<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 September 27, 1997
------------------
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
-------
WOLVERINE TUBE INC.
-------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0970812
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1525 Perimeter Parkway, Suite 210
Huntsville, Alabama 35806
---------------------------------------- ---------
(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 October 31, 1997
----------- -------------------------------
Common Stock, par value $0.01 per share 14,060,106 shares
<PAGE> 2
WOLVERINE TUBE, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I. Financial Information
Item I. Financial Statements
Condensed Consolidated Statements of Income (unaudited) -
Three and Nine-Month Periods Ended September 27, 1997 and
September 28, 1996..............................................2
Condensed Consolidated Balance Sheets (unaudited)-
September 27, 1997 and December 31, 1996........................3
Condensed Consolidated Statements of Cash Flows (unaudited) -
Nine-Month Periods Ended September 27, 1997 and
September 28, 1996..............................................4
Notes to Condensed Consolidated
Financial Statements (unaudited)................................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................8
PART II. Other Information
Item 1. Legal Proceedings...............................................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: Nine-month period ended:
-------------------------- ----------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales ................................... $ 159,380 $ 168,653 $ 511,038 $ 528,346
Cost of goods sold .......................... 140,871 145,806 447,612 456,501
--------- --------- --------- ---------
Gross profit ................................ 18,509 22,847 63,426 71,845
Selling, general and
administrative expenses ................... 5,243 5,046 16,239 16,250
Non-recurring charge ........................ -- -- 4,384 --
--------- --------- --------- ---------
Income from operations ...................... 13,266 17,801 42,803 55,595
Other expenses:
Interest expense .......................... 1,602 2,287 5,984 6,918
Amortization and other, net ............... 152 351 400 979
--------- --------- --------- ---------
Income before income taxes and
extraordinary item ........................ 11,512 15,163 36,419 47,698
Income taxes ................................ 4,223 5,583 13,230 17,421
--------- --------- --------- ---------
Income before extraordinary item ............ 7,289 9,580 23,189 30,277
Extraordinary item, net of income
tax benefit of $2,782....................... -- -- 4,738 --
--------- --------- --------- ---------
Net income .................................. 7,289 9,580 18,451 30,277
Less: Preferred stock dividends ............. (70) (70) (210) (210)
--------- --------- --------- ---------
Net income applicable to common shares ...... $ 7,219 $ 9,510 $ 18,241 $ 30,067
========= ========= ========= =========
Earnings per common share:
Income before extraordinary item .......... $ 0.51 $ 0.67 $ 1.61 $ 2.12
Extraordinary item, net of
income tax benefit ....................... -- -- (0.33) --
--------- --------- --------- ---------
Net income per share ........................ $ 0.51 $ 0.67 $ 1.28 $ 2.12
========= ========= ========= =========
Weighted average number of common and
common equivalent shares .................. 14,240 14,215 14,227 14,191
========= ========= ========= =========
</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>
September 27, December 31,
1997 1996
------------- ------------
Current assets: (Unaudited) (Note)
<S> <C> <C>
Cash and equivalents ................................... $ 8,802 $ 2,967
Accounts receivable, net ............................... 88,242 79,128
Inventories ............................................ 72,168 73,525
Prepaid expenses and other ............................. 1,079 205
--------- ---------
Total current assets ................................ 170,291 155,825
Property, plant and equipment, net ......................... 153,458 150,221
Deferred charges and intangible assets, net ................ 88,294 84,946
Prepaid pensions ........................................... 4,969 6,028
--------- ---------
Total assets ........................................ $ 417,012 $ 397,020
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................... $ 39,257 $ 27,318
Accrued liabilities .................................... 8,429 11,231
Deferred income taxes .................................. 4,000 4,613
--------- ---------
Total current liabilities ........................... 51,686 43,162
Deferred income taxes ...................................... 25,995 25,857
Long-term debt ............................................. 94,347 100,473
Postretirement benefit obligations ......................... 12,378 12,505
Accrued environmental remediation .......................... 2,920 3,732
--------- ---------
Total liabilities ................................... 187,326 185,729
Minority interest .......................................... -- 69
Redeemable cumulative preferred stock, par
value $1 per share; 20,000
shares issued and outstanding at
September 27, 1997 and December 31, 1996 .............. 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,
14,057,076 and 13,980,517 shares
issued and outstanding at
September 27, 1997 and December
31, 1996, respectively ................................ 141 140
Additional paid-in capital ............................. 99,833 98,870
Retained earnings ...................................... 135,756 117,515
Accumulated currency translation adjustment ............ (8,044) (7,303)
--------- ---------
Total stockholders' equity .......................... 227,686 209,222
--------- ---------
Total liabilities, redeemable
cumulative preferred stock
and stockholder's equity ............................ $ 417,012 $ 397,020
========= =========
</TABLE>
Note: The Balance Sheet at December 31, 1996 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>
Nine-month period ended:
----------------------------
September 27, September 28,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................. $ 18,451 $ 30,277
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization ........................... 12,881 12,179
Deferred income taxes ................................... (411) 2,076
Non-cash portion of non-recurring charge ................ 3,533 --
Extraordinary loss on retirement of debt ................ 4,738 --
Changes in operating assets and liabilities:
Accounts receivable .................................... (9,257) (4,093)
Inventories ............................................ 1,708 (10,776)
Prepaid expenses and other ............................. (1,401) (1,379)
Accounts payable ....................................... 10,017 (179)
Accrued liabilities including pension,
postretirement benefit and environmental ............... (889) (2,199)
-------- --------
Net cash provided by operating activities .................. 39,370 25,906
INVESTING ACTIVITIES
Additions to property, plant and equipmen .................. (17,349) (4,602)
Purchase of subsidiary ..................................... -- (34,305)
Acqusition of business assets .............................. (4,048) --
Other ...................................................... (132) --
-------- --------
Net cash used by investing activities ...................... (21,529) (38,907)
FINANCING ACTIVITIES
Financing Fees ............................................. (820) --
Borrowings under revolving credit facility, net ............ 92,115 10,935
Issuance of common stock ................................... 907 2,547
Premium and fees paid on retirement of debt ............... (5,517) --
Principal payments on long-term debt and
capitalized lease obligations ............................ (98,440) (57)
Dividends paid ............................................. (210) (210)
-------- --------
Net cash provided (used) by financing activities ........... (11,965) 13,215
Effect of exchange rate on cash and equivalents ............ (41) 26
-------- --------
Net increase in cash and equivalents ....................... 5,835 240
Cash and equivalents beginning of period ................... 2,967 5,494
-------- --------
Cash and equivalents end of period ......................... $ 8,802 $ 5,734
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997
(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 and nine-month periods ended
September 27, 1997 are not necessarily indicative of the results of operations
that may be expected for the year ending December 31, 1997. 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, 1996.
