<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities Act
- ----- of 1934
For the quarterly period ended June 29, 1996
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OR
Transition report pursuant to Section 13 or 15 (d) of the Securities Act
- ----- of 1934
For the transition period from to
------------- -------------
Commission file number 1-12164
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WOLVERINE TUBE, INC.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0970812
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35806
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(Address of principal executive offices) (Zip Code)
(205) 353-1310
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each class of common stock, as of
the latest practicable date:
Class Outstanding at July 15, 1996
--------------- ----------------------------
Common Stock, par value $0.01 per share 13,814,454 shares
<PAGE> 2
WOLVERINE TUBE, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C> <C>
PART I Financial Information
Item 1. Financial Statements
(unaudited)
Condensed Consolidated Statements of Income -
Three and Six -Month Periods Ended June 29, 1996 and
July 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Balance Sheets -
June 29, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Cash Flows -
Six -Month Periods Ended June 29, 1996 and
July 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 10
PART II Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 3
WOLVERINE TUBE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three-month period ended: Six-month period ended:
------------------------- -----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................ $180,279 $164,453 $359,693 $344,209
Cost of goods sold............................... 154,695 141,941 310,695 297,785
-------- -------- -------- --------
Gross profit..................................... 25,584 22,512 48,998 46,424
Selling, general and administrative expenses..... 6,144 5,786 11,204 12,441
-------- -------- -------- --------
Income from operations........................... 19,440 16,726 37,794 33,983
Other expenses:
Interest expense............................... 2,328 2,270 4,631 4,653
Amortization and other, net.................... 500 290 628 613
-------- -------- -------- --------
Income before income taxes....................... 16,612 14,166 32,535 28,717
Income taxes..................................... 6,178 5,239 11,838 10,658
-------- -------- -------- --------
Net income....................................... 10,434 8,927 20,697 18,059
Less: Preferred stock dividends.................. (70) (70) (140) (140)
-------- -------- -------- --------
Net income applicable to common shares........... $ 10,364 $ 8,857 $ 20,557 $ 17,919
======== ======== ======== ========
Net income per share............................. $ 0.73 $ 0.63 $ 1.45 $ 1.28
======== ======== ======== ========
Weighted average number of common and
common equivalent shares....................... 14,141 14,095 14,179 14,054
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
WOLVERINE TUBE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
June 29, December 31,
1996 1995
---------- ------------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and equivalents...................................................... $ 14,128 $ 5,494
Accounts receivable, net.................................................. 93,109 80,940
Inventories............................................................... 66,689 55,237
Prepaid expenses and other................................................ 1,705 170
-------- --------
Total current assets.................................................. 175,631 141,841
Property, plant and equipment, net.......................................... 144,118 148,876
Deferred charges and intangible assets, net................................. 60,218 61,239
Prepaid pension obligations................................................. 6,517 5,269
-------- --------
Total assets.......................................................... $386,484 $357,225
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................................... $ 40,482 $ 37,400
Accrued liabilities....................................................... 11,780 10,435
Deferred income taxes..................................................... 1,947 1,647
-------- --------
Total current liabilities............................................. 54,209 49,482
Deferred income taxes....................................................... 24,610 23,132
Long-term debt.............................................................. 100,515 100,547
Postretirement benefit obligations.......................................... 13,027 12,774
Accrued environmental remediation........................................... 4,658 4,690
-------- --------
Total liabilities..................................................... 197,019 190,625
Minority interest 74 74
Redeemable cumulative preferred stock, par value $1 per share;
20,000 shares issued and outstanding at June 29, 1996 and
December 31, 1995......................................................... 2,000 2,000
Stockholders' equity:
Cumulative preferred stock, par value $1 per share;
500,000 shares authorized................................................. -- --
Common stock, par value $.01 per share; 20,000,000 shares
authorized, 13,814,454 and 13,669,603 shares issued and outstanding at
June 29, 1996 and December 31, 1995, respectively......................... 138 137
Additional paid-in capital................................................ 95,479 93,189
Retained earnings......................................................... 98,769 78,212
Accumulated currency translation adjustment............................... (6,995) (7,012)
-------- --------
Total stockholders' equity............................................ 187,391 164,526
-------- --------
Total liabilities, redeemable cumulative preferred stock
and stockholders' equity............................................ $386,484 $357,225
======== ========
</TABLE>
Note: The Balance Sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE> 5
WOLVERINE TUBE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six-month period ended:
-----------------------
June 29, July 1,
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 20,697 $ 18,059
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization................... 8,099 8,871
Deferred taxes.................................. 1,777 (1,361)
Changes in operating assets and liabilities:
Accounts receivable............................ (12,159) (22,672)
Inventories.................................... (11,446) 3,221
Prepaid expenses and other..................... (1,742) (546)
Accounts payable............................... 3,078 7,927
Accrued liabilities............................ 1,824 4,770
-------- --------
Net cash provided by operating activities......... 10,128 18,269
INVESTING ACTIVITIES
Additions to property, plant and equipment........ (2,327) (9,998)
Proceeds received from sale of assets............. -- 130
Other............................................. -- (235)
-------- --------
Net cash (used) by investment activities.......... (2,327) (10,103)
FINANCING ACTIVITIES
Repayments under revolving credit facility, net... -- (8,500)
Issuance of common stock.......................... 999 840
Principal payments on long-term debt and
capitalized lease obligations.................... (30) (317)
Dividends paid.................................... (140) (140)
-------- --------
Net cash provided (used) by financing activities.. 829 (8,117)
Effect of exchange rate on cash and equivalents... 4 (6)
-------- --------
Net increase in cash.............................. 8,634 43
Cash and equivalents beginning of period.......... 5,494 108
-------- --------
Cash and equivalents end of period................ $ 14,128 $ 151
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 29, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries after
elimination of significant intercompany accounts and transactions. The
accompanying condensed financial statements have been prepared in accordance
with instructions to Form 10-Q and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying condensed financial statements (and all
information in this report) have not been examined by independent auditors;
but, in the opinion of management all adjustments, which consist of normal
recurring accruals necessary for a fair presentation of the results for the
periods, have been made. The results of operations for the three-month and
six-month periods ended June 29, 1996 are not necessarily indicative of the
results of operations that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
The Company uses its internal operational reporting cycle for
quarterly financial reporting.
Certain amounts in the condensed consolidated statement of income for
the three-month and six-month periods ended July 1, 1995 have been reclassified
to conform to the presentation in the three-month and six-month periods ended
June 29, 1996.
NOTE 2 - CONTINGENCIES
The Company is subject to extensive U.S. and Canadian federal, state,
provincial and local environmental laws and regulations. These laws, which are
constantly changing, regulate among other things the discharge of materials
into the environment.
