Wheeling-Pittsburgh Corporation Announces Second Quarter 2007 Results
WHEELING, W.Va., Aug. 10 /PRNewswire-FirstCall/ — Wheeling-Pittsburgh Corporation , the holding company of Wheeling-Pittsburgh Steel Corporation, today reported its financial results for the quarter ended June 30, 2007.
For the second quarter of 2007, the Company reported an operating loss of $35.4 million and a net loss of $41.6 million, or $(2.71) per basic and diluted share. This compares to operating income of $19.3 million and net income of $9.3 million for second quarter of 2006, or $0.64 per basic and $0.63 per diluted share.
Steel shipments for the second quarter of 2007 totaled 684,592 tons or $682 per ton versus 667,944 tons or $717 per ton for the second quarter of 2006 (excluding non-steel product revenue). Net sales for the second quarter of 2007 totaled $467.0 million as compared to net sales of $493.9 million for the second quarter of 2006. Net sales for the second quarter of 2006 included $15.0 million from the sale of coke to the Company’s joint venture partner. The decrease in net sales versus the year ago quarter was due to a decrease in the average selling price of steel products sold of $35 per ton and a decrease in the sale of coke during the second quarter 2007 due to the deconsolidation of the Mountain State Carbon joint venture effective January 1, 2007, offset by an increase in the volume of steel products sold.
Cost of sales for the second quarter of 2007 totaled $474.3 million as compared to cost of sales of $445.4 million for the second quarter of 2006. Cost of sales for the second quarter of 2007 was reduced by an insurance recovery of $9.5 million related to a prior year claim. Cost of sales for the second quarter of 2006 included the cost of coke sold of $11.5 million and was reduced by an insurance recovery of $0.6 million related to a prior year claim.
Cost of sales of steel products sold during the second quarter of 2007 totaled $483.8 million, or $707 per ton versus $434.5 million or $651 per ton during the second quarter of 2006. The overall increase of $49.3 million resulted principally from a per ton increase of $56 and an increase in the volume of steel products sold. The increase in the per ton cost of steel products resulted principally from unplanned outages as well as changes in the cost of certain raw materials including scrap, pig iron and purchased slabs. The cost of coke during the second quarter of 2007 was lower than the second quarter of 2006.
As a result of our substantial losses to date in 2007 and the use of cash for operating expenses, principally due to higher scrap market prices, changes in vendor contracts and decreased selling prices and volume as well as for capital investments, management anticipates that the Company may require additional liquidity in the foreseeable future. These losses, together with our earnings outlook, make it likely that we will not be able to comply with our financial covenant under the Term Loan agreement, which becomes effective on April 1, 2008. While we have been able to obtain relief from such covenants in the past, at this time we cannot assure that we will be able to improve our results, obtain additional financing or get relief from our Term Loan covenant. In addition, our auditors included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern in an amendment to our Form 10-K, which we filed today as part of our SEC filings related to the proposed merger with Esmark. Furthermore, in connection with this filing, the Company reclassified $286.5 million of long- term debt to a current classification as of June 30, 2007.
James P. Bouchard, Chairman and Chief Executive Officer, said, “Our second quarter results were disappointing. As we have previously indicated, results were impacted by unplanned outages of the Electric Arc Furnace in April, higher than anticipated scrap costs, as well as weaker than expected market conditions. We knew at the time of the proxy contest that Wheeling-Pitt’s cost structure had to be lowered and that this would take time to accomplish. There are several actions which we could take to alleviate the liquidity situation. First and foremost, among these possible actions is the proposed merger with Esmark, which will infuse between $50 million to $200 million of fresh equity into the combined company. We expect to refinance our revolving credit facility in connection with the merger, which should provide substantial additional liquidity. The merger also brings to Wheeling Pitt the cash flow from the Esmark companies. Post merger there is also material improvement of the combined company balance sheet. The merger is proceeding as planned under all of the terms and conditions agreed to by the Boards of Wheeling Pitt and Esmark.”
Management will conduct a live call tomorrow, August 10, 2007 at 1pm ET to review the Company’s financial results and business prospects. Individuals wishing to participate can join the conference call by dialing 800-289-0529 or 913-981-5523. A replay will be available through August 16, 2007 by dialing 888-203-1112 or 719-457-0820, and using the pass code 9105648. The call can also be accessed via the Internet live or as a replay through http://www.investorcalendar.com.]/
Forward-Looking Statements Cautionary Language
This release contains certain projections or other forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities-Exchange Act regarding future events or the future financial performance of Wheeling-Pittsburgh Corporation that involve risks and uncertainties. Forward-looking statements reflect the current views of management and are subject to a number of risks and uncertainties that could cause actual results to differ materially from actual future events or results. These risks and uncertainties include, among others, factors relating to (1) the Company’s potential inability to generate sufficient operating cash flow to service or refinance its indebtedness; (2) concerns relating to financial covenants and other restrictions contained in its credit agreements; (3) intense competition, dependence on suppliers of raw materials and cyclical demand for steel products; (4) the risk that the businesses of the Company and Esmark will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (5) the ability of the combined companies to realize the expected benefits from the proposed combination, including expected operating efficiencies, synergies, cost savings and increased productivity, and the timing of realization of any such benefits; (6) lower than expected operating results for the Company; (7) the risk of unexpected consequences resulting from the combination of the Company and Esmark; and (8) certain other risks identified in section “Item 1A – Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and other reports and filings with the SEC, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. In addition, any forward-looking statements represent Wheeling-Pittsburgh Corporation’s views only as of today and should not be relied upon as representing the Company’s views as of any subsequent date. While Wheeling-Pittsburgh Corporation may elect to update forward-looking statements from time to time, the company specifically disclaims any obligation to do so.