The Company uses its internal operational reporting cycle for quarterly
financial reporting.
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 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 with respect to these
waste disposal sites is not material.
The Company has accrued environmental remediation costs of $2,920,000
as of September 27, 1997 consisting primarily of $38,000 for estimated
remediation costs for the London and Fergus, Canada, facilities, $1,792,000 for
the Decatur, Alabama facility, $595,000 for the Greenville, Mississippi
facility, and an aggregate of $495,000 for the Ardmore, Tennessee facility and
the Shawnee, Oklahoma facility (with respect to the Double Eagle Refinery site).
Based on information currently available, the Company believes that the costs of
these matters are not reasonable likely to have a material adverse effect on the
Company's consolidated financial condition, results of operations or liquidity.
5
<PAGE> 7
NOTE 3 - INVENTORIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Inventories are as follows: September 27, December 31,
1997 1996
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Finished products $15,962 $13,626
Work-in-progress 23,495 26,646
Raw materials and supplies 32,711 33,253
- -------------------------------------------------------------------------------
$72,168 $73,525
================================================================================
</TABLE>
NOTE 4 - INTEREST EXPENSE, NET
Interest expense is net of interest income and capitalized interest of
$162,000 and $285,000 for the three-month periods ended September 27, 1997 and
September 28, 1996, respectively, and $537,000 and $884,000 for the nine-month
periods ended September 27, 1997 and September 28, 1996, respectively.
NOTE 5 - LONG-TERM DEBT
In April 1997, the Company completed a refinancing which consisted of
entering into a new five year $200 million unsecured credit agreement (the "New
Credit Agreement") to replace the Company's existing credit facility, as well as
a tender offer for the $99 million in outstanding principal amount of the
Company's 10 1/8% Senior Subordinated Notes due 2002 ("Notes"). The New Credit
Agreement (i) provides for an aggregate available revolving credit facility of
$200 million, including a $20 million sublimit available to Wolverine Tube
(Canada) Inc., (ii) matures in full in April 2002, and (iii) provides for an
interest rate, at the Company's election, at a floating base rate that is either
(a) the higher of the federal funds effective rate plus .50% or the prime rate
or (b) LIBOR plus a specified margin of .25% to .875%. Upon the consummation of
the refinancing, on April 30, 1997, the Company borrowed approximately $107
million under the New Credit Agreement, substantially all of which was used to
finance the purchase of the $98.225 million in Notes that were tendered as well
as related financing expenses. Accordingly, during the second quarter the
Company recorded an extraordinary after-tax charge of $4,738,000 ($7,520,000
pre-tax) resulting from the early retirement of the Notes. As of September 27,
1997, the Company had approximately $106 million in additional borrowing
availability under the New Credit Agreement. On October 31, 1997, the balance of
$775,000 in aggregate principal amount of the Notes that had remained
outstanding was called for redemption by the Company at 103.8%, pursuant to the
terms of the Notes.
NOTE 6 - INTEREST RATE INSTRUMENTS
On May 7, 1997, the Company entered into an interest rate swap
agreement with a certain lender providing bank financing. The agreement
effectively fixed the interest rate on $65,000,000 floating debt provided under
the New Credit Agreement at a rate of 6.82% plus the specified margin from the
New Credit Agreement of .25% to .875%. The interest rate swap expires on May 7,
2002 and is based on 3-month LIBOR. This interest rate swap is accounted for as
a hedge; accordingly, gains and losses are recognized as interest expense.
6
<PAGE> 8
NOTE 7 - NON-RECURRING CHARGE
During the second quarter of 1997, the Company recognized a
non-recurring, pre-tax charge of $4,384,000 ($2,997,000 net of tax). This charge
included $1.8 million of expenses related to the implementation of the Company's
1997 Voluntary Early Retirement Program; $1.3 million of severance costs
primarily associated with the departure of the Company's former Chief Executive
Officer; $0.6 million professional fees and other costs associated with an
acquisition that was not completed; and $0.7 million for the cost of
discontinuing the Poland operations of Small Tube Manufacturing Corporation (a
wholly-owned subsidiary of the Company).
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three-Month Period Ended September 27, 1997 Compared to
Three-Month Period Ended September 28, 1996
For the three-month period ended September 27, 1997, consolidated net
sales were $159.4 million compared with $168.7 million in the three-month period
ended September 28, 1996. The decrease in sales for the three-month period this
year versus last year was attributable to a decrease in shipments and
fabrication charges, which was partially offset by increased copper prices. The
average Comex price of copper was $1.02 per pound in the most recent three-month
period compared with $0.91 per pound in the same period a year ago. The primary
impact to Wolverine of higher copper prices is higher net sales and costs 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 1997 decreased to
81.9 million pounds compared with 89.4 million pounds in the three-month period
a year ago. Shipments of commercial tube products decreased 11.7%, primarily as
a result of decreased shipments of industrial tube used in the residential air
conditioning industry as those customers generally did not meet their
anticipated levels of production during that period. Shipments of the Company's
wholesale products decreased 5.3% as a result of increased competition in the
United States market. In addition, the Company is experiencing a softness in
demand for wholesale products in Canada which is primarily the result of lower
construction activity in this market. Shipments of rod, bar and strip products
were unchanged compared to the three-month period a year ago.
Consolidated gross profit decreased to $18.5 million in the three-month
period of 1997 compared to $22.8 million in the three-month period of 1996. This
decrease is primarily the result of decreased shipments of commercial products,
which are generally the Company's highest margin product, and a shift in product
mix to products with lower margins within the commercial products category. In
addition, there was a decrease in shipments of wholesale products. During the
three-month period of 1997, the Company experienced a reduction in fabrication
charges for wholesale products as compared to the three-month period in 1996. In
order for the Company to manage weak market conditions, the Company utilized its
manufacturing capabilities and shifted production to lower margin products
within these product categories for which there was a stronger market.
