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WHX Corporation Reports Financial Results for the Fourth Quarter and Year End 2008, and Analyst Call on 4/6 at 8:30 am ET
"For WHX Corporation, 2008 was a year of challenge, transition, transformation and achievement," said
Financial Highlights:
Fourth Quarter Results
WHX reported a net loss of
The net loss in 2008 included non-cash asset impairment charges of
The Company generated Adjusted EBITDA of
Revenue for the fourth quarter of 2008 was
2008 Results
WHX reported net income of
The Company realized significant non-recurring items in 2008 and 2007. 2008 results include non-cash asset impairment charges of
The Company's Adjusted EBITDA of
2008 net sales were
For 2008, gross profit increased 33.3% to
Operating income increased 93.2% to
Non-cash asset impairment charges in 2008 totaling
Segment Operating Results
All data regarding segment operating results is before corporate allocations and impairments.
Precious Metal Segment
For the fourth quarter of 2008, the Precious Metal segment operating income decreased by
For full year 2008, net sales for the Precious Metal segment increased
Precious Metal segment operating income increased by
Tubing Segment
For the fourth quarter of 2008, the Tubing segment's operating income increased by
For full year 2008, net sales for the Tubing segment increased
Tubing segment operating income increased by
Engineered Materials Segment
For the fourth quarter of 2008, the Engineered Materials segment operating income decreased by
For full year 2008, net sales for the Engineered Materials segment increased
Engineered Materials segment operating income increased by
Bairnco Segments:
For the fourth quarter of 2008, net sales for the Arlon Electronic Materials ("Arlon EM") segment decreased 1.8% to
Fourth quarter sales for the Arlon Coated Materials ("Arlon CM") segment increased 6% to
Fourth quarter sales for the Kasco segment decreased 7.0% to
For full year 2008, the Bairnco segments' operating income increased to
Due to the acquisition of Bairnco in 2007, the following Bairnco segment discussion for the full year 2008 reflects net sales and operating income for 2007 on a pro forma basis for a full year in 2007, including the period
2007
2008 Pro forma
(in thousands)
Net Sales:
Arlon Electronic Materials $64,208 $64,630
Arlon Coated Materials 72,395 65,497
Kasco 67,202 66,149
Total net sales $203,805 $196,276
Operating income/(loss)
Arlon Electronic Materials $6,243 $5,792
Arlon Coated Materials (a) (1,199) (1,411)
Kasco 3,786 2,267
Total operating
income $8,830 $6,648
(a) The operating results for the Arlon Coated Materials segment for 2008
include $1.7 million of costs to consolidate two plants in San Antonio,
Texas into one. In addition to the direct move costs, 2007 results were
negatively impacted by a plant shutdown and related operating
inefficiencies during the move.
Arlon EM sales of
Operating income of
The improvement in gross profit was partially offset by higher SG&A expenses. Included in the 2008 expenses is
WHX Business System
The Company continues to apply the WHX Business System at all of its business units. The System is at the heart of the operational and improvement methodologies for all WHX companies and employees. Strategy Deployment forms the roof of the business system and serves to convert strategic plans into tangible actions ensuring alignment of goals throughout each of our businesses. The pillars of the System are the key performance indicators used to monitor and drive improvement. The steps of the System are the specific tool areas that drive the key metrics and overall performance. WHX utilizes lean tools and philosophies to reduce and eliminate waste coupled with Six Sigma tools targeted at variation reduction. The System is a proven, holistic approach to increasing shareholder value and achieving long term, sustainable, and profitable growth.
Rights Offering
On
Reverse Stock Split
On
NASDAQ Listing
On
Loan Amendments
On
On
WHX Corporation 4th Quarter and Total Year 2008 Earnings Call,
WHX Corporation will hold a conference call to discuss the 2008 financial results on
US/Canada Dial-in #: 1-866-393-1336
Conference ID: 90930265
NOTE: In order to join this conference call, all speakers and participants will be required to provide the Conference ID Number listed above.
Note Regarding Presentation of Non-GAAP Financial Measures:
The financial data contained in this press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission ("SEC"), including "Adjusted EBITDA". The Company is presenting Adjusted EBITDA because it believes that it provides useful information to investors about WHX, its business and its financial condition. The Company defines Adjusted EBITDA as net income before the effects of realized and unrealized losses on derivatives, interest expense, taxes, depreciation and amortization, LIFO liquidation gain, and pension credit and excludes certain non-recurring and non-cash items. The Company believes Adjusted EBITDA is useful to investors because it is one of the measures used by the Company's Board of Directors and management to evaluate its business, including in internal management reporting, budgeting and forecasting processes, in comparing operating results across the business, as an internal profitability measure, as a component in evaluating the ability and the desirability of making capital expenditures and significant acquisitions, and as an element in determining executive compensation. Further, the Company believes that Adjusted EBITDA is a measure of leverage capacity and the Company's ability to service its debt.
However, Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in
- Adjusted EBITDA does not reflect the Company's net realized and unrealized losses and gains on derivatives and LIFO liquidations of its precious metal inventory;
- Adjusted EBITDA does not reflect the Company's interest expense;
- Adjusted EBITDA does not reflect the Company's tax expense or the cash requirements to pay its taxes;
- Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacement; and
- Adjusted EBITDA does not include pension credit.
The Company compensates for these limitations by relying primarily on its GAAP financial measures and by using Adjusted EBITDA only supplementally. The Company believes that consideration of Adjusted EBITDA, together with a careful review of its GAAP financial measures, is the most informed method of analyzing WHX.
The Company reconciles Adjusted EBITDA to Net income (loss), and that reconciliation is set forth below. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in the Company's Annual Report on Form 10-K for the year ended
Our Company
WHX Corporation is a diversified global industrial company delivering value through the WHX Business System which drives innovation, operating excellence and superior customer service. WHX and its affiliated companies employ over 2,300 people at 35 locations in eight countries.
Our companies are organized into six businesses: Precious Metals, Tubing, Engineered Materials, Arlon Electronic Materials, Arlon Coated Materials and Kasco.
We sell our products and services through direct sales forces, distributors and manufacturer's representatives. We serve a diverse customer base, including the construction, electronics, telecommunications, home appliance, transportation, utility, medical, semiconductor, and aerospace and aviation markets. Other markets served include the signage industry and meat room products and maintenance services for the food industry.
We are based in
Forward-Looking Statements
This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that reflect WHX's current expectations and projections about its future results, performance, prospects and opportunities. WHX has tried to identify these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions. These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties and other factors, that could cause its actual results, performance, prospects or opportunities in 2008 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These factors include, without limitation, WHX's need for additional financing and the terms and conditions of any financing that is consummated, customers' acceptance of its new and existing products, the risk that the Company will not be able to compete successfully, and the possible volatility of the Company's stock price and the potential fluctuation in its operating results. Although WHX believes that the expectations reflected in these forward-looking statements are reasonable and achievable, such statements involve significant risks and uncertainties and no assurance can be given that the actual results will be consistent with these forward-looking statements. Investors should read carefully the factors described in the "Risk Factors" section of the Company's filings with the SEC, including the Company's Form 10-K for the year ended
WHX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
(Dollars and shares in thousands)
Net sales $146,371 $160,775 $725,785 $637,866
Cost of goods sold 110,813 122,504 549,105 505,341
Gross profit 35,558 38,271 176,680 132,525
GP% 24.3% 23.8% 24.3% 20.8%
Selling, general and
administrative
expenses 30,339 28,242 131,574 110,660
SG&A % 20.7% 17.6% 18.1% 17.3%
Income from operations
before unusual items 5,219 10,029 45,106 17,187
Environmental remediation
expense - 2,151 - 4,678
Proceeds from insurance
claim 48 (849) (3,399) (6,538)
Benefit plan curtailment (3,875) - (3,875) 727
Asset impairments 8,291 - 8,291 -
Loss (gain) on disposal
of assets 53 (5) 212 283
Income from operations 702 8,732 43,877 22,715
Other:
Interest expense 6,369 10,930 36,787 39,488
Realized and
unrealized loss on
derivatives 430 849 1,355 1,888
Other (income)
expense 638 (56) 1,354 272
Income (loss) before
taxes (6,735) (2,991) 4,381 (18,933)
