WHITE PLAINS, N.Y., May 18 /PRNewswire-FirstCall/ -- WHX Corporation
(Nasdaq: WXCO); ("WHX" or the "Company") today reported financial results for
the first quarter ended March 31, 2009. The Company also announced that it
will hold an earnings call on Tuesday, May 19, 2009 at 8:30 am Eastern Time.
"The world-wide economic recession which became evident in the latter part
of 2008 intensified to levels during the first quarter of 2009 not experienced
in many years, and in particular its impact on US based manufacturers," said
Glen Kassan, Vice Chairman of the Board and Chief Executive Officer of WHX.
"This had a material adverse effect on almost all of our businesses during the
first quarter of 2009 driving our sales down by over 25% as compared to the
first quarter of 2008. Significant end market declines and negative inventory
adjustments were experienced by many of our served markets, especially general
industrial markets, residential and industrial construction, transportation
and appliances.
In late 2008 we formulated contingency plans to respond to the
deteriorating economic conditions. Those plans and other cost containment
actions were aggressively implemented during the first quarter of 2009 with
the goals of maintaining adequate liquidity, preserving or increasing shares
of key markets, sustaining margins on sales and retaining key employees.
The implementation and utilization of the WHX Business System has been and
will continue to be central to achieving these goals and position the Company
to realize enhanced performance as the global economies recover."
Financial Highlights:
First Quarter Results
WHX reported a net loss of $11.4 million on net sales of $132.7 million in
the first quarter of 2009, compared with a net loss of $6.2 million on net
sales of $177.3 million for the first quarter of 2008. Basic and diluted net
loss per common share was $0.93 on 12,179,000 shares outstanding for the first
quarter of 2009, compared with a net loss of $6.21 on 1,000,000 shares
outstanding in the same period of 2008. The large difference in the number of
shares outstanding is due to the additional shares issued in the Rights
Offering in September 2008. In addition, the Company consummated a 1 for 10
reverse stock split in November 2008 of its outstanding common stock. To
enhance comparability, the 2008 period has been adjusted on a retroactive
basis as if the reverse stock split had occurred on January 1, 2008.
The Company-wide effort to reduce controllable costs wherever reasonably
possible and to conserve cash continued throughout the first quarter and
included a reduction in compensation and benefits for salaried employees and
layoffs in both the salaried and hourly workforce. It further included the
temporary idling of certain of the Company's manufacturing facilities for
various periods during the quarter to better match production with customer
demand. Notwithstanding the progress made during the quarter in achieving its
goals, the Company could not overcome the weakened global demand for its
products, and its shipments and revenues declined significantly compared to
the first quarter of 2008.
Revenue for the first quarter of 2009 was $132.7 million, a decrease of
$44.6 million, or 25.2% from $177.3 million for 2008 amid the general
slow-down in the U.S. and world economies, especially weakness in the U.S.
housing and automotive markets.
The net loss in 2009 included non-cash pension expense of $3.5 million
compared to a non-cash pension credit of $1.8 million in 2008. In addition,
restructuring costs of $0.5 million were recorded in the first quarter of 2009
relating to the consolidation of the former Bairnco Corporate office into the
WHX Corporate office.
The Company generated Adjusted EBITDA of $2.4 million for the first
quarter of 2009, as compared to $10.5 million for the same period in 2008.
The decline in first quarter Adjusted EBITDA was principally due to lower
sales and operating income from our businesses. Adjusted EBITDA excludes
certain non-recurring and non-cash items. See "Note Regarding Use of Non-GAAP
Financial Measurements" below for the definition of Adjusted EBITDA.
Segment Operating Results
All data regarding segment operating results is before corporate
allocations.
Precious Metal Segment
Net sales for the Precious Metal segment decreased $21.3 million or 46.7%,
to $24.4 million in the first quarter of 2009 from $45.7 million in the first
quarter of 2008. The decreased sales were primarily driven by lower volume in
almost all of its markets, particularly the sales to the electronics,
construction equipment, and appliance markets, but also by lower precious
metal prices in 2009 compared to the first quarter of 2008.