Consolidated selling, general and administrative expenses for the
three-month period of 1997 were $5.2 million as compared to $5.0 million in the
three-month period in 1996.
8
<PAGE> 10
Consolidated net interest expense for the three-month period in 1997
decreased to $1.6 million from $2.3 million in the three-month period in 1996.
This decrease is primarily the result of reduced interest expense resulting from
the Company's refinancing of its 10 1/8% Senior Subordinated Notes due 2002
("Notes") in April 1997.
The effective tax rate for the three-month period ended September 27,
1997 was 36.7%, compared with 36.8% in the three-month period a year ago.
Consolidated net income for the three-month period in 1997 was $7.3
million or $0.51 per share, compared to $9.6 million or $0.67 per share in the
three-month period a year ago.
Nine-Month Period Ended September 27, 1997 Compared to
Nine-Month Period Ended September 28, 1996
For the nine-months ended September 27, 1997, consolidated net sales
were $511.0 million compared with $528.3 million in the nine-month period ended
September 28, 1996. The decrease in sales for the nine-month period this year
versus the same period last year was attributable to a decrease in shipments and
fabrication charges, which was partially offset by increased copper prices. The
average Comex price of copper was $1.09 per pound in the most recent nine-month
period compared with $1.08 per pound in the same period a year ago. The primary
impact to Wolverine of higher copper prices is higher net sales and a
corresponding increase in 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 nine-month period of 1997 decreased to
254.6 million compared with 261.9 million pounds in the nine-month period a year
ago. Shipments of commercial tube products decreased 5.1% primarily as a result
of decreased shipments of industrial tube used in the residential air
conditioning industry, as those customers generally did not meet their
anticipated levels of production, during that period, as well as a decrease in
technical tube shipments because the manufacturers of large commercial air
conditioners reduced their production from previous years' levels. The decline
in shipments was offset somewhat by increased shipments of fabricated products
as a result of the acquisition of Tube Forming, Inc. in September 1996.
Shipments of the Company's wholesale products increased 6.3% as a result of
increased participation in the United States market. Rod, bar and strip products
decreased 5.3%, primarily as a result of decreased shipments of strip products
to the Canadian mint.
Consolidated gross profit decreased to $63.4 million in the nine-month
period of 1997 compared to $71.8 million in the nine-month period in 1996. This
decrease is primarily the result of decreased shipments of commercial products,
which are generally the Company's highest margin product, and a shift in product
mix to products with lower margins within the commercial product category.
Consolidated selling, general and administrative expenses for the
six-month period of 1997 were $16.2 million compared to $16.3 million in the
six-month period of 1996.
9
<PAGE> 11
During the nine-month period of 1997, the Company recognized a
non-recurring pre-tax charge to operations of $4.4 million ($3.0 million after
tax). This one-time charge to operations reflects $1.8 million of expenses
incurred in connection with the implementation of the Company's 1997 Voluntary
Early Retirement Program; $1.3 million of severance cost primarily associated
with the departure of the Company's former Chief Executive Officer; $0.6 million
of professional fees and other cost associated with an acquisition that was not
completed; and $0.7 million of cost for discontinuing the Poland operations of
Small Tube Manufacturing Corporation (a wholly owned subsidiary of the Company).
Consolidated net interest expenses for the nine-month period in 1997
was $6.0 million compared to $6.9 million in the nine-month period in 1996. This
decrease is primarily due to reduced interest expense associated with the
Company's refinancing of debt in April 1997 which was partially offset by
reduced interest income resulting from the Company's use of cash holdings in the
third quarter of 1996 to purchase Tube Forming, Inc.
The Company incurred an extraordinary charge associated with the early
extinguishment of the Notes. The charge on the extinguishment net of tax was
$4.7 million ($7.5 million pre-tax).
The effective tax rate for the nine-month period in 1997 was 36.3%
compared to 36.5% in the nine-month period in 1996.
Consolidated net income for the nine-month period in 1997 was $18.5
million or $1.28 per share, compared to $30.3 million or $2.12 per share in the
nine-month period a year ago. Adjusting for the one-time after tax charge of
$3.0 million or $0.22 per share and the extraordinary charge of $4.7 million or
$0.33 per share, consolidated net income and earnings per share for the
nine-month period in 1997 would have been $26.2 million or $1.83 per share.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $39.4 million in the
first nine-months of 1997 compared to $25.9 million in the first nine-months of
1996. The change was primarily due to the decrease in net income which was
offset by a decrease in inventory and an increase in accounts payable. The
Company's inventory balance for the first nine-months of 1997 decreased $1.7
million as compared to a $10.8 million increase in the first nine-months of 1996
as a result of reduced production requirements. The $9.3 million increase in net
accounts receivable from December 31, 1996 is primarily due to increases in
Comex copper prices over the prevailing prices at year end 1996.
On April 30, 1997, the Company entered into a new five-year $200
million unsecured credit agreement (the "New Credit Agreement") to replace the
Company's existing credit facility as well as to finance a tender offer for the
$99 million in outstanding principal amount of the Notes. The New Credit
Agreement (i) provides for an aggregate available revolving credit facility of
$200 million, including a $20 million sub-limit facility available to Wolverine
Tube (Canada) Inc., (ii) matures in full in April 2002, and (iii) provides for
an interest rate, at the Company's selection, at a floating base rate that is
either (a) the higher of the federal funds effective rate plus .50% or the prime
rate or (b) LIBOR plus a specified margin of .25% to .875%. Upon the
consummation of the refinancing, the Company borrowed approximately $107 million
under the New Credit Agreement, substantially all of which was used to
10
<PAGE> 12
refinance the purchase of the $98.225 million in Notes that were tendered in the
tender offer and related refinancing expenses. As of September 27, 1997 the
Company had approximately $94 million in outstanding borrowings and obligations
under the New Credit Agreement and approximately $106 million in additional
borrowing availability thereafter. On October 31, 1997 the balance of $775,000
in aggregate principal amount of the Notes that had remained outstanding was
called for redemption by the Company at 103.8%, pursuant to the terms of the
Notes.
