WXCO Whx Corp. (MM)

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 DATASOURCE: WHX Corporation CONTACT: Glen Kassan, Vice Chairman of the Board and Chief Executive Officer of WHX Corporation, +1-914-461-1260

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