Segment operating income decreased by $4.1 million to a loss of $0.4
million in the first quarter of 2009, compared to operating income of $3.7
million in the first quarter of 2008. The decrease was driven by the sales
decline, but also by reduced gross profit margin, principally due to the mix
of product sold. Sales to the HVAC and welding distribution markets declined
less than to other markets, but yield a significantly lower gross profit
margin than do other sales. In April 2009, the Company announced the closure
of a facility in New Hampshire which is part of the Precious Metal segment and
the relocation of the functions to existing facilities in Milwaukee and in
China.
Tubing Segment
In the first quarter of 2009, net sales for the Tubing segment declined
$8.5 million, or 28.6%, to $21.2 million from $29.6 million in the first
quarter of 2008, driven by reduced sales to the home appliance markets
serviced by the Specialty Tubing Group. There was also a reduction in sales to
the petrochemical and shipbuilding markets serviced by the Stainless Steel
Tubing Group, which was partially offset by growth in sales to the medical
market.
Segment operating income decreased by $2.3 million to operating income of
$0.1 million in the first quarter of 2009 as compared to operating income of
$2.5 million in the first quarter of 2008. Gross margin percentage declined
because our costs could not be reduced in the same proportion as the sales
decline due to the fixed nature of certain of our expenses, partially offset
by reductions in raw material costs.
Engineered Materials Segment
Net sales for the Engineered Materials segment decreased $8.9 million, or
17.5%, to $42.1 million in the first quarter of 2009 from $51.0 million in the
first quarter of 2008. This sales decline was caused by continuing weakness in
the commercial flat roofing fasteners market as our customers utilized their
existing inventories, ongoing weakness in natural gas and other utility
connectors used in residential construction, and a drop in sales to its
international markets.
Segment operating income decreased by $1.6 million from operating income
of $2.4 million in the first quarter of 2008 to operating income of $0.8
million in the first quarter of 2009. The decline in operating income was
principally the result of the lower sales volume which was partially offset by
pricing increases. Gross margin percentage for the segment remained relatively
stable.
Arlon Electronic Materials ("EM")
In the first quarter of 2009 net sales for the Arlon EM segment increased
by $0.6 million, or 3.8%, to $17.0 million, from $16.4 million in the prior
year. Sales of electronic high technology materials to the printed circuit
board industry rose by $2.2 million. PTFE laminate sales to commercial
applications, such as cellular antennas, were largely related to third
generation ("3G") cellular technology upgrades in China and increased cellular
infrastructure activity in India. Reflecting the economic downturn, sales of
silicone rubber composites decreased by $1.5 million in the first quarter of
2009. These products are used for flexible heaters, traction motor insulation,
and hose and duct materials which are used in transportation, semiconductor,
and general industrial markets.
Segment operating income increased $0.1 million to $1.7 million in the
first quarter of 2009, principally as a result of higher sales and improved
operating efficiencies in the China manufacturing facility as well as reduced
staffing and expense reductions compared to the same quarter of the prior
year.
Arlon Coated Materials ("CM")
Arlon CM sales decreased by $5.3 million, or 30.2%, from $17.7 million in
the first quarter of 2008 to $12.3 million in the first quarter of 2009. Sales
decreased on weakness in most product lines due to the world-wide economic
recession, with lower demand from the Asian shipping container market and the
North American graphics market for corporate imaging, slightly offset by
higher sales in the North American digital print media market. Also, this
segment's industrial product sales decreased as a result of the general
economic recession, particularly affecting industrial electronics and
automotive business as manufacturers and distributors work through existing
inventories.
Operating losses increased from a $0.7 million loss in the first quarter
of 2008 to $1.1 million loss in the same quarter of 2009. Gross profit
decreased on lower sales and from the associated impact on throughput,
underutilized capacity, and plant inefficiencies. This was partially offset by
the effect of certain improvements from Lean Manufacturing techniques, along
with an improved sales mix, which slightly increased gross profit as a percent
of sales in the first quarter of 2009.
