Wolverine Tube (NYSE:WLV)
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Wolverine Tube Announces Third Quarter Results
Free Cash Flow $18 Million in the Quarter
HUNTSVILLE, Ala., Oct. 31 /PRNewswire-FirstCall/ -- Wolverine Tube, Inc. today
reported a net loss of $31.7 million or $2.58 per share for the third quarter of
2003, compared with net income of $1.8 million, or $0.15 per diluted share in
the third quarter of 2002. The third quarter results included a $23.2 million
goodwill impairment charge and a previously announced restructuring charge of
$6.4 million ($4.3 million after tax). Excluding these items, this net loss
would have been $4.3 million or $0.35 per share in the third quarter of 2003.
Net sales for the third quarter of 2003 were $144.1 million compared with $134.8
million in the year-earlier period. Total pounds of product shipped were 80.5
million pounds, compared to 77.2 million pounds in the prior year. Gross profit
for the third quarter of 2003 decreased to $6.2 million from $14.5 million in
the third quarter of 2002. Cash flow from operations was $19.4 million in the
third quarter of 2003, compared to $16.5 million in the prior year. Free cash
flow generated in the quarter was $17.8 million, compared to $14.4 million in
the third quarter of 2002. Free cash flow is defined as cash flow from
operations less capital expenditures. Results for the three and nine-month
periods ended September 28, 2003, are outlined in the accompanying tables.
Commenting on the announcement, Dennis Horowitz, Chairman, President and Chief
Executive Officer said, "The third quarter financial results were disappointing
and to a large extent reflect issues that we have spoken about before, including
rising energy, healthcare and pension costs, a leaner product mix, pricing
pressures and the adverse impact of the strong Canadian dollar. Exacerbating the
impact of the aforementioned on operating profit was a confluence of events
which negatively affected manufacturing efficiencies, including, lower than
anticipated volumes at our Booneville facility, an unsuccessful union organizing
attempt at our Decatur facility and the east coast blackout which affected our
London, Ontario, Canada operations."
THIRD QUARTER RESULTS BY SEGMENT
Shipments of commercial products totaled 53.5 million pounds, a 5.7 percent
increase from last year's third quarter shipments of 50.6 million pounds. Net
sales were $106.1 million, up 5.1 percent from last year's third quarter sales
of $101.0 million. Gross profit was $5.9 million, compared to last year's third
quarter gross profit of $11.7 million. The decrease in gross profit reflects the
shift in mix from the higher value added technical and enhanced surface tube to
lower value smooth tube and the aforementioned costs and manufacturing issues.
Shipments of wholesale products totaled 22.4 million pounds, a 7.2 percent
increase over last year's third quarter shipments of 20.9 million pounds. Net
sales were $28.5 million, up 15.7 percent from last year's third quarter sales
of $24.6 million. Gross profit was $38 thousand, compared to $1.9 million in
last year's third quarter. Again, the cost issues discussed above, along with
rapidly increasing copper prices and short supply of recycled materials, have
impacted this quarter's operations as compared to the third quarter of last
year.
Shipments of rod, bar and other products totaled 4.6 million pounds, a 20.7
percent decrease from last year's third quarter shipments of 5.8 million pounds.
Net sales were $9.5 million, compared to $9.2 million in the third quarter of
2002. Gross profit was $330 thousand, down from last year's $862 thousand. Gains
in our European distribution facility were more than offset by losses in North
America in rod and bar, which were due to declines in volume and price.
OUTLOOK
Commenting on the outlook for the Company, Horowitz said, "As we look forward,
we are finally beginning to sense an improvement in the industrial sector of the
North American economy. Also, the demand from our China facility remains strong
and our Portugal facility continues to expand, albeit at a rate and pace below
our expectations, reflecting the lackluster European economy. Productivity and
efficiencies at our facilities have returned to more normal levels and we will
benefit financially from the workforce reduction that was previously announced."
Horowitz continued, "We anticipate recording an additional restructuring charge
of $2.5 million to $5.0 million in future quarters, for the Booneville closure.