In the ordinary course of business the Company enters into various
types of transactions that involve contracts and financial instruments with
off-balance sheet risk. The Company enters into these financial instruments to
manage financial market risk, including foreign exchange risk, commodity price
risk for certain customers and interest rate risk. The Company is exposed to
loss on the forward contracts in the event of non-performance by the customer
whose orders are covered by such contracts. However, the Company does not
anticipate non-performance by such customers. The Company accounts for its
interest rate swap as a hedge, accordingly, gains and losses are recognized as
interest expense. The Company enters into these financial instruments utilizing
over-the-counter as opposed to exchange traded instruments. The Company
mitigates the risk that counter parties to these over-the-counter agreements
will fail to perform by only entering into agreements with major international
financial institutions.
Capital expenditures were $17.3 million for the first nine-months of
1997 and $4.6 million for the first nine months of 1996. The Company currently
expects to spend approximately $20 million in 1997 under its existing capital
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 New Credit
Agreement.
Upon review of current business and market conditions, the Company
elected to adopt the 1997 Voluntary Early Retirement Program (the "Plan"). This
Plan rewards certain eligible employees who elected on a voluntary basis to take
early retirement from the Company between March 26, 1997 and May 12, 1997. After
the execution of a binding Voluntary Early Retirement Agreement and General
Release by each eligible employee, the Company paid each such employee an early
retirement payment and provided certain other considerations. The payment was an
amount equal to four weeks' base pay plus one additional week's pay for each
year of service, up to a maximum of twenty-six weeks' total, less applicable
taxes and withholdings required by law. Twenty-six employees from various
locations and departments throughout the Company elected to participate in the
Plan. At the end of the second quarter the implementation of the Plan was
completed. The Company expects to realize approximately $2.0 million in reduced
salary and related expenses per year as a result of the Plan. Implementation of
the Plan resulted in an approximate $1.8 million charge that was included in the
Company's non-recurring charge and recognized in the second quarter of 1997. The
primary components of the charge relating to the Plan include approximately $1.0
million relating to severance and vacation pay and $0.6 million of increased
pension expense resulting from these early retirements.
The Company continues to experience weak demand for its tubular
products used in the commercial market and unusually weak demand in the
residential air conditioning market. The unanticipated availability of reclaimed
chlorofluorocarbons ("CFCs") at reasonable prices has slowed the rate of
replacing large commercial air conditioners using CFC refrigerants. In addition,
the record levels
11
<PAGE> 13
of manufacturer and distributor residential inventories, compounded by a cool
spring and early summer, has softened demand for the Company's high margin
residential air conditioner products. In addition, wholesale products
experienced price decreases due to a slowdown in product demand and increases in
foreign competition. In order to manage these weak markets, the Company
exercised its flexibility and shifted manufacturing to lower margin products.
These markets are very volatile and are subject to rapid change. However, if
these market conditions persist throughout the fourth quarter of 1997, the
Company could experience a decrease in fabrication charges compared to the
fourth quarter of 1996.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain of the statements and subject areas contained herein that are
not based upon historical or current facts deal with or may be impacted by
potential future circumstances and developments. Such statements and the
discussion of such subject areas involve, and are therefore qualified by, the
inherent risks and uncertainties surrounding future expectations generally, and
also may materially differ from the Company's actual future experience involving
any one or more of such subject areas. The Company has attempted to identify, in
context, certain of the factors that it currently believes may cause actual
future experience and results to differ from current expectations regarding the
relevant statement or subject area. The Company's operations and results also
may be subject to the effect of other risks and uncertainties in addition to the
relevant qualifying factors identified elsewhere herein, including, but not
limited to, cyclicality and seasonality in the industries to which the Company
sells its products, the impact of competitive products and pricing,
extraordinary fluctuations in the pricing and supply of the Company's raw
materials, volatility of commodities markets, unanticipated developments in the
areas of environmental compliance, and other risks and uncertainties identified
from time to time in the Company's reports filed with the Securities and
Exchange Commission.
ENVIRONMENTAL
The Company's facilities and operations are subject to extensive
environmental laws and regulations. During the nine-month period ended September
27, 1997, the Company spent approximately $0.8 million on environmental matters
which include remediation costs, monitoring costs and legal and other costs. The
Company has a reserve of $2.9 million for environmental remediation costs which
is reflected in the Company's Condensed Consolidated Balance Sheet. The Company
has approved $3.1 million for capital expenditures relating to environmental
matters during 1997, of which $ 2.6 million has been spent through September 27,
1997. Based upon information currently available, the Company believes that the
costs of the environmental matters described below are not reasonably likely to
have a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
Oklahoma City, Oklahoma
The Company is one of a number of Potentially Responsible Parties
("PRP's") 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 (the "Group"), as the site owner
has filed for bankruptcy protection. In March 1993, twenty-three PRP's named
with respect to the soil contamination
12
<PAGE> 14
of the site, including the Company, submitted a settlement offer to the EPA.
Settlement negotiations between the Group and the EPA are continuing, but
currently contemplate a settlement and consent order among the PRP's, the EPA
and the State of Oklahoma, which would provide for each PRP's liability to be
limited to a prorata share of an aggregate amount based upon the EPA's
worst-cast cost scenario to remediate the site. Under the current proposal, the
Company's settlement amount is estimated to be $390,000.
Decatur, Alabama
The Company is subject to 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"). Should the EPA decide to order
remediation, the remaining monitoring, legal and other costs are estimated to be
$1.8 million. Under an agreement between the Company and an affiliate of the
Henley Group, Inc. (collectively, "Henley"), the prior owner of the property,
Henley took control of investigation and any required cleanup of the Burial
Site. In February 1997, the Company exercised its option to release Henley from
liability for further remediation, monitoring and related costs with respect to
the Burial Site in exchange for a settlement payment, all pursuant to the terms
of the existing agreements with Henley. In June 1997, the Company released
Henley from liability of the Burial Site following the receipt of the settlement
payment. The Company is currently awaiting comments and approval from the EPA on
a Corrective Measures Study ("CMS") that Henley had submitted to the EPA
regarding the Burial Site. The cost to the Company to comply with the CMS, as
currently presented, will not have an adverse effect on the Company's financial
position, results of operations, or liquidity.