Kasco
Kasco sales decreased by $1.2 million, or 6.9%, from $16.9 million in the
first quarter of 2008 to $15.7 million in the first quarter of 2009. Kasco
North America sales grew 3% due to strong U.S. and Canada route sales despite
softer distributor sales. Price reductions were made to retain market share;
however, product mix of higher margin products offset lower selling prices.
Sales for Kasco's European operations declined 24%, significantly affected by
the stronger U.S. dollar, but also reflecting global economic weakness.
Operating income decreased $0.4 million from $1.3 million in the first quarter
of 2008 to $0.9 million in the same quarter of 2009.
Loan Amendments
On May 8, 2009, Handy & Harman and almost all of its subsidiaries amended
their Loan and Security Agreement with Wachovia Bank, National Association, as
agent (the "Wachovia Facilities") to provide for, among other things,
additional term loans to the borrowers thereunder in the aggregate principal
amount of approximately $5.3 million, which were consolidated with the
existing term loans under the Wachovia Facilities for a combined aggregate
principal amount of $15.0 million, and additional guaranties by certain
subsidiary trusts. Pursuant to this amendment: (a) a portion of the
obligations under the tranche B term loan under the Wachovia Facilities was
prepaid in an amount equal to $5.0 million; and (b) the remaining available
proceeds of the term loans are to be used for operating and working capital
purposes. Handy & Harman's Loan and Security Agreement with Steel Partners II,
L.P. was also amended on May 8, 2009 to provide for additional guaranties by
certain subsidiary trusts.
Shelf Registration Statement
On April 24, 2009, the Company filed a shelf registration statement on
Form S-3 with the SEC. If and when the shelf registration statement is
declared effective by the SEC, the Company may from time to time issue up to
$10 million of its common stock, preferred stock, debt securities, and
warrants to purchase common stock, preferred stock, or debt securities, or any
combination of the above, separately or as units. The terms of any offerings
under the shelf registration statement will be determined at the time of the
offering. The Company does not presently have any definitive plans or current
commitments to sell securities that may be registered under the shelf
registration statement. The Company believes that, once effective, the shelf
registration statement will provide the Company with the flexibility to
quickly raise capital in the market as conditions become favorable with a
minimum of administrative preparation and expense. The net proceeds of any
such issuances under the shelf registration statement are expected to be used
for general corporate purposes, which may include working capital and/or
capital expenditures.
WHX Corporation 1st Quarter 2009 Earnings Call, May 19th at 8:30 ET
WHX Corporation will hold a conference call to discuss the first quarter
2009 financial results on Tuesday, May 19, at 8:30 am ET. The dial information
for the call is:
*US/Canada Dial-in #: ( 866 ) 393 - 1336
*Int'l/Local Dial-In #: ( 973 ) 935 - 8643
Conference ID 99788863
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 expense or 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 the United States of America
("GAAP"), and the items excluded from Adjusted EBITDA are significant
components in understanding and assessing financial performance. Therefore,
Adjusted EBITDA should not be considered a substitute for net income (loss) or
cash flows from operating, investing, or financing activities. Because
Adjusted EBITDA is calculated before recurring cash charges including realized
and unrealized losses on derivatives, interest expense and taxes, and is not
adjusted for capital expenditures or other recurring cash requirements of the
business, it should not be considered as a measure of discretionary cash
available to invest in the growth of the business. There are a number of
material limitations to the use of Adjusted EBITDA as an analytical tool,
including the following:
-- 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 expense or 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 December 31, 2008.
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 business segments: 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 White Plains, New York and our common stock is listed on
the Nasdaq Capital Market under the symbol WXCO.
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 2009 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 December 31, 2008 for information
regarding risk factors that could affect the Company's results. Except as
otherwise required by Federal securities laws, WHX undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events, changed circumstances or any other reason.
