower volumes and increased manufacturing costs which more than off-set the improved unit fabrication revenues. Additionally, the allocation of our base inventory hedging losses in the quarter impacted this product segment, which contributed to the overall loss for the quarter. Shipments totaled 15.4 million pounds as compared to last year's 22.8 million pounds. Notwithstanding the reduction in pounds shipped, significantly higher copper prices resulted in an increase in net sales to $72.4 million from the prior year's $51.0 million.
Gross profit in rod, bar and other products was $140 thousand in the third quarter of 2006, compared to gross profit of $943 thousand in the same period of 2005. The reduction in gross profit is attributed to weaker demand, higher unit costs due to the underabsorption of overhead, productivity challenges in the Montreal facility and the negative impact of the strength of the Canadian dollar. These items were offset by higher unit fabrication revenue. Pounds of rod and bar product shipped were 4.1 million in the third quarter of 2006, as compared to 5.5 million pounds in 2005. Net sales increased to $22.5 million from $16.3 million in 2005, reflecting increased copper prices, offset by reduced volume.
LIQUIDITY
Commenting on liquidity, Jed Deason, Chief Financial Officer, stated, "As of October 27, the Company had utilized $55.4 million under its receivables sale facility and had $4.5 million of outstanding borrowings under its $35.0 million revolving credit facility, which is also used to support letters of credit and other holdbacks. Total North American available liquidity as of October 27 was $29.8 million, including $12.1 million in cash in North America and $17.7 million under the revolving credit facility. We continue to closely monitor our available liquidity." Deason concluded, "We continue to work with Rothschild, Inc. on short term liquidity and capital structure issues. We have issued a separate press release today that provides an update on our Restructuring and Rationalization Program."
THIRD QUARTER CONFERENCE CALL
The Company will hold a conference call this morning 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 (866) 710-0179 (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 November 30, 2006 on this website or by calling (877) 919-4059 (pass code: 15909398). Should you have any problems accessing the call or the replay, please contact the Company at (256) 580-3958.
The tables following the text of this press release provide financial details that will be discussed on the conference call. This includes a reconciliation of net income (loss) 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, and metal joining 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 operating and financial results and liquidity. 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 operating and financial results and liquidity, 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 COMEX copper, silver and other metals pricing; continuation of historical trends in customer inventory levels and expected demand for our products; outsourcing levels of OEMs; the rate and pace of substitutions for copper products on our product lines; 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; the success of our product and process development activities, productivity and efficiency initiatives, including and related to transportation and natural gas, electricity and other utilities; the impact and timing of the closing of the Jackson, Tennessee and Montreal, Quebec facilities; global expansion activities, market share penetration efforts; working capital management programs and capital spending initiatives; the customers' continuing support of payment terms; and our ability to pursue alternative sources of liquidity. A discussion of these and other 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)
Three-month Nine-month
period ended period ended
10/1/2006 10/2/2005 10/1/2006 10/2/2005
---------- ---------- ---------- ----------
In thousands, except per share data
Pounds shipped 84,874 82,796 278,992 240,537
==================== ========== ========== ========== ==========
Net sales $ 396,100 $ 225,704 $1,112,396 $ 635,507
Cost of goods sold 386,329 227,615 1,062,607 621,704
------------------- ---------- ---------- ---------- ----------
Gross profit (loss) 9,771 (1,911) 49,789 13,803
Selling, general
and administrative
expenses 6,535 8,795 23,928 25,747
Advisory fees and
expenses 1,792 - 3,907 -
Restructuring charges 55,580 1,849 55,571 1,903
------------------- ---------- ---------- ---------- ----------
Operating (loss) (54,136) (12,555) (33,617) (13,847)
Interest expense, net 6,908 5,235 19,521 15,801
Amortization and
other, net (775) 323 1,484 765
------------------- ---------- ---------- ---------- ----------
Loss before income
taxes (60,269) (18,113) (54,622) (30,413)
Income tax provision
(benefits) (10,749) (6,915) (9,393) (11,051)
------------------- ---------- ---------- ---------- ----------
Net (loss) $ (49,520) $ (11,198) $ (45,229) $ (19,362)
------------------- ---------- ---------- ---------- ----------
==================== ========== ========== ========== ==========
Basic (loss) per
share: $ (3.29) $ (0.74) $ (3.00) $ (1.29)
Diluted (loss)
per share: $ (3.29) $ (0.74) $ (3.00) $ (1.29)
Weighted average
number of common
shares outstanding
------------------- ---------- ---------- ---------- ----------
Basic shares 15,072 15,034 15,068 15,015
Diluted shares 15,072 15,034 15,068 15,015
------------------- ---------- ---------- ---------- ----------
Segment Information (Unaudited)
Three-month Nine-month
period ended period ended
10/1/2006 10/2/2005 10/1/2006 10/2/2005
---------- ---------- ---------- ----------
In thousands
Pounds:
Commercial 65,366 54,452 198,599 162,174
Wholesale 15,397 22,846 66,660 65,628
Rod, bar, and other 4,111 5,498 13,733 12,735
------------------- ---------- ---------- ---------- ----------
Total pounds 84,874 82,796 278,992 240,537
=================== ========== ========== ========== ==========
Net sales:
Commercial $ 301,223 $ 158,424 $ 788,633 $ 458,375
Wholesale 72,424 51,017 261,743 135,044
Rod, bar, and other 22,453 16,263 62,020 42,088
------------------- ---------- ---------- ---------- ----------
Total net sales $ 396,100 $ 225,704 $1,112,396 $ 635,507
===================== ========== ========== ========== ==========
Gross Profit (Loss):
Commercial $ 11,983 $ (1,429) $ 28,081 $ 13,662
Wholesale (2,352) (1,425) 22,101 (1,727)
Rod, bar, and other 140 943 (393) 1,868
------------------- ---------- ---------- ---------- ----------
Total gross
profit (loss) $ 9,771 $ (1,911) $ 49,789 $ 13,803
===================== ========== ========== ========== ==========
WOLVERINE TUBE, INC.