Tax provision (benefit) (1,157) (392) 1,370 1,838
Net income (loss) $(5,578) $(2,599) $3,011 $(20,771)
Basic and diluted per
share of common stock $(0.46) $(2.60) $0.75 $(20.77)
Weighted average number
of common shares
outstanding 12,179 1,000 4,001 1,000
WHX CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2008 2007
(Dollars and shares in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $8,656 $6,090
Trade receivables - less allowance for
doubtful accounts of $3,178 and $2,776 81,610 89,546
Inventories 75,270 83,709
Deferred income taxes 1,310 3,339
Other current assets 10,378 12,023
Total current assets 177,224 194,707
Property, plant and equipment at cost,
less accumulated depreciation and
amortization 102,508 124,336
Goodwill 65,070 64,317
Other intangibles, net 36,965 39,892
Other non-current assets 17,717 18,337
$399,484 $441,589
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
EQUITY
Current Liabilities:
Trade payables $36,599 $49,053
Accrued environmental liability 6,722 7,805
Accrued liabilities 37,382 40,308
Accrued interest expense - related party 2,499 19,615
Current portion of long-term debt 12,956 7,513
Short-term debt - related party - 5,100
Short-term debt 32,970 50,180
Deferred income taxes 257 142
Total current liabilities 129,385 179,716
Long-term debt 109,174 141,678
Long-term debt - related party 54,098 154,901
Accrued pension liability 133,990 15,653
Other employee benefit liabilities 4,233 7,595
Deferred income taxes 5,413 8,217
Other liabilities 5,098 3,374
441,391 511,134
Stockholders' (Deficit) Equity:
Preferred stock - $.01 par value;
authorized 5,000 shares; issued and
outstanding - 0 - shares - -
Common stock - $.01 par value;
authorized 180,000 and 50,000 shares;
issued and outstanding 12,179 and 1,000
shares in 2008 and 2007, respectively 122 10
Warrants - 1,287
Accumulated other comprehensive loss (163,502) (32,559)
Additional paid-in capital 552,583 395,838
Accumulated deficit (431,110) (434,121)
Total stockholders' deficit (41,907) (69,545)
$399,484 $441,589
WHX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2008 2007
(in thousands)
Cash flows from operating activities:
Net income (loss) $3,011 $(20,771)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 20,927 18,242
Non-cash stock based compensation 553 1,612
Acquired in-process research and
development - 1,851
Amortization of debt related costs 1,806 2,111
Payment in kind interest on related
party debt 5,285 4,721
Curtailment of employee benefit
obligations (3,875) 727
Deferred income taxes (643) (531)
Loss on asset dispositions 212 282
Asset impairment charges 8,291 -
Equity in after-tax income of affiliated
companies (27) (66)
Unrealized gain on derivatives (384) (103)
Reclassification of net cash settlements
on derivative instruments 1,739 1,991
Decrease (increase) in operating assets
and liabilities, net of effect of
acquisitions:
Trade and other receivables 6,744 2,114
Inventories 7,498 13,826
Other current assets 1,449 1,699
Accrued interest-related party (17,643) 9,424
Other current liabilities (22,434) (39,440)
Other items-net (2,430) (42)
Net cash provided by (used in) operating
activities 10,079 (2,353)
Cash flows from investing activities:
Acquisitions - (102,595)
Plant additions and improvements (12,314) (10,226)
Net cash settlements on derivative
instruments (1,739) (1,991)
Proceeds from sales of assets 8,253 4,314
Net cash used in investing activities (5,800) (110,498)
Cash flows from financing activities:
Proceeds of stock-rights offering 155,561 -
Proceeds from term loans - related party - 115,929
Proceeds from term loans - domestic 4,000 76,000
Net revolver borrowings (repayments) (17,084) 3,368
Repayments of term loans - foreign (517) (495)
Repayments of term loans - domestic (30,367) (22,127)
Repayments of term loans - related party (111,188) (55,376)
Deferred finance charges (1,562) (3,671)
Net change in overdrafts (1,107) (102)
Other 618 453
Net cash provided by (used in) financing
activities (1,647) 113,979
Net change for the period 2,633 1,128
Effect of exchange rate changes on net
cash (67) 186
Cash and cash equivalents at beginning
of period 6,090 4,776
Cash and cash equivalents at end of
period $8,656 $6,090
WHX CORPORATION
CONSOLIDATED SEGMENT DATA
(unaudited)