The Company has received various communications from regulatory
authorities concerning certain environmental matters and has currently been
named as a potentially responsible party ("PRP") at various waste disposal
sites. The Company believes that its potential liability in excess of the
amounts accrued with respect to these waste disposal sites is not material.
The Company is one of a number of PRPs named by the Environmental
Protection Agency (EPA) with respect to the soil and groundwater contamination
at the Double Eagle Refinery Superfund site in Oklahoma City, Oklahoma. The
costs associated with the cleanup of this site will be entirely borne by the
PRP group, as the site owner is currently bankrupt. In
5
<PAGE> 7
March 1993, twenty-three PRPs named with respect to the soil contamination of
the site, including the Company, submitted a settlement offer to the EPA. The
PRPs offered to pay the EPA $2,200,000 in return for an agreement with the EPA
and the State of Oklahoma to release those PRPs from all liability concerning
soil contamination at the site. The Company's portion of the settlement offer
is $272,188.
On June 30, 1995, the EPA responded to the PRP's offer with two
settlement options and a proposed consent order pursuant to which the
settlement would be effectuated. Under the first option, the EPA would accept
the PRP's offer but could reopen the settlement if the EPA's cost to remediate
the site exceeds $12.0 million. Such excess would be allocated pro rata based
on each company's contribution to the original settlement. The second option
allows each PRP to pay a certain amount based upon the EPA's worst-case cost
scenario to remediate the site and receive complete protection from reopening
the agreement. Under this option, Wolverine's contribution to the settlement
would be approximately $347,355. In February 1996, the Company notified the
EPA, the United States Department of Interior and the Oklahoma Department of
Wildlife that it planned to accept the second settlement option pending final
resolution of consent order language and volumetric reallocation. Under this
settlement option, the Company would pay $347,355 for remediation response
costs and $8,464 for natural resource damages.
The Company has received an order under Section 3008(h) of the
Resource Conservation and Recovery Act (RCRA) to perform a facilities
investigation of its site in Decatur, Alabama, including a portion of the site
where wastes were buried ( the "Burial Site"). Contamination of the entire
site is probable and should the EPA decide to order remediation, remediation,
monitoring, legal and other costs are estimated to be $2,500,000. Under a
purchase agreement and a subsequent agreement between the Company and the
Henley Group, Inc. ("Henley"), Henley took control of investigating the Burial
Site and indemnified the Company from the cost of investigation and any
required cleanup of the Burial Site. These agreements expire on December 31,
1999, and the potential liability, if any, at that time reverts back to the
Company.
In 1993, the Company commissioned a series of environmental
assessments of its properties in Canada which were purchased in 1988 from
Noranda Metal Industries Limited ("NMI") (collectively with its parent,
Noranda, Inc., "Noranda"). These assessments resulted in the finding of PCBs
above permissible limits at the New Westminster facility and in an adjacent
tidal flat of the Fraser River. Additional findings include traces of PCBs
within the Montreal facility, as well as the presence of heavy metal and other
contaminants at the New Westminster and Montreal facilities.
On October 13, 1993, the Company filed a statement of claim against
Noranda and other parties, contending that Noranda is liable for substantially
all of the cleanup costs at New Westminster and Montreal under the
environmental indemnity contained in the purchase agreement and that Noranda
materially breached the agreement by failing, among other things, to provide
full and complete disclosure of the condition of the facilities. The Statement
of Claim seeks certain declaratory judgments, specific performance of the
agreement, and general specific prospective damages of up to $25,000,000
(Canadian).
6
<PAGE> 8
The Ministry of Environment, Lands and Parks of the Province of
British Columbia (the "B.C. Ministry") has issued a Pollution Abatement Order
to the Company and NMI regarding the New Westminster facility and a tidal flat
in the Fraser River immediately adjacent to an outfall from this property's
drainage system. The order requires the Company and NMI to prevent discharge
of contaminants from the property, to undertake further investigation of this
site and to prepare a remediation plan and implementation schedule for cleanup
of the contaminated area, including the Fraser River.
In November 1994, Wolverine and NMI submitted remediation plans to the
B.C. Ministry. The B.C. Ministry rejected these plans and directed Wolverine
and NMI to conduct further tests and to develop plans to remove the majority of
the contaminated material from both the New Westminster Property and the Fraser
River and to treat or dispose of, at a minimum, certain highly contaminated
portions of this material. On July 31, 1995, Wolverine and NMI submitted
revised remediation plans to the B.C. Ministry.
Operations at the New Westminster facility were discontinued in April
1991, and the facility was sold in November 1995 to Juker Holdings Ltd.
("Juker"). Terms of the sales agreement provide that Juker assume
responsibility for the remediation of the New Westminster and neighboring
properties (excluding the Fraser River) and indemnify Wolverine from any
liability with respect to the remediation of the Property. Wolverine and Juker
have requested that the B.C. Ministry replace Wolverine with Juker as a party
to the B.C. Order. No response to this request has been received. The Company
believes that Juker has sufficient financial resources to meet whatever
liability it faces as a result of the sales agreement and the B.C. Order.
On December 21, 1995, the B.C. Ministry issued a letter amending the
Pollution Abatement Order requiring Wolverine and NMI to submit by February 24,
1996 (subsequently extended to April 26, 1996), a detailed implementation work
plan incorporating comments contained in the letter, for remediation of the
Property and the Fraser River. As provided under the sales agreement, Juker
has responded to the B.C. Ministry comments as they relate to the Property.
The B.C. Ministry is currently reviewing the plan submitted by Juker which
relates to the Property. The Company believes Juker is liable for
substantially all of these remediation costs connected with the New Westminster
Property. However, if Wolverine is forced to bear a substantial portion of the
costs, this could have a material adverse effect on the Company's consolidated
financial position, results of operations and liquidity.
Wolverine also anticipates that significant costs could be incurred in
remediating the PCB and other contamination in the vicinity of the Fraser
River. Negotiations are ongoing with the B.C. Ministry regarding the level of
remediation of the Fraser River that will be required. Wolverine estimates a
range of between $1,385,000 and $2,300,000 to remove the contamination
depending upon the level of remediation ultimately selected. Wolverine
continues to believe that Noranda should be held entirely responsible for the
study and remediation costs related to the Fraser River. If, however, the
Company is forced to bear a substantial portion of these costs, and the
remediation plan selected by the B.C. Ministry requires significant
expenditures, then these costs could have a material adverse effect on the
Company's consolidated financial position, results of operations and liquidity.
7
<PAGE> 9
Although the Company believes that Noranda and NMI together have
sufficient financial resources to meet whatever liability they might face as a
result of the Ontario Litigation and the B.C. Order, preliminary discovery has
suggested that NMI alone would not have sufficient resources to bear these
expenses.