New Westminster, British Columbia
In February 1988, the Company purchased substantially all of the assets
of Noranda Metal Industries Limited ("NMI" and, collectively with its parent,
Noranda, Inc., "Noranda"), which included property located in Montreal, Quebec
(the "Montreal Property"), Fergus, Ontario (the "Fergus Property"), and a
leasehold interest in property located on Annacis Island in Delta, British
Columbia (the "New Westminster Property", and collectively with the Montreal
Property and the Fergus Property, the "Properties"). In 1993, the Company
commissioned a series of environmental assessments of the Properties, which
resulted in the finding of PCB's above permissible limits at the New Westminster
Property and in an adjacent tidal flat of the Fraser River. Additional findings
include traces of PCB's within the Montreal Property, as well as the presence of
heavy metal and other contaminants at the New Westminster Property and the
Montreal Property.
The Company discontinued operations at the New Westminster facility 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 New Westminster Property.
The Company currently has no obligation to remediate the soil
contamination at its Montreal property under current Quebec statutes. The traces
of PCB's within the Montreal Property have been
13
<PAGE> 15
remediated. The Company has instituted a program to prevent further
contamination and is monitoring the existing contamination. The Company intends
to continue to operate the Montreal Property and does not currently plan 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 Condensed Consolidated Financial Statements.
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 conditions of the facilities. The Statement of Claim
seeks certain declaratory judgements, specific performance of the agreement, and
general specific prospective damages of up to $25,000,000 (Canadian). In
September 1997, the Company and Noranda reached an agreement to settle the
Statement of Claim. The settlement provides that Noranda will reimburse the
Company for a portion of the costs incurred in the remediation study and other
related costs associated with the New Westminster Property. In addition, the
agreement contemplates that Noranda and the Company would enter into a cost
sharing arrangement with respect to future remediation costs at the Montreal
Property, up to a maximum amount of $9.9 million. Pursuant to the proposed
arrangement, which would expire in September 2002, Noranda would be responsible
for a maximum of $6 million and the Company would be responsible for a maximum
of $3.9 million of such costs. Any remediation costs in excess of $9.9 million
would be the sole responsibility of the Company.
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 the 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. Pursuant to the sale agreement
with Juker, Juker assumes responsibility for the remediation of the New
Westminster Property, other than with respect to Fraser River. The Company has
been informed that Juker has completed the remediation of the New Westminster
Property, and that NMI has completed the remediation of the Fraser River and
associated uplands, all as outlined in the implementation plan that was approved
by the B.C. Ministry. The Company does not anticipate that it will have any
further liability under the Pollution Abatement Order.
Ardmore, Tennessee
On December 28, 1995, the Company entered into a Consent Order and
Agreement with the Tennessee Division of Superfund (the "Tennessee Division"),
relating to the Ardmore facility, under which the Company agreed to conduct a
preliminary investigation regarding whether volatile organics detected in and
near the municipal drinking water supply are related to the Ardmore facility
and, if necessary, to undertake an appropriate response. That investigation has
disclosed contamination, including elevated concentrations of certain volatile
organic compounds, in soils of 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
14
<PAGE> 16
Agreement, the Company submitted a Remedial Investigation and Feasibility Study
("RI/FS") work plan, which was accepted by the Tennessee Division, and the
Company has initiated the RI/FS. Based on the available information, and
recognizing that the nature and scope of remediation will be affected by the
results of the RI/FS, the Company preliminarily estimates a range of between
$855,000 and $1,655,000 to complete the investigation and remediation of this
site, of which approximately $750,000 has been spent.
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 intervene, however, the Company could incur
additional costs for any further investigation or remedial action required.
Greenville, Mississippi
Following the Company's acquisition of its Greenville, Mississippi
facility, (the "Greenville facility"), a preliminary investigation disclosed
volatile organic contaminants in soil and groundwater at the site. Based on
further investigation, it appears that the contamination has not spread off
site. The Company entered into a Consent Order with the Mississippi Department
of Environmental Quality ("MDEQ") for a pilot study program which will help
determine the effectiveness of certain technology tentatively identified for
remediation and which will also help define the scope of remediation for the
site. The pilot study program concluded on June 1, 1997. The Company entered
into a final consent agreement with the MDEQ on July 15, 1997. Remediation
efforts began in the third quarter of 1997 and are expected to continue for
approximately three years. The remaining total investigative and remedial costs
could total $1,190,000, under the remediation plan the Company adopted.
Applicable costs of testing and remediation required at the Greenville facility
are being shared with the former owners of the facility on a dollar for dollar
basis, not to exceed $750,000, pursuant to the terms of an Escrow Agreement
established at the time the facility was acquired. Any remediation costs in
excess of the shared amount would be the sole responsibility of the Company.
Other
The Company has been identified by the EPA as one of a number of PRP's
at Superfund sites in Athens, Alabama and in Criner, 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 Henley, the prior owner of the
site, has retained liability for all cleanup costs resulting from past disposal
of used oil at the Criner, Oklahoma site pursuant to an indemnification
agreement between the Company and Henley. Henley, which is not affiliated with
the Company, has discharged these obligations to date.
15
<PAGE> 17
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate earnings per
share for all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be excluded. The
impact is expected to result in an increase in primary earnings per share for
the three-month period ended September 28, 1996 of $0.02 per share.
Additionally, the impact is expected to result in an increase in primary
earnings per share for the nine-month periods ended September 27, 1997 and
September 28, 1996 of $0.03 and $0.07 per share, respectively.
In June 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No.130, "Reporting Comprehensive
Income," and No.131, "Disclosures about Segments of an Enterprise and Related
Information." These statements establish standards for reporting and display of
comprehensive income and its components and for reporting information about
business segments and products in financial statements, and are effective for
years beginning after December 15, 1997. Adoption of these statements is not
expected to have a material effect on the Company's financial statements.
16
<PAGE> 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material legal proceeding developments during the
three-month period ended September 27, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
3.2 By-Laws of the Company, as amended
11 Computation of Earnings per Share
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports
No reports on Form 8-K were filed by the Company during the
three-month period ended September 27, 1997.