Statement of operations data: Three Months Ended Twelve Months Ended
(in thousands) December 31, December 31,
2008 2007 2008 2007
Net Sales:
Precious Metal $25,223 $36,282 $156,847 $150,484
Tubing 25,127 26,576 118,318 117,627
Engineered Materials 48,179 49,428 246,815 228,248
Arlon Electronic
Materials (a) 15,799 16,089 64,208 45,576
Arlon Coated Materials (a) 15,632 14,751 72,395 47,647
Kasco (a) 16,411 17,649 67,202 48,284
Total net sales $146,371 $160,775 $725,785 $637,866
Operating income (loss) before
corporate allocations and
impairments
Precious Metal $2,222 $5,860 $16,461 $14,128
Tubing 2,792 1,061 10,896 4,799
Engineered Materials 2,095 3,346 22,553 20,923
Arlon Electronic
Materials (a) (b) 2,011 1,392 6,243 496
Arlon Coated Materials
(a) (b) (988) (912) (1,199) (2,881)
Kasco (a) (b) 1,083 1,477 3,786 1,657
Total 9,215 12,224 58,740 39,122
Corporate expenses allocation:
Precious Metal 1,051 626 4,192 4,361
Tubing 986 601 3,926 3,980
Engineered Materials 920 560 3,662 3,707
Arlon Electronic
Materials (a) 286 210 1,100 876
Arlon Coated Materials (a) 285 177 1,240 916
Kasco (a) 297 237 1,151 928
Total 3,825 2,411 15,271 14,768
Impairments of long-lived assets:
Precious Metal 7,790 - 7,790 -
Tubing 501 - 501 -
Total 8,291 - 8,291 -
Segment operating income (loss):
Precious Metal (6,619) 5,234 4,479 9,767
Tubing 1,305 460 6,469 819
Engineered Materials 1,175 2,786 18,891 17,216
Arlon Electronic
Materials (a) (b) 1,725 1,182 5,143 (380)
Arlon Coated Materials
(a) (b) (1,273) (1,089) (2,439) (3,797)
Kasco (a) (b) 786 1,240 2,635 729
Segment operating
income (loss) (2,901) 9,813 35,178 24,354
Unallocated corporate expenses
& non operating units 1,951 1,282 6,698 8,994
Unallocated pension credit (1,780) (1,498) (8,335) (5,778)
Proceeds from insurance claims,
net 48 (849) (3,399) (6,538)
Employee benefit plan
curtailment (3,875) - (3,875) -
Environmental remediation
expense - 2,151 - 4,678
Loss (gain) on disposal of assets 53 (5) 212 283
Income from operations 702 8,732 43,877 22,715
Interest expense 6,369 10,930 36,787 39,488
Realized and unrealized loss on
derivatives 430 849 1,355 1,888
Other expense (income) 638 (56) 1,354 272
Income (loss) before taxes $(6,735) $(2,991) $4,381 $(18,933)
a) The results of the Bairnco segments in 2007 reflect the period
subsequent to its acquisition, April 13 through December 31, 2007.
b) The following non-recurring charges relating to the purchase
accounting for the Bairnco acquisition are included in 2007 results
above: Arlon EM-$3.5 million, Arlon CM-$2.4 million, and Kasco-$1.5
million. The operating income (loss) for the Arlon CM segment includes
$0.1 million and $1.7 million of move costs in the quarter and for the
year ended December 31, 2008, respectively, to consolidate two plants
in San Antonio, Texas into one. In addition to the direct move costs,
the results of the periods were negatively impacted by a plant
shutdown and related operating inefficiencies during the move.
WHX Corporation
Supplemental Non-GAAP Disclosures
EBITDA and Adjusted EBITDA
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
(in thousands) (in thousands)
Net income (loss) $(5,578) $(2,599) $3,011 $(20,771)
Add (Deduct):
Tax provision (1,157) (392) 1,370 1,838
Interest expense 6,369 10,930 36,787 39,488
Depreciation and
amortization expense 4,776 4,917 20,927 18,242
Non-cash pension credit (1,780) (1,498) (8,335) (5,778)
Lifo liquidation gain (1,448) (4,594) (3,927) (4,594)
Realized and unrealized
loss on derivatives 430 849 1,355 1,888
(Gain)/Loss on disposal
of assets 53 (5) 212 283
"EBITDA" 1,665 7,608 51,400 30,596
Adjusted EBITDA:
Proceeds from insurance
claims 48 (849) (3,399) (6,538)
Non-cash benefit plan
curtailment (gain)
loss (3,875) - (3,875) 727
Accrual for legacy
environmental
expense - 2,151 - 4,678
Non-recurring executive
severance - - 1,257 -
Non-cash stock-based
compensation
expense 141 (32) 553 1,612
Non-cash asset
impairment 8,291 - 8,291 -
Purchase accounting
adjustments - (449) - 7,378
Non-recurring plant
consolidation
costs 100 220 1,729 2,587
Write-off of deferred
financing fees - - - 173
Adjusted EBITDA $6,370 $8,649 $55,956 $41,213
CONTACT: WHX Corporation
Glen Kassan, Vice Chairman of the Board and
Chief Executive Officer
914-461-1260
SOURCE WHX Corporation