In connection with the proposed business combination of Wheeling- Pittsburgh Corporation (“Wheeling-Pitt”) and Esmark Incorporated (“Esmark”), Clayton Acquisition Corporation (“New Esmark”) has filed with the SEC a registration statement on Form S-4 and related preliminary proxy statement with the SEC. Stockholders of Wheeling-Pitt and Esmark are urged to read the registration statement, proxy statement/prospectus and any other relevant documents, including the definitive proxy statement/prospectus, filed with the SEC when they become available, as well as any amendments or supplements to those documents, because they will contain important information, including information on the proposed transaction as well as participants and their interests in the Company and Esmark. Stockholders will be able to obtain a free copy of the registration statement and related proxy statement/prospectus, as well as other filings containing information about Wheeling-Pitt and Esmark, at the SEC’s website at http://www.sec.gov/. New Esmark, Wheeling-Pitt, Esmark and their respective directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of Wheeling-Pitt in connection with the proposed business combination transaction. Information regarding the participants in the proxy solicitation and their respective interests may be obtained by reading the registration statement and related preliminary proxy statement. This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
About Wheeling-Pittsburgh:
Wheeling-Pittsburgh is a steel company engaged in the making, processing and fabrication of steel and steel products using both integrated and electric arc furnace technology. The Company manufactures and sells hot rolled, cold rolled, galvanized, pre-painted and tin mill sheet products. The Company also produces a variety of steel products including roll formed corrugated roofing, roof deck, floor deck, bridgeform and other products used primarily by the construction, highway and agricultural markets.
The Company’s condensed consolidated statements of operations and condensed consolidated balance sheets are attached.
WHEELING-PITTSBURGH CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share amounts) Quarter Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Revenues: Net sales, including sales to affiliates of $62,346, $88,390, $121,831 and $183,246 $466,977 $493,925 $864,698 $930,903 Cost and expenses: Cost of sales, including cost of sales to affiliates of $66,236, $83,703, $130,636 and $176,385 474,284 445,384 890,556 853,502 Depreciation and amortization expense 9,260 8,830 18,816 17,137 Selling, general and administrative expense 18,867 20,425 43,651 41,075 Total cost and expenses 502,411 474,639 953,023 911,714 Operating (loss) income (35,434) 19,286 (88,325) 19,189 Interest expense and other financing costs (10,160) (7,024) (19,692) (13,175) Other income 4,005 3,838 6,532 6,654 (Loss) income before income taxes and minority interest (41,589) 16,100 (101,485) 12,668 Income tax provision – 5,233 – 5,233 (Loss) income before minority interest (41,589) 10,867 (101,485) 7,435 Minority interest – (1,538) – (216) Net (loss) income $(41,589) $9,329 $(101,485) $7,219 (Loss) earnings per share: Basic $(2.71) $0.64 $(6.63) $0.50 Diluted $(2.71) $0.63 $(6.63) $0.49 Weighted average shares (in thousands): Basic 15,333 14,530 15,310 14,523 Diluted 15,333 14,829 15,310 14,734 Shipments – tons 684,592 667,944 1,288,485 1,288,612 Production – tons 609,024 675,649 1,173,305 1,337,060 Note: The condensed consolidated statements of operations for the quarter and six months ended June 30, 2007, the condensed consolidated statement of cash flows for the six months ended June 30, 2007 and the condensed consolidated balance sheet at June 30, 2007 do not include Mountain State Carbon, LLC WHEELING-PITTSBURGH CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) June 30, December 31, 2007 2006 Assets Current assets: Cash and cash equivalents $8,098 $21,842 Accounts receivables, less allowance for doubtful accounts of of $3,104 and $2,882 217,861 138,513 Inventories 225,394 212,221 Prepaid expenses and other current assets 22,581 27,911 Total current assets 473,934 400,487 Investment in and advances to affiliated companies 130,676 53,585 Property, plant and equipment, less accumulated depreciation of $118,008 and $114,813 447,759 626,210 Deferred income tax benefits 25,224 30,537 Restricted cash – 2,163 Other intangible assets, less accumulated amortization of $2,155 and $2,136 236 255 Other assets 7,613 9,308 Total assets $1,085,442 $1,122,545 Liabilities Current liabilities: Accounts payable, including book overdrafts of $9,836 and $13,842 $199,572 $99,536 Short-term debt 150,700 110,000 Payroll and employee benefits payable 40,061 34,766 Accrued income and other taxes 9,039 10,333 Deferred income taxes payable 25,224 30,537 Accrued interest and other current liabilities 26,031 10,257 Convertible debt, net of discount of $7,624 65,376 – Long-term debt due in one year 226,196 32,119 Total current liabilities 742,199 327,548 Long-term debt 13,356 254,961 Employee benefits 123,400 121,953 Other liabilities 12,523 25,600 Total liabilities 891,478 730,062 Minority interest in consolidated subsidiary – 106,290 Stockholders’ equity Preferred stock – $.001 par value; 20,000,000 shares authorized; no shares issued or outstanding – – Common stock – $.01 par value; 80,000,000 shares authorized; 15,342,149 and 15,274,796 issued; 15,335,483 and 15,268,130 shares outstanding 153 153 Additional paid-in capital 301,025 289,903 Accumulated deficit (105,644) (4,159) Treasury stock, 6,666 shares, at cost (100) (100) Accumulated other comprehensive (loss) income (1,470) 396 Total stockholders’ equity 193,964 286,193 Total liabilities and stockholders’ equity $1,085,442 $1,122,545
Wheeling-Pittsburgh Corporation
CONTACT: Dennis Halpin of Wheeling-Pittsburgh Corporation,+1-304-234-2421
Web site: http://www.wpsc.com/
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