The Company has no obligation to remediate the soil contamination at
its Montreal facility under current Quebec statutes. The Company has
instituted a program to prevent further contamination and is monitoring the
existing contamination. The traces of PCBs within the Montreal facility have
been remediated. The Company intends to continue to operate its Montreal
facility and does not intend to remediate the heavy metal contamination; thus,
no estimate has been made of the costs to remove the heavy metal from the soil
and no amount has been accrued in the accompanying consolidated financial
statements.
The Company has become aware that a municipal drinking water supply in
the vicinity of the Company's Ardmore, Tennessee facility (the "Ardmore
Facility") is apparently contaminated with certain substances (volatile
organics) that have also been found in soils at the Ardmore Facility. The
Tennessee Division of Superfund (the "Tennessee Division") has advised the
Company that the Ardmore Facility is considered the likely source of the
contaminants. Ardmore plant personnel met with the Tennessee Division on July
13, 1995, to discuss the situation, and the regulatory personnel acknowledged
that no formal administrative or other action had been taken to list the
Ardmore Facility as a Superfund site under federal or state law.
On December 28, 1995, the Company entered into a Consent Order and
Agreement with the Tennessee Division relating to the Ardmore Facility under
which the Company agreed to conduct a preliminary investigation regarding
whether the volatile organics in or at the municipal drinking water supply are
related to the Ardmore Facility and, if necessary, to undertake any appropriate
response. That investigation has disclosed elevated concentrations of certain
volatile organic compounds in soils in certain areas of the Ardmore Facility
and also has disclosed elevated levels of certain volatile organic compounds in
the shallow residuum groundwater zone at the Ardmore Facility. Under the terms
of the Consent Order and Agreement, the Company is required to perform a
Remediation Investigation and Feasibility Study ("RI/FS") if it is determined
that the results of the preliminary investigation disclose contaminants at
certain levels. The Tennessee Division has indicated that a RI/FS will be
required regarding this site. The Company is currently working with the
Tennessee Division on developing a work plan for the RI/FS. It is premature to
estimate the cost of a RI/FS, or any remedial action that may be required
following any RI/FS.
A recent report of a 1995 EPA site inspection of the Ardmore Facility
recommended further action for the site. The Company believes, however, that
because the Tennessee Division is actively supervising an ongoing investigation
of the Ardmore Facility, it is unlikely that EPA will intervene and take
additional action. If the EPA should decide to intervene, however, that could
increase the cost of any required further investigation or remedial action.
8
<PAGE> 10
The Company has completed a Phase II environmental investigation at
the Greenville, Mississippi facility (the "Greenville Facility"). The
investigation indicates the presence of soil and water contamination above
acceptable limits. The Company is working with the Mississippi Department of
Environmental Quality to further define the area of contamination and prepare a
plan of remediation. A Phase III environmental study has been completed and
found no off site contamination. While the Company's environmental consultants
are evaluating potential remedies and no remediation plan has been prepared,
the current preliminary estimate of cost to complete testing and remediate the
Greenville Facility is $1,500,000, although this estimate may change depending
on the remediation plan ultimately adopted. The costs of testing and
remediation required at the Greenville Facility will be shared with the former
owners of the facility on a dollar for dollar basis, not to exceed $750,000,
under an Escrow Agreement established at the time of the 1994 acquisition of
Small Tube Products Company.
The Company has accrued environmental remediation costs of $4,658,000
at June 29, 1996, consisting primarily of $208,000 for estimated remediation
costs for the London and Fergus Facilities, $2,500,000 for the Decatur
Facility, $750,000 for the Greenville Facility, and $1,200,000 for various
waste disposal sites. Based on information currently available, the Company
believes that the costs of these matters are not reasonably likely to have a
material adverse effect on the Company's consolidated financial condition,
results of operations or liquidity.
NOTE 3 - INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
June 29, December 31,
1996 1995
- --------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Finished Products $10,208 $11,530
Work-in-process 25,668 20,757
Raw materials and supplies 30,813 22,950
- --------------------------------------------------------------------------
$66,689 $55,237
==========================================================================
</TABLE>
NOTE 4 - INTEREST EXPENSE, NET
Interest expense is net of interest income and capitalized interest of $339,000
and $433,000 for the three-month period ended June 29, 1996 and July 1, 1995,
respectively, and $599,000 and $973,000 for the six-month period ended June 29,
1996 and July 1, 1995, respectively.
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three-Month Period Ended June 29, 1996 Compared to
Three-Month Period Ended July 1, 1995
For the three months ended June 29, 1996, consolidated net sales were
$180.3 million compared with $164.5 million in the three-month period ended
July 1, 1995. The increased sales for the three-month period this year versus
last year were attributable to increased shipments and fabrication charges
which were partially offset by a decrease in the price of copper. The average
COMEX price of copper was $1.16 per pound in the most recent three-month period
compared with $1.33 per pound in the same period last year. The primary impact
to Wolverine of lower copper prices is lowered net sales and cost of goods
sold. The Company uses various strategies to minimize the effect of copper
prices on the Company's earnings.
Total pounds shipped for the three-month period of 1996 increased to
87.5 million pounds compared with 76.9 million pounds a year ago. Shipments of
commercial tube increased 2.1% primarily as a result of increased shipments of
industrial tube used in residential air-conditioning and appliance applications
and increased shipments of technical tube used in the production of large
commercial air conditioning units. Shipments of wholesale products increased
88.4% as the Company increased its offering in the United States as fabrication
charges of these products increased. Shipments of rod, bar and strip products
increased 3.6% due to increased shipments of strip products used in coinage
applications which were partially offset by reduced sales of rod and bar
products to service centers for electrical applications.
Consolidated gross profit increased to $25.6 million in the three-month
period of 1996 compared to $22.5 million in the three-month period of 1995.
This gross profit improvement was due to increased shipments and fabrication
charges and decreased manufacturing costs resulting from efficiencies realized
from the completion of several capital projects completed in 1995.
Consolidated selling, general and administrative expenses for the
three-month period of 1996 were $6.1 million compared to $5.8 million for the
three-month period of 1995. This increase was primarily the result of
increased professional fees and general management salaries which were offset
by decreased incentive expenses as operational results did not exceed planned
levels.
Consolidated net interest expense for the three-month period of 1996
was $2.3 million which is unchanged from the three-month period in 1995.
Increased interest income on cash and equivalents have partially offset
decreased capitalized interest resulting from the completion of several capital
projects.
10
<PAGE> 12
The effective tax rate for the three-month period ended June 29, 1996
was 37.2% as compared to 37.0% for the three-month period ended July 1, 1995.