WHX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months ended March 31,
2009 2008
(in thousands except per share)
Net sales $132,679 $177,277
Cost of goods sold 103,323 136,473
Gross profit 29,356 40,804
Selling, general and administrative expenses 32,200 36,080
WHX Pension Plan expense (credit) 3,458 (1,800)
Restructuring charges 533 -
Gain on disposal of assets (4) (22)
Income (loss) from operations (6,831) 6,546
Other:
Interest expense 5,224 10,371
Realized and unrealized (gain) loss
on derivatives (281) 1,627
Other income (161) (51)
Loss before income taxes (11,613) (5,401)
Tax provision (benefit) (245) 811
Net loss $(11,368) $(6,212)
Basic and diluted per share of common stock
Net loss $(0.93) $(6.21)
Weighted average number of common
shares outstanding (a) 12,179 1,000
(a) Basic and diluted net loss per common share was $0.93 on 12,179,000
shares outstanding for the first quarter of 2009, compared with a net loss of
$6.21 on 1,000,000 shares outstanding in the same period of 2008. The large
difference in the number of shares outstanding is due to the additional shares
issued in the Rights Offering in September 2008. In addition, the Company
consummated a 1 for 10 reverse stock split in November 2008 of its outstanding
common stock. To enhance comparability, the 2008 period has been adjusted on a
retroactive basis as if the reverse stock split had occurred on January 1,
2008.
WHX CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, December 31,
(Dollars and shares in thousands) 2009 2008
ASSETS
Current Assets:
Cash and cash equivalents $6,891 $8,656
Trade receivables - less allowance for
doubtful accounts of $3,572 and $3,178
at 3/31/09 and 12/31/08, respectively 73,241 81,610
Inventories 77,177 75,270
Deferred income taxes 1,108 1,310
Other current assets 9,882 10,378
Total current assets 168,299 177,224
Property, plant and equipment at cost, less
accumulated depreciation and amortization 100,210 102,508
Goodwill 65,060 65,070
Other intangibles, net 36,212 36,965
Other non-current assets 18,148 17,717
$387,929 $399,484
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current Liabilities:
Trade payables $37,174 $36,599
Accrued environmental liability 6,050 6,722
Accrued liabilities 31,892 37,382
Accrued interest expense - related party 554 262
Current portion of long-term debt 11,343 12,956
Short-term debt 39,739 32,970
Deferred income taxes 248 257
Total current liabilities 127,000 127,148
Long-term debt 104,891 109,174
Long-term debt - related party 54,098 54,098
Accrued interest expense - related party 4,004 2,237
Accrued pension liability 137,469 133,990
Other employee benefit liabilities 5,087 4,936
Deferred income taxes 4,753 5,413
Other liabilities 4,326 4,395
441,628 441,391
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 shares; issued and outstanding
12,179 shares 122 122
Accumulated other comprehensive loss (164,033) (163,502)
Additional paid-in capital 552,690 552,583
Accumulated deficit (442,478) (431,110)
Total stockholders' deficit (53,699) (41,907)
$387,929 $399,484
WHX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31,
2009 2008
(in thousands)
Cash flows from operating activities:
Net loss $(11,368) $(6,212)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,925 5,348
Non-cash stock based compensation 116 69
Amortization of debt related costs 391 355
Long-term interest on related party debt 1,767 1,775
Deferred income taxes (467) 66
Gain on asset dispositions (4) (22)
Unrealized loss (gain) on derivatives 388 (162)
Reclassification of net cash settlements on
derivative instruments (669) 1,789
Decrease (increase) in operating assets and
liabilities:
Trade and other receivables 7,931 (19,890)
Inventories (2,197) (1,565)
Other current assets 135 583