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: November 5, 1997 By: /s/ James E. Deason
----------------------
James E. Deason
Executive Vice President
Chief Financial Officer
18
<PAGE> 1
Exhibit 3.2
--------------------------------
WOLVERINE TUBE, INC.
BY-LAWS
AS AMENDED MAY 22, 1997
--------------------------------
<PAGE> 2
WOLVERINE HOLDING COMPANY
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STOCKHOLDER MEETINGS
1. Time and Place of Meetings...................................... 1
2. Annual Meeting.................................................. 1
3. Special Meetings................................................ 1
4. Notice of Meetings.............................................. 1
5. Inspectors...................................................... 1
6. Quorum.......................................................... 2
7. Voting.......................................................... 2
8. Order of Business............................................... 2
DIRECTORS
9. Function........................................................ 4
10. Number, Election, and Terms..................................... 4
11. Vacancies and Newly Created Directorships....................... 5
12. Removal......................................................... 5
13. Nominations of Directors: Election.............................. 5
14. Resignation..................................................... 6
15. Regular Meetings................................................ 6
16. Special Meetings................................................ 7
17. Quorum.......................................................... 7
18. Participation in Meetings by Telephone Conference............... 7
19 Committees...................................................... 7
20. Compensation.................................................... 8
21. Rules........................................................... 8
NOTICES
22. Generally....................................................... 8
23. Waivers......................................................... 8
OFFICERS
24. Generally....................................................... 9
26. Succession...................................................... 9
27. Authority and Duties............................................ 9
STOCK
28. Certificates................................................... 9
29. Classes of Stock............................................... 10
30. Transfers and Restrictions on Transfers........................ 10
31. Lost, Stolen, or Destroyed Certificates........................ 10
32. Record Dates................................................... 10
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
INDEMNIFICATION
33. Damages and Expenses........................................... 11
34. Insurance, Contracts, and Funding.............................. 12
GENERAL
35. Fiscal Year.................................................... 12
36. Seal........................................................... 12
37. Reliance upon Books, Reports, and Records...................... 12
38. Time Periods................................................... 13
39. Amendments..................................................... 13
40. Certain Defined Terms.......................................... 13
</TABLE>
<PAGE> 4
STOCKHOLDER MEETINGS
1. Time and Place of Meetings. All meetings of the stockholders for the
election of Directors or for any other purpose will be held at such time and
place, within or without the State of Delaware, as may be designated by the
Board or, in the absence of a designation by the Board, the Chairman, the
President, or the Secretary, and stated in the notice of meeting. The Board may
postpone and reschedule any previously scheduled annual or special meeting of
the stockholders.
2. Annual Meeting. An annual meeting of the stockholders will be held
at such date and time as may be designated from time to time by the Board, at
which meeting the stockholders will elect by a plurality vote the Directors to
succeed those whose terms expire at such meeting and will transact such other
business as may properly be brought before the meeting in accordance with By-law
8.
3. Special Meetings. Special meetings of the stockholders may be called
only by (a) the Chairman, and (b) the Secretary within 10 calendar days after
receipt of the written request of a majority of the Whole Board. Any such
request by a majority of the Whole Board must be sent to the Chairman and the
Secretary and must state the purpose or purposes of the proposed meeting.
Special meetings of holders of the outstanding Preferred Stock, if any, may be
called in the manner and for the purposes provided in the applicable Preferred
Stock Designation or in the Certificate of Incorporation of the Corporation.
4. Notice of Meetings. Written notice of every meeting of the
stockholders, stating the place, date, and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than 10 nor more than 60 calendar days before the date
of the meeting to each stockholder of record entitled to vote at such meeting,
except as otherwise provided herein or by law. When a meeting is adjourned to
another place, date, or time, written notice need not be given of the adjourned
meeting if the place, date, and time thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the adjournment is
for more than 30 calendar days, or if after the adjournment a new record date is
fixed for the adjourned meeting, written notice of the place, date, and time of
the adjourned meeting must be given in conformity herewith. At any adjourned
meeting, any business may be transacted which properly could have been
transacted at the original meeting.
5. Inspectors. The Board may appoint one or more inspectors of election
to act as judges of the voting and to determine those entitled to vote at any
meeting of the stockholders, or any adjournment thereof, in advance of such
meeting. The Board may designate one or more persons as
<PAGE> 5
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is able to act at a meeting of stockholders, the presiding officer
of the meeting may appoint one or more substitute inspectors.
6. Quorum. Except as otherwise provided by law or in a Preferred Stock
Designation or in the Certificate of Incorporation of the Corporation, the
holders of a majority of the stock issued and outstanding, present in person or
represented by proxy and entitled to vote at such meeting, will constitute a
quorum at all meetings of the stockholders for the transaction of business
thereat. If, however, such quorum is not present or represented at any meeting
of the stockholders, the stockholders entitled to vote thereat, present in
person or represented by proxy, will have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present or represented.
7. Voting. Except as otherwise provided by law, by the Certificate of
Incorporation, or in a Preferred Stock Designation, each stockholder will be
entitled at every meeting of the stockholders to one vote for each share of
stock having voting power standing in the name of such stockholder on the books
of the Corporation on the record date for the meeting and such votes may be cast
either in person or by written proxy. Every proxy must be duly executed and
filed with the Secretary. A stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary. The vote upon any question brought before a
meeting of the stockholders may be by voice vote, unless otherwise required by
the Certificate of Incorporation or these By-laws or unless the Chairman or the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon, present in person or by proxy at such meeting, otherwise
determine. Every vote taken by written ballot will be counted by the inspectors
of election. When a quorum is present at any meeting, the affirmative vote of
the holders of a majority of the stock, present in person or represented by
proxy at the meeting and entitled to vote on the subject matter that has
actually been voted, will be the act of the stockholders, except in the election
of Directors or as otherwise provided in these By-laws, the Certificate of
Incorporation, a Preferred Stock Designation, or by law.