Consolidated net income for the second quarter of 1996 was $10.4
million, or $0.73 per share, on 14.1 million average shares outstanding,
compared with a $8.9 million, or $0.63 on 14.1 million shares outstanding for
the second quarter of 1995.
Six-Month Period Ended June 29, 1996 Compared to
Six-Month Period Ended July 1, 1995
For the six-months ended June 29, 1996, consolidated net sales were
$359.7 million compared with $344.2 million in the six-month period ended July
1, 1995. The increased sales for the six-month period this year versus last
year were attributable to increased shipments and fabrication charges which
were partially offset by a decrease in the price of copper. The average COMEX
price of copper was $1.17 per pound in the most recent six-month period
compared with $1.35 per pound in the same period last year. The primary impact
to Wolverine of lower copper prices is lowered net sales and cost of goods
sold. The Company uses various strategies to minimize the effect of copper
prices on the Company's earnings.
Total pounds shipped for the six-month period of 1996 increased to
172.5 million pounds compared with 161.7 million pounds a year ago. Shipments
of commercial tube increased only 0.4% as a result of softening marketing
conditions in the automotive and consumer appliance industry that the Company
experienced in the first quarter of 1996. Shipments of wholesale products
increased 54.4% as the Company increased its offering in the United States as
fabrication charges of these products increased. Shipments of rod, bar and
strip products decreased 6.0% due to reduced sales of rod and bar products to
service centers for electrical applications and reduced shipments of strip
products used in coinage applications.
Consolidated gross profit increased to $49.0 million in the first
six-month period of 1996 compared to $46.4 million in the first six-month
period of 1995. This gross profit improvement was due to increased shipments
and fabrication charges and decreased manufacturing costs resulting from
efficiencies realized from the completion of several capital projects
completed in 1995.
Consolidated selling, general and administrative expenses for the
six-month period of 1996 were $11.2 million compared to $12.4 million for the
six-month period of 1995. This decrease was primarily the result of decreased
incentive expenses as operational results did not exceed planned levels, and
decreased pension expenses resulting from the pension plan's investment
performance which was partially offset by increased professional fees and
general management salaries.
11
<PAGE> 13
Consolidated net interest expense for the six-month period of 1996 was
$4.6 million compared to $4.7 million in the six-month period of 1995.
Increased interest income on cash and equivalents have partially offset
decreased capitalized interest resulting from the completion of several capital
projects.
The effective tax rate for the six-month period ended June 29, 1996 was
36.4% as compared to 37.1% for the three-month period ended July 1, 1995. The
lower effective tax rate in the six-month period ended June 29, 1996 is
primarily the result of a tax reorganization which reduced the provision
recorded for the Canadian operations.
Consolidated net income for the first six-months of 1996 was $20.7
million, or $1.45 per share, on 14.2 million average shares outstanding,
compared with a $18.1 million, or $1.28 on 14.1 million shares outstanding for
the first six-months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities is the Company's primary
source of liquidity and totaled $10.1 million during the first six-months of
1996 compared to $18.3 million in the first six-months of 1995. The change was
primarily due to changes in working capital in the 1996 period compared to the
1995 period. The $12.2 million increase in net accounts receivable from the
December 31, 1995 balance sheet is due to increased shipments in the first
six-months of 1996 compared to the last six-months of 1995 which was partially
offset by declining COMEX copper prices.
The Company has an unsecured credit agreement with a group of banks.
The credit agreement, as amended in June 1996, (i) provides an aggregate
available revolving credit facility limit of $75.0 million, (ii) has up to a
Cdn. $13.5 million sublimit available to Wolverine Tube (Canada) Inc., (iii)
matures in full in March 1998, and (iv) bears interest, at the Company's
election, at a floating base rate which is either the federal funds effective
rate, plus a specified margin of .50% to 1.50%, or LIBOR plus a specified
margin of .25% to 1.00%, and (v) allows the formation of a separate wholly
owned subsidiary to manage the accounts receivable of the Company. As of June
29, 1996 (and at the date hereof), there were no outstanding borrowings under
the agreement.
The Company's $99 million, 10.125% Senior Subordinated Notes due
September 1, 2002, are redeemable at the option of the Company beginning on
September 1, 1997, at rates ranging from 103.80% in 1997 to 100% in 2000. In
the event that the Company elects to redeem these notes, it would require the
use of other long-term financing.
Capital expenditures were $2.3 million for the first six-months of
1996 and $10.0 million for the first six-months of 1995. The Company currently
expects to spend approximately $8.0 million in 1996 under its existing capital
improvement program. The Company believes that it will be able to satisfy its
existing working capital needs, interest obligations and capital expenditure
requirements with cash flow from operations and funds available from the credit
agreement.
12
<PAGE> 14
ENVIRONMENTAL
The Company's facilities and operations are subject to extensive
environmental laws and regulations. During the six-month ended June 29, 1996,
the Company spent approximately $1.0 million on environmental matters which
include remediation costs, monitoring costs and legal and other costs. The
Company has a reserve of $4.7 million for environmental remediation costs which
is reflected in the Company's Condensed Consolidated Balance Sheet.
In 1993, the Company discovered the presence of PCBs and other
contaminants at certain Canadian properties (the "Properties") that the Company
acquired in 1988 from Noranda Metal Industries Limited ("NMI"), and its parent,
Noranda Inc. ("Noranda"). On December 16, 1993, the Ministry of Environment,
Lands and Parks of the Province of British Columbia (the "B.C. Ministry")
issued a Pollution Abatement Order to Wolverine and NMI with respect to one of
the Properties (the "New Westminster Property") and a tidal flat in the Fraser
River immediately adjacent to an outfall from this property's drainage system.
In November 1994, Wolverine and NMI submitted remediation plans to the
B.C. Ministry. The B.C. Ministry rejected these plans and directed Wolverine
and NMI to conduct further tests and to develop plans to remove the majority of
the contaminated material from both the New Westminster Property and the Fraser
River and to treat or dispose of, at a minimum, certain highly contaminated
portions of this material. On July 31, 1995, Wolverine and NMI submitted
revised remediation plans to the B.C. Ministry.
In November 1995, Wolverine sold its interest in the New Westminster
Property to Juker Holdings, Ltd. ("Juker") for $1,926,000 (U.S.). Terms of the
sales agreement provide that Juker assume responsibility for the remediation of
the New Westminster and neighboring properties (excluding the Fraser River) and
indemnify Wolverine from any liability with respect to the remediation of the
property. Wolverine and Juker have requested that the B.C. Ministry replace
Wolverine with Juker as a party to the B.C. Order. No response to this request
has been received. The Company believes that Juker has sufficient financial
resources to meet whatever liability it faces as a result of the sales
agreement and the B.C. Order.