Accrued interest expense-related party 292 4,188
Other current liabilities (1,354) 5,521
Other items-net 64 85
Net cash used in operating activities (50) (8,072)
Cash flows from investing activities:
Plant additions and improvements (2,141) (3,523)
Net cash settlements on derivative instruments 669 (1,789)
Proceeds from sales of assets 58 78
Net cash used in investing activities (1,414) (5,234)
Cash flows from financing activities:
Proceeds from term loans - domestic - 4,000
Net revolver borrowings 6,827 11,291
Repayments of term loans - foreign (122) (136)
Repayments of term loans - domestic (5,641) (3,509)
Deferred finance charges (880) (1,146)
Net change in overdrafts (364) 1,577
Other (92) 3
Net cash provided by (used in) financing
activities (272) 12,080
Net change for the period (1,736) (1,226)
Effect of exchange rate changes on net cash (29) 149
Cash and cash equivalents at beginning of
period 8,656 6,090
Cash and cash equivalents at end of period $6,891 $5,013
WHX CORPORATION
CONSOLIDATED SEGMENT DATA
(unaudited)
Statement of operations data: Three Months Ended
(in thousands) March 31,
2009 2008
Net Sales:
Precious Metal $24,350 $45,688
Tubing 21,150 29,626
Engineered Materials 42,096 51,009
Arlon Electronic Materials 17,031 16,404
Arlon Coated Materials 12,340 17,675
Kasco 15,712 16,875
Total net sales $132,679 $177,277
Operating income (loss) before corporate
allocations:
Precious Metal (442) 3,685
Tubing 131 2,480
Engineered Materials 793 2,388
Arlon Electronic Materials 1,748 1,619
Arlon Coated Materials (a) (1,068) (609)
Kasco 920 1,309
Total 2,082 10,872
Corporate expenses allocation:
Precious Metal 1,005 1,288
Tubing 943 1,207
Engineered Materials 879 1,124
Arlon Electronic Materials 397 463
Arlon Coated Materials 287 499
Kasco 366 476
Total 3,877 5,057
Segment operating income (loss):
Precious Metal (1,447) 2,397
Tubing (812) 1,273
Engineered Materials (86) 1,264
Arlon Electronic Materials 1,351 1,156
Arlon Coated Materials (a) (1,355) (1,108)
Kasco 554 833
Segment operating income (loss) (1,795) 5,815
Unallocated corporate expenses & non
operating units 1,049 1,091
Unallocated pension expense (credit) 3,458 (1,800)
Restructuring costs 533 -
Gain on disposal of assets (4) (22)
Income (loss) from operations (6,831) 6,546
Interest expense 5,224 10,371
Realized and unrealized (gain) loss on
derivatives (281) 1,627
Other income (161) (51)
Loss before taxes $(11,613) $(5,401)
(a) The operating loss of the Arlon CM segment in 2008 included $0.6
million of move costs to consolidate two plants in San Antonio, Texas into
one. In addition to the direct move costs, the results of the quarter 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 March 31,
2009 2008
(in thousands)
Net loss $(11,368) $(6,212)
Add (Deduct):
Tax provision (benefit) (245) 811
Interest expense 5,224 10,371
Depreciation and amortization expense 4,925 5,348
Non-cash WHX & other pension expense (credit) 3,458 (2,035)
Realized and unrealized loss (gain) on
derivatives (281) 1,627
Gain on disposal of assets (4) (22)
"EBITDA" 1,709 9,888
Adjusted EBITDA:
Non-cash stock-based compensation expense 116 69
Non-recurring restructuring & plant
consolidation costs 533 589
Adjusted EBITDA $2,358 $10,546
CONTACT: WHX Corporation
Glen Kassan, Vice Chairman of the Board and
Chief Executive Officer
914-461-1260
SOURCE WHX Corporation
-0- 05/18/2009
/CONTACT: Glen Kassan, Vice Chairman of the Board and Chief Executive
Officer of WHX Corporation, +1-914-461-1260/
(WXCO)
CO: WHX Corporation; Bairnco; Handy & Harman; Wachovia Bank; Steel Partners
II, L.P.
ST: New York
IN: PRM MAC MCT MNG
SU: ERN CCA
PR
-- NY18172 --
8172 05/18/2009 09:00 EDT http://www.prnewswire.com
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