At the same time, while overall business conditions are still challenging, early
indications are that the fourth quarter will show improvement over our recently
completed third quarter, even given our normal seasonality."
THIRD QUARTER CONFERENCE CALL
The Company will hold a conference call on October 31, 2003 at 9:30 a.m. Central
Time (10:30 a.m. ET) 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 "Conference Calls" link. If you are unable to participate at this time, a
replay will be available through November 14, 2003, on this website or by
calling (800) 858-5309 (access code 40179, pass code 40179). 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 net cash provided (used) by
operating activities to free cash flow and net cash provided (used) by operating
activities to adjusted earnings before interests, 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 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," "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. 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 and 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, factors that could affect actual results
include, without limitation, the timing and magnitude of recovery from the
current economic downturn, costs and cost savings related to the Booneville
closing, the persistence of low levels of U.S. commercial construction activity,
the effect of currency fluctuations, competitive products and pricing,
environmental contingencies, regulatory pressures, labor cost (including
healthcare and pension expense), raw material costs, technology, fuel and energy
costs, the mix of geographic and product revenues, and any inability to achieve
or delays in achieving anticipated results from our cost reduction initiatives
(including our workforce reduction program), product and process development
activities, productivity and efficiency initiatives, global expansion
activities, market share penetration efforts and working capital management
programs. 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 Nine-month
period ended period ended
---------------------- ----------------------
9/28/2003 9/29/2002 9/28/2003 9/29/2002
--------- --------- --------- ---------
Pounds shipped 80,520 77,232 247,285 238,342
========= ========= ========= =========
Net sales $ 144,099 $ 134,817 $ 440,574 $ 424,907
Cost of goods sold 137,857 120,347 407,105 376,902
--------- --------- --------- ---------
Gross profit 6,242 14,470 33,469 48,005
Selling, general
and administrative
expenses 8,105 7,061 23,812 23,215
Restructuring
charges 6,438 -- 6,438 --
--------- --------- --------- ---------
Income (loss)
from operations (8,301) 7,409 3,219 24,790
Interest expense,
net 5,269 5,620 15,739 14,921
Gain on
extinguishment
of debt -- (1,074) -- (1,074)
Amortization and
other, net 244 455 1,278 1,057
Goodwill impairment 23,153 -- 23,153 --
--------- --------- --------- ---------
Income (loss)
before income
taxes (36,967) 2,408 (36,951) 9,886
Income tax
provision
(benefits) (5,245) 581 (5,966) 2,885
--------- --------- --------- ---------
Net income (loss) $ (31,722) $ 1,827 $ (30,985) $ 7,001
========= ========= ========= =========
Net income (loss)
per common share
- basic $ (2.58) $ 0.15 $ (2.52) $ 0.57
Net income (loss)
per common share
- diluted $ (2.58) $ 0.15 $ (2.52) $ 0.56
========= ========= ========= =========
Basic shares 12,279 12,258 12,273 12,219
Diluted shares 12,279 12,405 12,273 12,351
========= ========= ========= =========
Segment Information (Unaudited)
In thousands
Three-month Nine-month
period ended period ended
---------------------- ----------------------
9/28/2003 9/29/2002 9/28/2003 9/29/2002
--------- --------- --------- ---------
Pounds:
Commercial 53,469 50,564 167,723 162,088
Wholesale 22,415 20,899 65,897 59,516
Rod, bar, and other 4,636 5,769 13,665 16,738
--------- --------- --------- ---------
Total pounds 80,520 77,232 247,285 238,342
========= ========= ========= =========
Net sales:
Commercial $ 106,098 $ 100,996 $ 332,099 $ 326,217
Wholesale 28,512 24,650 80,917 71,537
Rod, bar, and other 9,489 9,171 27,558 27,153
--------- --------- --------- ---------
Total net sales $ 144,099 $ 134,817 $ 440,574 $ 424,907
========= ========= ========= =========
Gross Profit:
Commercial $ 5,874 $ 11,709 $ 31,749 $ 41,200
Wholesale 38 1,899 500 4,844
Rod, bar, and other 330 862 1,220 1,961
--------- --------- --------- ---------
Total gross profit $ 6,242 $ 14,470 $ 33,469 $ 48,005
========= ========= ========= =========
WOLVERINE TUBE, INC.