On December 21, 1995, the B.C. Ministry issued a letter amending the
Pollution Abatement Order requiring Wolverine and NMI to submit by February 24,
1996 (subsequently extended to April 26, 1996), a detailed implementation work
plan incorporating comments contained in the letter, for remediation of the
Property and the Fraser River. As provided under the sales agreement, Juker
has responded to the B.C. Ministry comments as they relate to the Property.
The B.C. Ministry is currently reviewing the plan submitted by Juker which
relates to the Property. The Company believes Juker is liable for
substantially all of these remediation costs connected with the New Westminster
Property. However, if Wolverine is forced to bear a substantial portion of the
costs, this could have a material adverse effect on the Company's consolidated
financial position, results of operations and liquidity.
13
<PAGE> 15
Wolverine also anticipates that significant costs could be incurred in
remediating the PCB and other contamination in the vicinity of the Fraser
River. Negotiations are ongoing with the B.C. Ministry regarding the level of
remediation of the Fraser River that will be required. Wolverine estimates a
range of between $1,385,000 and $2,300,000 to remove the contamination,
depending upon the level of remediation ultimately selected. Wolverine
continues to believe that Noranda should be held entirely responsible for the
study and remediation costs related to the Fraser River. If, however, the
Company is forced to bear a substantial portion of these costs, and the
remediation plan selected by the B.C. Ministry requires significant
expenditures, then these costs could have a material adverse effect on the
Company's consolidated financial position, results of operations and liquidity.
Although management believes that Noranda Inc. and NMI together have
sufficient financial resources to meet whatever liability they might face as a
result of the Ontario Litigation and the B.C. Order, preliminary discovery has
suggested that NMI alone would not have sufficient resources to bear these
expenses. At present, Noranda Inc. has not been named as a party to the B.C.
Order.
The Company has become aware that a municipal drinking water supply
in the vicinity of the Company's Ardmore, Tennessee, facility (the "Ardmore
Facility") contains certain substances (volatile organics) that have also been
found in soils at the Ardmore Facility. The Tennessee Division of the Superfund
(the "Tennessee Division") advised the Company that the Ardmore Facility is
considered the likely source of the contaminants. Ardmore plant personnel met
with the Tennessee Division on July 13, 1995, to discuss the situation and the
regulatory personnel acknowledged that no formal administrative or other action
had been taken to list the Ardmore Facility as a Superfund site under federal
or state law.
On December 28, 1995, the Company entered into a Consent Order and
Agreement with the Tennessee Division relating to the Ardmore Facility under
which the Company agreed to conduct a preliminary investigation regarding
whether the volatile organics in or at the municipal drinking water supply are
related to the Ardmore Facility and, if necessary, to undertake any appropriate
response. The estimated cost of the investigation is not material. Until the
preliminary investigation is completed, the Company cannot determine whether
any additional action is necessary to the Ardmore Facility. That investigation
has disclosed elevated concentrations of certain volatile organic compounds in
soils in certain areas of the Ardmore Facility and also has disclosed elevated
levels of certain volatile organic compounds in the shallow residuum groundwater
zone at the Ardmore Facility. Under the terms of the Consent Order and
Agreement, the Company is required to perform a Remediation Investigation and
Feasibility Study ("RI/FS") if it is determined that the results of the
preliminary investigation disclose contaminants at certain levels. The
Tennessee Division has indicated that a RI/FS will be required regarding this
site. The Company is currently working with the Tennessee Division on
developing a work plan for an RI/FS. It is premature to estimate the cost of a
RI/FS, or any remedial action that may be required following any RI/FS.
A recent report of a 1995 EPA site inspection of the Ardmore Facility
recommended further action for the site. The Company believes, however, that
because the Tennessee Division
14
<PAGE> 16
is actively supervising an ongoing investigation of the Ardmore Facility, it is
unlikely that EPA will intervene and take additional action. If the EPA should
decide to intervene, however, that could increase the cost of any required
further investigation or remedial action.
The Company has completed a Phase II environmental investigation at
the Greenville, Mississippi, facility (the "Greenville Facility"). The
investigation indicates the presence of soil and water contamination above
acceptable limits. The Company is working with the Mississippi Department of
Environmental Quality to further define the area of contamination and prepare a
plan of remediation. A Phase III environmental study has recently been
completed and found no evidence of off-site contamination. While the Company's
environmental consultants are evaluating potential remedies and no remediation
plan has been prepared, the current preliminary estimated cost to complete
testing and remediate the Greenville Facility is $1,500,000, although this
estimate may change depending on the remediation plan ultimately adopted. The
costs of testing and remediation required at the Greenville Facility will be
shared with the former owners of the facility on a dollar for dollar basis, not
to exceed $750,000, under an Escrow Agreement established at the time of the
1994 acquisition of Small Tube Products Company.
The Company has been identified by the EPA as one of a number of
Potentially Responsible Parties ("PRPs") at three Superfund sites in Athens,
Alabama; Criner, Oklahoma; and Oklahoma City, Oklahoma. The Company believes
that its potential liability with respect to these Superfund sites is not
material. However, there can be no assurance that the Company will not be named
a PRP at additional Superfund sites in the future or that the costs associated
with those sites would not be substantial.
The Company believes that it faces no significant liability for the
Athens, Alabama, site because it has removed all of the material that it
contributed to the site. The Company believes that it faces no significant
liability for the Criner, Oklahoma, site because The Henley Group, Inc.
("Henley") has retained liability for all cleanup costs resulting from the
Company's past disposal of used oil at the Criner, Oklahoma site pursuant to an
indemnification agreement between the Company and Henley entered into in
connection with the acquisition in 1987 of substantially all the assets of the
seamless copper tube business of Henley (the "1987 Purchase Agreement").
Henley, which is not affiliated with the Company, has discharged these
obligations to date.
The Company was also notified on December 16, 1992 and February 12,
1993 of its potential liability in connection with the Double Eagle Refinery
Superfund site in Oklahoma City, Oklahoma for soil and groundwater
contamination, respectively. The Company is one of a number of PRPs named by the
EPA in connection with the disposal of used oil at this site. By letter dated
March 31, 1993, 23 of the 46 PRPs named with respect to the soil contamination
of the site, including the Company, submitted a settlement offer to the EPA,
whereby the PRPs offered to pay the EPA $2.2 million, in return for an
agreement with the EPA and the State of Oklahoma pursuant to which those PRPs
would be released from all past and future liability concerning the site. The
Company agreed to contribute $272,188 to the settlement offer. On June 30,
1995, the EPA responded to the PRP's offer with two settlement options. Under
the first option, the EPA would accept the PRP's offer but could reopen the
settlement if the EPA's cost to
15
<PAGE> 17
remediate the site exceeds $12.0 million. Such excess would be allocated pro
rata (based on each Company's contribution to the original settlement). The
second option allows each PRP to pay a certain amount, based upon the EPA's
worst case cost scenario to remediate the site, and receive complete protection
from reopening the agreement. Under this option, Wolverine's contribution to
the settlement would be approximately $347,355. In February 1996, the Company
notified the EPA, the United States Department of Interior and the Oklahoma
Department of Wildlife Conservation that it planned to accept the second
settlement option pending final resolution of consent order language and
volumetric reallocation. Under this settlement option, the Company would pay
$347,355 for remediation response cost and $8,464 for natural resource damages.