Condensed Consolidated Balance Sheet (Unaudited)
In thousands 10/1/2006 10/2/2005 12/31/2005
------------------------------ --------- --------- ---------
Assets
Cash and cash equivalents $ 24,491 $ 25,467 $27,329
Accounts receivable 93,875 109,475 104,186
Inventory 171,552 132,479 146,705
Other current assets 11,050 27,244 10,209
Property, plant and
equipment, net 145,003 187,096 181,238
Other assets 111,868 100,429 99,098
------------------------------ --------- --------- ---------
Total assets $ 557,839 $ 582,190 $ 568,765
============================== ========= ========= =========
Liabilities and Stockholders'
Equity
Accounts payables and other
accrued expenses $ 144,493 $ 98,512 $ 106,754
Short-term borrowings 2,655 170 248
Deferred income taxes 751
Pension liabilities 34,569 31,399 42,889
Long-term debt 235,041 235,192 234,920
Other liabilities 20,568 20,278 20,652
------------------------------ --------- --------- ---------
Total liabilities 438,077 385,551 405,463
------------------------------ --------- --------- ---------
Stockholders' equity 119,762 196,639 163,302
------------------------------ --------- --------- ---------
Total liabilities and
stockholders' equity $ 557,839 $ 582,190 $ 568,765
============================== ========= ========= =========
WOLVERINE TUBE, INC. FINANCIAL DATA
Consolidated Statements of Cash Flow (Unaudited)
Nine-month period ended
In thousands 10/1/2006 10/2/2005
----------------------------------------- ---------- ----------
Net (loss) ($45,229) ($19,362)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 12,982 12,803
Other non-cash charges 53,872 4,119
Changes in operating assets
and liabilities (24,112) 1,885
----------------------------------------- ---------- ----------
Net cash used by operating activities (2,487) (555)
Investing activities:
Additions to property, plants
and equipment (3,760) (7,639)
Other 104 861
----------------------------------------- ---------- ----------
Net cash used by investing activities (3,656) (6,778)
Financing activities:
Net borrowings 2,383 (2,093)
Issuance of common stock 62 430
Other (1,062) (997)
----------------------------------------- ---------- ----------
Net cash provided (used) by
financing activities 1,383 (2,660)
Effect of exchange rate 1,922 443
----------------------------------------- ---------- ----------
Net decrease in cash (2,838) (9,550)
Cash and equivalents at
beginning of year 27,329 35,017
----------------------------------------- ---------- ----------
Cash and equivalents at quarter end $24,491 $25,467
========================================= ========== ==========
This press release contains, and our conference call will include,
references to earnings before interest, taxes, depreciation and
amortization (EBITDA), a non-GAAP financial measure. The following
table provides a reconciliation of EBITDA and adjusted EBITDA to net
income (loss). Management believes EBITDA and adjusted EBITDA are
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 Net Income (Loss) to Earnings Before Interest,
Taxes, Depreciation and Amortization (Unaudited)
Three-month period ended Nine-month period ended
In thousands 10/1/2006 10/2/2005 10/1/2006 10/2/2005
----------- --------- --------- ---------
Net Income (loss) ($49,520) ($11,198) ($45,229) ($19,362)
Depreciation and
amortization 4,367 4,258 12,982 12,803
Interest expense,
net 6,908 5,235 19,521 15,801
Income tax
provision/(benefit) (10,749) (6,915) (9,393) (11,051)
----------- --------- --------- ---------
Earnings before
interest, taxes,
depreciation and
amortization
(EBITDA) (48,994) (8,620) (22,119) (1,809)
Restructuring
Charges 55,580 1,849 59,477 1,903
Advisory fees and
expenses 1,792 - - -
Asset impairment (1,021) - - -
----------- --------- --------- ---------
Adjusted EBITDA $7,357 ($6,771) $37,358 $94
=========== ========= ========= =========