8. Order of Business. (a) The Chairman, or such other officer of the
Corporation designated by a majority of the Whole Board, will call meetings of
the stockholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board prior to the meeting, the presiding officer of
the meeting of the stockholders will also determine the order of business and
have the authority in his or her sole discretion to regulate the conduct of any
such meeting, including without limitation by imposing restrictions on the
persons (other than
2
<PAGE> 6
stockholders of the Corporation or their duly appointed proxies) who may attend
any such stockholders' meeting, by ascertaining whether any stockholder or his
proxy may be excluded from any meeting of the stockholders based upon any
determination by the presiding officer, in his sole discretion, that any such
person has unduly disrupted or is likely to disrupt the proceedings thereat, and
by determining the circumstances in which any person may make a statement or ask
questions at any meeting of the stockholders.
(b) At an annual meeting of the stockholders, only such business will
be conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board in accordance with By-law 4, (ii) otherwise properly brought before
the meeting by the presiding officer or by or at the direction of a majority of
the Whole Board, or (iii) otherwise properly requested to be brought before the
meeting by a stockholder of the Corporation in accordance with By-law 8(c).
(c) For business to be properly requested by a stockholder to be
brought before an annual meeting, the stockholder must (i) be a stockholder of
record of the Corporation at the time of the giving of the notice for such
annual meeting provided for in these By-laws, (ii) be entitled to vote at such
meeting, and (iii) have given timely notice thereof in writing to the Secretary.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation not less-than 60 calendar
days prior to the annual meeting; provided, however, that in the event public
announcement of the date of the annual meeting is not made at least 75 calendar
days prior to the date of the annual meeting, notice by the stockholder, to be
timely, must be so received not later than the close of business on the 10th
calendar day following the day on which public announcement is first made of the
date of the annual meeting. A stockholder's notice to the Secretary must set
forth as to each matter the stockholder proposes to bring before the annual
meeting (A) a description in reasonable detail of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (B) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made, (C) the class
and number of shares of the Corporation that are owned beneficially and of
record by the stockholder proposing such business and by the beneficial owner,
if any, on whose behalf the proposal is made, and (D) any material interest of
such stockholder proposing such business and the beneficial owner, if any, on
whose behalf the proposal is made in such business. Notwithstanding the
foregoing provisions of this By-law 8(c), a stockholder must also comply with
all applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder
3
<PAGE> 7
with respect to the matters set forth in this By-law 8(c). For purposes of this
By-law 8(c) and By-law 13, "public announcement" means disclosure in a press
release reported by the Dow Jones News Service, Associated Press, or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to sections 13, 14, or 15(d) of
the Securities Exchange Act of 1934, as amended, or furnished to stockholders.
Nothing in this By-law 8(c) will be deemed to affect any rights of stockholders
to request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934, as amended.
(d) At a special meeting of stockholders, only such business may be
conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the Chairman or a majority of the Whole Board in accordance with By-law 4, or
(ii) otherwise properly brought before the meeting by the presiding officer or
by or at the direction of a majority of the Whole Board.
(e) The determination of whether any business sought to be brought
before any annual or special meeting of the stockholders is properly brought
before such meeting in accordance with this By-law 8 will be made by the
presiding officer of such meeting. If the presiding officer determines that any
business is not properly brought before such meeting, he or she will so declare
to the meeting and any such business shall not be conducted or considered.
DIRECTORS
9. Function. The business and affairs of the Corporation will be
managed under the direction of its Board.
10. Number, Election, and Terms. (a) Subject to the rights, if any, of
any series of Preferred Stock to elect additional Directors and to the minimum
and maximum number of authorized Directors provided in the Certificate of
Incorporation, the authorized number of Directors may be determined from time to
time only by a vote of a majority of the Whole Board. The Directors, other than
those who may be elected by the holders of any series of the Preferred Stock,
will be classified with respect to the time for which they severally hold office
in accordance with the Certificate of Incorporation.
(b) Notwithstanding anything contained in the Certificate of
Incorporation or these By-laws to the contrary, the term of any Director who is
also an officer of the Corporation will terminate automatically, without any
further action on the part of the Board or such Director, upon the termination
for any
4
<PAGE> 8
reason of such Director in his or her capacity as an officer of the Corporation.
Notwithstanding anything contained in the Certificate of Incorporation or these
By-laws to thecontrary, the affirmative vote of at least 75% of the Directors
then in office will be required to amend, repeal, or adopt any provision
inconsistent with this By-law 10(b).
(c) No person or current director who attains the age of 70 shall stand
for either election or reelection as a director.
11. Vacancies and Newly Created Directorships. Subject to the rights,
if any, of the holders of any series of Preferred Stock to elect additional
Directors, newly created directorships resulting from any increase in the number
of Directors And any vacancies on the Board resulting from death, resignation,
disqualification, removal, or other cause will be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board, or by a sole remaining Director. Any
Director elected in accordance with the preceding sentence will hold office for
the remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until such Director's
successor is elected and qualified. No decrease in the number of Directors
constituting the Board will shorten the term of an incumbent Director.
12. Removal. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional Directors, any Director may be
removed from office by the stockholders only for cause and only in the manner
provided in the Certificate of Incorporation.
13. Nominations of Directors: Election. (a) Subject to the rights, if
any, of the holders of any series of Preferred Stock to elect additional
Directors, only persons who are nominated in accordance with the following
procedures will be eligible for election at a meeting of stockholders as
Directors of the Corporation.
(b) Nominations of persons for election as Directors of the Corporation
may be made only at an annual meeting of stockholders (i) by or at the direction
of the Board or (ii) by any stockholder who is a stockholder of record at the
time of giving of notice provided for in this By-law 13, who is entitled to vote
for the election of Directors at such meeting, and who complies with the
procedures set forth in this By-law 13. All nominations by stockholders must be
made pursuant to timely notice in proper written form to the Secretary.