16
<PAGE> 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material legal proceeding developments during the
three-month period ended June 29, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 16, 1996, the Company held its Annual Meeting of Shareholders.
The matters voted upon at the meeting and the results of these votes are as
follows:
<TABLE>
<CAPTION>
1. Election of Directors Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Jan K. Ver Hagen 11,021,699 42,494
James E. Deason 10,987,754 76,439
Thomas P. Evans 10,984,349 79,844
</TABLE>
2. Appointment of Ernst & Young LLP, as independent auditors
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C>
11,049,446 7,735 7,012
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Fourth Amendment to the Loan Agreement, dated
June 7, 1996
11 Computation of Earnings per Share
27 Financial Data Schedule (for SEC use only)
(b) Reports
No reports on Form 8-K were filed by the Company during the
three-month period ended June 29, 1996.
17
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereto duly authorized.
Wolverine Tube, Inc.
--------------------
(registrant)
Dated: August 7, 1996 By: /s/ James E. Deason
------------------------------
James E. Deason
Executive Vice President
Finance and Administration
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
- ------ -----------
<S> <C>
10.1 Fourth Amendment to the Loan Agreement, dated
June 7, 1996
11 Computation of Earnings Per Share
27 Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 10.1
FOURTH AMENDMENT TO LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT"), is
made and entered into as of the 7th day of June, 1996, by and among (i)(a)
WOLVERINE TUBE, INC., a Delaware corporation with principal office and place of
business in Huntsville, Alabama ("WOLVERINE TUBE"), and (b) WOLVERINE TUBE
(CANADA) INC., an Ontario corporation with principal office and place of
business in London, Ontario, Canada ("WOLVERINE CANADA") (Wolverine Tube and
Wolverine Canada are hereinafter collectively referred to as the "BORROWERS",
and each is hereinafter individually referred to as a "BORROWER"), (ii)(a)
MELLON BANK, N. A., a national banking association with principal office and
place of business in Pittsburgh, Pennsylvania ("MELLON BANK"), (b) PNC BANK,
KENTUCKY, INC., a Kentucky banking corporation with principal office and place
of business in Louisville, Kentucky ("PNC"), (c) BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, a national banking association with principal office
and place of business in San Francisco, California ("BANK OF AMERICA"), and (d)
THE BANK OF NOVA SCOTIA, a Canadian banking corporation with principal office
and place of business in Toronto, Ontario, Canada ("BANK OF NOVA SCOTIA")
(Mellon Bank, PNC, Bank of America and Bank of Nova Scotia are each sometimes
hereinafter individually referred to as a "BANK", and all of the same are
sometimes hereinafter collectively referred to as the "BANKS"), and (iii)
MELLON BANK, N. A., in its capacity as agent for the Banks (in such capacity,
the "AGENT").
Preliminary Statement:
---------------------
A. Pursuant to that certain Loan Agreement dated as of
February 28, 1994, among the Borrowers, the Banks and PNC, as Initial Agent (in
such capacity the "INITIAL AGENT"), as amended pursuant to that certain First
Amendment to Loan Agreement dated as of November 23, 1994, among the Borrowers,
the Banks and the Initial Agent, the Second Amendment to Loan Agreement dated
as of April 5, 1995, and the Third Amendment to Loan Agreement dated as of
April 26, 1996 (collectively, the "LOAN AGREEMENT"), the Banks have established
a revolving credit facility in the principal amount of Seventy-Five Million
U.S. Dollars ($75,000,000.00) in favor of the Borrowers upon the terms and
conditions set forth in the Loan Agreement.
B. The Borrowers, the Banks and the Agent desire to amend the
Loan Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants set forth herein, and for other good and valuable
consideration, the mutuality, receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS. Each capitalized term used herein,
unless otherwise expressly defined herein, shall have the meaning set forth in
the Loan Agreement.
SECTION 2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement
is hereby amended as set forth below in this Section 2.
2.1 DEFINITIONS. Section 1 of the Loan Agreement is amended
by deleting the definitions of "Capital Expenditures", "Loan Instruments",
"Small Tube" and "Small Tube Guaranty Agreement" and by adding the following
definitions:
<PAGE> 2
1.31 "Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether in cash or accrued as
liabilities and including that portion of Capital Leases originally
incurred during such period which is capitalized on the balance sheet
of either Borrower) incurred by either Borrower during such period
that, in conformity with GAAP, are included in the balance sheet of
either Borrower; provided, that expenditures described in the
definition of "Permitted Receivables Transactions" shall not be deemed
to be Capital Expenditures.
1.81 "Loan Instruments" means this Loan Agreement, the
Revolving Notes, the Canadian Revolving Note, the Drafts, any
applications, reimbursement agreements and other documents or
certificates executed in favor of PNC or Mellon relating to the
Letters of Credit, each Request for Revolving Loan, Request For
Canadian Base Rate Loan, Request for Bankers' Acceptance, Compliance
Certificate, the Guaranty Agreement, the Small Tube Guaranty
Agreement, the Tennessee Subsidiary Guaranty Agreement, the Tennessee
Subsidiary Subordination Agreement and all other agreements, documents
and instruments delivered by either Borrower pursuant to this Loan
Agreement.
1.126 "Small Tube" means Small Tube Manufacturing
Corporation, a Delaware corporation.
1.127 "Small Tube Guaranty Agreement" means the Limited
Guaranty Agreement dated as of November 23, 1994, executed and
delivered by Small Tube and STPC Holding, Inc. in favor of the Agent
for the benefit of the Banks.