Condensed Consolidated Balance Sheets (Unaudited)
In thousands
9/28/03 12/31/02
Assets --------- ---------
Cash and cash equivalents $ 50,059 $ 53,920
Accounts receivable 87,469 65,212
Inventory 96,396 85,485
Other current assets 10,207 14,402
Property, plant and equipment, net 202,806 208,999
Other assets 101,034 122,702
--------- ---------
Total assets $ 547,971 $ 550,720
========= =========
Liabilities and Stockholders' Equity
Accounts payables and other accrued expenses $ 65,776 $ 49,583
Short-term borrowings 1,574 1,217
Deferred income taxes 6,687 11,902
Pension liabilities 18,776 14,540
Long-term debt 255,451 255,712
Other liabilities 17,633 17,131
--------- ---------
Total liabilities 365,897 350,085
--------- ---------
Stockholders' equity 182,074 200,635
--------- ---------
Total liabilities and stockholders' equity $ 547,971 $ 550,720
========= =========
WOLVERINE TUBE, INC.
Reconciliation of Net Cash Provided (Used) by Operating Activities
to Free Cash Flow (1) (Unaudited)
In thousands
Three-month Nine-month
period ended period ended
---------------------- ----------------------
9/28/2003 9/29/2002 9/28/2003 9/29/2002
--------- --------- --------- ---------
Net income (loss) $ (31,722) $ 1,827 $ (30,985) $ 7,001
Depreciation and
amortization 4,743 4,601 14,117 13,326
Changes in
operating assets
and liabilities 21,011 10,887 (9,855) 8,313
Goodwill impairment 23,153 -- 23,153 --
Non-cash portion
of restructuring
charge 5,077 -- 5,077 --
Other (2,834) (787) (3,717) (583)
--------- --------- --------- ---------
Net cash provided
(used) by
operating
activities 19,428 16,528 (2,210) 28,057
Additions to
property, plant
and equipment (1,676) (2,129) (4,330) (5,409)
--------- --------- --------- ---------
Free cash flow $ 17,752 $ 14,399 $ (6,540) $ 22,648
========= ========= ========= =========
Reconciliation of Net Cash Provided (Used) by Operating Activities
to Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization (2) (Unaudited)
In thousands
Three-month Nine-month
period ended period ended
---------------------- ----------------------
9/28/2003 9/29/2002 9/28/2003 9/29/2002
--------- --------- --------- ---------
Net cash provided
(used) by
operating
activities $ 19,428 $ 16,528 $ (2,210) $ 28,057
Changes in
operating assets
and liabilities (21,011) (10,887) 9,855 (8,313)
Other 2,834 787 3,717 583
Non-cash portion
of restructuring
charge (5,077) 0 (5,077) 0
Restructuring
charges 6,438 -- 6,438 --
Interest expense,
net 5,269 5,620 15,739 14,921
Income tax
provision (benefit) (5,245) 581 (5,966) 2,885
--------- --------- --------- ---------
Adjusted earnings
before interest,
taxes,
depreciation and
amortization $ 2,636 $ 12,629 $ 22,496 $ 38,133
========= ========= ========= =========
(1) This statement reconciles net cash provided (used) by operating
activities to free cash flow, which is a non-GAAP financial
measure. Management believes free cash flow is a meaningful
measure of financial performance and liquidity and provides
investors with a measure of cash that may be used for debt
service and for other purposes.
(2) This statement reconciles net cash provided (used) by operating
activities to adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA), which is a
non-GAAP financial measure. Management believes Adjusted EBITDA
is a meaningful measure of liquidity and the Company's ability to
service debt.
DATASOURCE: Wolverine Tube, Inc.
CONTACT: James E. Deason, Executive Vice President, Chief Financial
Officer of Wolverine Tube, +1-256-580-3959
Web site: http://www.wlv.com/
http://www.silvaloy.com/