1.131 "Permitted Receivables Transactions" means (i) the
contribution of up to $45,000,000 in cash by Wolverine Tube to the
Tennessee Subsidiary to enable the Tennessee Subsidiary to complete
the first of the receivables purchases described in clause (iii); (ii)
the making of cash advances from time to time by Wolverine Tube to the
Tennessee Subsidiary in an amount not exceeding $12,000,000 at any one
time outstanding to enable the Tennessee Subsidiary to make the
receivables purchases described in clause (iii) and the repayment of
such advances by the Tennessee Subsidiary from cash accumulated
pursuant to the receivables purchases described in clause (iii); (iii)
the purchase from time to time by the Tennessee Subsidiary of
receivables from Wolverine Tube at a price not less than 96% of the
face amount of such receivables; (iv) the making of advances by the
Tennessee Subsidiary to the Borrowers and Small Tube and the making of
dividends by the Tennessee Subsidiary to Wolverine from cash
accumulated pursuant to the receivables purchases described in clause
(ii); (v) the provision of management services by Wolverine Tube to
the Tennessee Subsidiary and the payment of a management fee from the
Tennessee Subsidiary to Wolverine Tube in an amount not less than the
cost of providing such services; (vi) the provision of credit services
by the Tennessee Subsidiary to Wolverine Tube and the payment of a fee
to the Tennessee Subsidiary in an amount not less than the cost of
providing such services; and (vii) the provision of credit and
collection services by the Tennessee Subsidiary to Wolverine Canada
and Small Tube and the payment of a collection fee to the Tennessee
Subsidiary in an amount not greater than 4% of the face amount of the
collected receivables.
1.132 "Tennessee Subsidiary" means Wolverine Finance Company,
a Tennessee corporation.
-2-
<PAGE> 3
1.133 "Tennessee Subsidiary Guaranty Agreement" means that
certain Guaranty Agreement dated as of June 7, 1996, executed and
delivered by the Tennessee Subsidiary in favor of the Agent for the
benefit of the Banks.
1.134 "Tennessee Subsidiary Subordination Agreement" means
that certain Subordination Agreement dated as of June 7, 1996, among
Wolverine Tube, the Agent for the benefit of the Banks and the
Tennessee Subsidiary.
2.2 SUBSIDIARIES. Section 4.2 is deleted and the following
is substituted:
4.2 Subsidiaries. Wolverine Canada, STPC Holding, Inc.,
Small Tube, the Tennessee Subsidiary and the NRO, and any other
nonresident owned investment corporations incorporated from time to
time under the laws of the Province of Ontario as contemplated by
Section 6.6(iv) hereof, are wholly-owned subsidiaries of Wolverine
Tube and, together with Wolverine Tube International Ltd., a
corporation formed and existing under the laws of the U.S. Virgin
Islands, are the only Subsidiaries of Wolverine Tube. Wolverine
Canada has no Subsidiaries.
2.3. MERGERS, DISSOLUTIONS AND OTHER EXTRAORDINARY EVENTS.
Section 6.1(b) is deleted and the following is substituted:
(b) Sell, lease, assign, transfer or dispose of assets other
than (i) in the ordinary course of each Borrower's business as
historically conducted, (ii) the assets comprising Wolverine Canada's
plant located in or about New Westminster, British Columbia, Canada,
and (iii) Permitted Receivables Transactions.
2.4 INDEBTEDNESS. Section 6.2 is amended by deleting the
"and" at the end of clause (f), by deleting the period and substituting "and"
at the end of clause (g), and by adding the following clause (h):
(h) Indebtedness of the Borrowers and Small Tube to the
Tennessee Subsidiary or of the Tennessee Subsidiary to Wolverine Tube
pursuant to Permitted Receivables Transactions.
2.5 INVESTMENTS. Section 6.6(v) is deleted and the following
is substituted:
(v) (A) The capital contributions to the Subsidiaries
referred to in Section 4.2 made prior to the date of the Third
Amendment to this Agreement, (B) the capital contribution to the
Tennessee Subsidiary contemplated by the definition of Permitted
Receivables Transactions, (C) the intercompany advances contemplated
by the definition of Permitted Receivables Transactions, and (D)
capital contributions to the nonresident owned investment corporations
incorporated after the date of the Third Amendment to this Agreement
referred to in clause (iv) above, which capital contributions shall
not be in excess of the capital contributions made to the NRO prior to
the date of the Third Amendment to this Agreement.
2.6 TRANSACTIONS WITH AFFILIATES. Section 6.16 is amended by
deleting the proviso and substituting the following:
provided, the provisions of this Section 6.16 shall not apply
to (a) the management agreement between Wolverine Tube and Genstar,
(b) the transactions
-3-
<PAGE> 4
involving the NRO described in Section 6.2(g) or Section 6.6(iv) or
(c) Permitted Receivables Transactions.
2.7 COVENANTS WITH RESPECT TO THE TENNESSEE SUBSIDIARIES. A
new Section 6.18 is added to the Loan Agreement to read as follows:
6.18. Tennessee Subsidiary. The Tennessee Subsidiary will
not engage in any business, activities, or transactions, other than
Permitted Receivables Transactions and the execution and delivery of
the Tennessee Subsidiary Guaranty Agreement and the Tennessee
Subsidiary Subordination Agreement.
SECTION 3. EXTENSION OF REVOLVING LOAN COMMITMENT TERMINATION
DATE. Pursuant to Section 2.1B of the Loan Agreement, the Borrowers, the
Lenders and the Agent agree that the Revolving Loan Commitment Termination Date
shall be extended to March 1, 1999.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrowers
represent and warrant to the Banks and the Agent as follows:
4.1 AUTHORIZATION; COMPLIANCE WITH OTHER INSTRUMENTS, ETC.
The execution, delivery and performance of this Amendment have been duly
authorized by all necessary corporate action on the part of each Borrower, will
not result in any violation of or be in conflict with or constitute a default
under the Articles of Incorporation or By-Laws of either Borrower or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to either Borrower, or result in the creation of any Lien
upon any of the properties or assets of either Borrower.
4.2 ENFORCEABILITY. This Amendment and the Loan Instruments,
as amended hereby, constitute the valid and binding obligations of each
Borrower, legally enforceable against such Borrower in accordance with its
terms, except to the extent the enforceability of this Amendment and the Loan
Instruments, as amended hereby, are subject to the effect of applicable laws
affecting the rights of creditors generally and equitable principles.
4.3 GOVERNMENTAL CONSENTS. Neither Borrower nor the
Tennessee Subsidiary is required to obtain any order, consent, approval or
authorization of, or is required to make any declaration or filing with, any
governmental authority in connection with the execution and delivery of this
Amendment or the Tennessee Subsidiary Guaranty or in connection with the
performance of the Loan Instruments, as amended hereby.
4.4 REPRESENTATIONS AND WARRANTIES UNDER THE TENNESSEE
SUBSIDIARY GUARANTY AND TENNESSEE SUBSIDIARY SUBORDINATION AGREEMENT. The
Borrowers hereby, restate, as of the date hereof, the representations and
warranties of the Tennessee Subsidiary contained in Section 11 of the Tennessee
Subsidiary Guaranty and the representations and warranties contained in Article
III of the Tennessee Subsidiary Subordination Agreement.
4.5 REPRESENTATIONS AND WARRANTIES UNDER THE LOAN AGREEMENT.
The Borrowers hereby restate, as of the date hereof, the representations and
warranties contained in Section 4 of the Loan Agreement.
4.6 EVENTS OF DEFAULT. No Event of Default and no Potential
Event of Default has occurred and is continuing or exists under the Loan
Agreement, as amended hereby.
For purposes of Section 7(e) of the Loan Agreement, the
foregoing representations and warranties shall be deemed to have been made in
connection with the Loan Agreement.
-4-
<PAGE> 5
SECTION 5. CONDITIONS. The effectiveness of Sections 2 and 3
is subject to the satisfaction of the following conditions:
5.1 CONSENTS AND ACKNOWLEDGMENTS. The Consents and
Acknowledgments attached to this Amendment shall have been executed and
delivered by each of the guarantors set forth thereon.
5.2 GUARANTY AND SUBORDINATION AGREEMENT. There shall have
been delivered to the Agent, with sufficient executed copies to provide one for
each Bank, a Guaranty in the form of Exhibit A hereto executed by the Tennessee
Subsidiary and a Subordination Agreement in the form of Exhibit B hereto
executed by Wolverine Tube and the Tennessee Subsidiary.
5.3 TENNESSEE SUBSIDIARY CORPORATE ACTION. There shall have
been delivered to the Agent (i) a copy of the Certificate of Incorporation of
the Tennessee Subsidiary certified as of a recent date by the Secretary of
State of Tennessee, and (ii) a certificate dated as of the date hereof signed
by the Secretary or Assistant Secretary of the Tennessee Subsidiary certifying
as to true copies of (A) the by-laws of the Tennessee Subsidiary, (B) all
corporate action taken by the Tennessee Subsidiary relative to the Tennessee
Subsidiary Guaranty, the Tennessee Subordination Agreement and the Permitted
Receivables Transactions, and (C) the names, true signatures and incumbency of
the persons authorized to sign the Tennessee Subsidiary Guaranty and the
Tennessee Subordination Agreement on behalf of the Tennessee Subsidiary.
5.4 OPINION OF COUNSEL. There shall have been delivered to
the Agent, an opinion of counsel to the Tennessee Subsidiary, in form and
substance satisfactory to the Agent, as to (i) the due incorporation of the
Tennessee Subsidiary, and (ii) the matters set forth in Sections 11(a) through
(d) of the Tennessee Subsidiary Guaranty.
5.5 CORPORATE ACTION OF THE BORROWERS. The Agent shall have
received a certificate signed by the Secretary or an Assistant Secretary of
each Borrower (i) confirming that no change has occurred in the certificate of
incorporation, bylaws or incumbency information furnished by such Borrower in
connection with the Third Amendment to Loan Agreement, (ii) as to true copies
of the corporate action taken by each Borrower in connection with this
Amendment and the Permitted Receivables Transactions, (iii) as to true copies
of all corporate action taken by Wolverine Tube relative to the Tennessee
Subsidiary Subordination Agreement and (iv) the names, true signatures and
incumbency of the persons authorized to sign the Tennessee Subsidiary
Subordination Agreement on behalf of the Tennessee Subsidiary.
5.6 OTHER DOCUMENTS. The Agent shall have received such
other documents, agreements and instruments as the Banks may reasonably
request.
SECTION 6. MISCELLANEOUS. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument. Except to the extent
expressly amended or modified hereby, the provisions of the Loan Instruments
shall remain in full force and effect.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to Loan Agreement to be duly executed as of the day and year first
above written.
WOLVERINE TUBE, INC.
By: /s/ James E. Deason
---------------------------------------------
Title: Executive V.P. Finance - Admin
------------------------------------------
WOLVERINE TUBE (CANADA) INC.
By: /s/ Robert B. Hare
--------------------------------------------
Title: Assistant Treasurer
-----------------------------------------
MELLON BANK, N. A., individually
and as Agent
By: /s/ Dwayne R. Finney
--------------------------------------------
Title: Assistant Vice President
-----------------------------------------
PNC BANK, KENTUCKY, INC.
By: /s/ Benjamin A. Willingham
--------------------------------------------
Title: Vice President
-----------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Michael J. McKinney
--------------------------------------------
Title: Vice President
-----------------------------------------
THE BANK OF NOVA SCOTIA
By: /s/ W. J. Brown
--------------------------------------------
Title: Vice President
-----------------------------------------
-6-
<PAGE> 1
Exhibit 11
WOLVERINE TUBE, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three-month period ended: Six-month period ended:
------------------------ ----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income applicable to common
shares........................................ $10,364 $ 8,857 $20,557 $17,919
======= ======= ======= =======
Weighted average common shares
outstanding................................... 13,736 13,604 13,705 13,552
Common equivalent shares
outstanding................................... 405 491 474 502
------- ------- ------- -------
Weighted average common and common
equivalent shares outstanding (1)............. 14,141 14,095 14,179 14,054
======= ======= ======= =======
Net income per common
share......................................... $ .73 $ .63 $ 1.45 $ 1.28
======= ======= ======= =======
</TABLE>
- ----------------------------
(1) Represents shares issuable upon the exercise of stock options based
upon the treasury stock method using the average market price. As
fully diluted shares outstanding are the same as primary shares
outstanding for all periods presented, net income per common share on
a fully-diluted basis is not separately presented.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME OF WOLVERINE TUBE INC. FOR THE SIX
MONTH PERIOD ENDED JUNE 29, 1996, AND THE CONDENSED CONSOLIDATED BALANCE SHEET
OF WOLVERINE TUBE, INC. AT JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-29-1996
<CASH> 14,128
<SECURITIES> 0
<RECEIVABLES> 93,109<F1>
<ALLOWANCES> 0
<INVENTORY> 66,689
<CURRENT-ASSETS> 175,631
<PP&E> 144,118<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 386,484
<CURRENT-LIABILITIES> 54,209
<BONDS> 100,515
0
2,000
<COMMON> 138
<OTHER-SE> 187,253
<TOTAL-LIABILITY-AND-EQUITY> 386,484
<SALES> 359,693
<TOTAL-REVENUES> 359,693
<CGS> 310,695
<TOTAL-COSTS> 310,695
<OTHER-EXPENSES> 11,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,631
<INCOME-PRETAX> 32,535
<INCOME-TAX> 11,838
<INCOME-CONTINUING> 20,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,697
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
<FN>
<F1>THE VALUES FOR THE TAGS RECEIVABLES AND PP&E ARE SHOWN NET OF THEIR RESPECTIVE
ALLOWANCE ACCOUNTS.
Page 1 of 1
</FN>
</TABLE>