(c) To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
60 calendar days prior to the annual meeting of stockholders; provided, however,
that in the event that public announcement of the date of the annual meeting
5
<PAGE> 9
is not made at least 75 calendar days prior to the date of the annual meeting,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th calendar day following the day on which public
announcement is first made of the date of the annual meeting. To be in proper
written form, such stockholder's notice must set forth or include (i) the name
and address, as they appear on the Corporation's books, of the stockholder
giving the notice and of the beneficial owner, if any, on whose behalf the
nomination is made; (ii) a representation that the stockholder giving the notice
is a holder of record of stock of the Corporation entitled to vote at such
annual meeting and intends to appear in person or by proxy at the annual meeting
to nominate the person or persons specified in the notice; (iii) the class and
number of shares of stock of the Corporation owned beneficially and of record by
the stockholder giving the notice and by the beneficial owner, if any, on whose
behalf the nomination is made; (iv) a description of all arrangements or
understandings between or among any of (A) the stockholder giving the notice,
(B) the beneficial owner on whose behalf the notice is given, (C) each nominee,
and (D) any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder giving the
notice; (v) such other information regarding each nominee proposed by the
stockholder giving the notice as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board; and (vi) the signed consent of each nominee to serve as a director of the
Corporation if so elected. At the request of the Board, any person nominated by
the Board for election as a Director must furnish to the Secretary that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. The presiding officer of any annual meeting will,
if the facts warrant, determine that a nomination was not made in accordance
with the procedures prescribed by this By-law 13, and if he or she should so
determine, he or she will so declare to the meeting and the defective nomination
will be disregarded. Notwithstanding the foregoing provisions of this By-law 13,
a stockholder must also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this By-law 13.
14. Resignation. Any Director may resign at any time by giving written
notice of his resignation to the Chairman or the Secretary. Any resignation will
be effective upon actual receipt by any such person or, if later, as of the date
and time specified in such written notice.
15. Regular Meetings. Regular meetings of the Board may be held
immediately after the annual meeting of the stockholders and at such other time
and place either within or without the State
6
<PAGE> 10
of Delaware as may from time to time be determined by the Board. Notice of
regular meetings of the Board need not be given.
16. Special Meetings. Special meetings of the Board may be called by
the Chairman or the President on one day's notice to each Director by whom such
notice is not waived, given either personally or by mail, telephone, telegram,
telex, facsimile, or similar medium of communication, and will be called by the
Chairman or the President in like manner and on like notice on the written
request of four or more Directors. Special meetings of the Board may be held at
such time and place either within or without the State of Delaware as is
determined by the Board or specified in the notice of any such meeting.
17. Quorum. At all meetings of the Board, a majority of the total
number of Directors then in office will constitute a quorum for the transaction
of business. Except for the designation of committees as hereinafter provided
and except for actions required by these By-laws or the Certificate of
Incorporation to be taken by a majority of the Whole Board, the act of a
majority of the Directors present at any meeting at which there is a quorum will
be the act of the Board. If a quorum is not present at any meeting of the Board,
the Directors present thereat may adjourn the meeting from time to time to
another place, time, or date, without notice other than announcement at the
meeting, until a quorum is present.
18. Participation in Meetings by Telephone Conference. Members of the
Board or any committee designated by the Board may participate in a meeting of
the Board or any such committee, as the case may be, by means of telephone
conference or similar means by which all persons participating in the meeting
can hear each other, and such participation in a meeting will constitute
presence in person at the meeting.
19. Committees. (a) The Board, by resolution passed by a majority of
the Whole Board, may designate one or more committees, each such committee to
consist of one or more Directors and each to have such lawfully delegable powers
and duties as the Board may confer.
(b) Each committee of the Board will serve at the pleasure of the Board
or as may be specified in any resolution from time to time adopted by the Board.
The Board may designate one or more Directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
such committee. In lieu of such action by the Board, in the absence or
disqualification of any member of a committee of the Board, the members thereof
present at any such meeting of such committee and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another member
of the Board to act at the meeting in the place of any such absent or
disqualified member.
7
<PAGE> 11
(c) Except as otherwise provided in these By-laws or by law, any
committee of the Board, to the extent provided in the resolution of the Board,
will have and may exercise all the powers and authority of the Board in the
direction of the management of the business and affairs of the Corporation. Any
such committee designated by the Board will have such name as may be determined
from time to time by resolution adopted by the Board. Unless otherwise
prescribed by the Board, a majority of the members of any committee of the Board
will constitute a quorum for the transaction of business, and the act of a
majority of the members present at a meeting at which there is a quorum will be
the act of such committee. Each committee of the Board may prescribe its own
rules for calling and holding meetings and its method of procedure, subject to
any rules prescribed by the Board, and will keep a written record of all actions
taken by it.
20. Compensation. The Board may establish the compensation for, and
reimbursement of the expenses of, Directors for membership on the Board and on
committees of the Board, attendance at meetings of the Board or committees of
the Board, and for other services by Directors to the Corporation or any of its
majority-owned subsidiaries.
21. Rules. The Board may adopt rules and regulations for the conduct of
meetings and the oversight of the management of the affairs of the Corporation.
NOTICES
22. Generally. Except as otherwise provided by law, these By-laws, or
the Certificate of Incorporation, whenever by law or under the provisions of the
Certificate of Incorporation or these By-laws notice is required to be given to
any Director or stockholder, it will not be construed to require personal
notice, but such notice may be given in writing, by mail, addressed to such
Director or stockholder, at the address of such Director or stockholder as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice will be deemed to be given at the time when the same is deposited in
the United States mail. Notice to Directors may also be given by telephone,
telegram, telex, facsimile, or similar medium of communication or as otherwise
may be permitted by these By-laws.
23. Waivers. Whenever any notice is required to be given by law or
under the provisions of the Certificate of Incorporation or these By-laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time of the event for which notice is to be
given, will be deemed equivalent to such notice. Attendance of a person at a
meeting will constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the
8
<PAGE> 12
transaction of any business because the meeting is not lawfully called or
convened.
OFFICERS
24. Generally. The officers of the Corporation will be elected by the
Board and will consist of a Chairman, a President (who, unless the Board
specifies otherwise, will also be the Chief Executive Officer), a Secretary, and
a Treasurer. The Board of Directors may also choose any or all of the following:
one or more Vice Chairmen, one or more Assistants to the Chairman, one or more
Vice Presidents (who may be given particular designations with respect to
authority, function, or seniority), and such other officers as the Board may
from time to time determine. Notwithstanding the foregoing, by specific action
the Board may authorize the Chairman to appoint any person to any office other
than Chairman, President, Secretary, or Treasurer. Any number of offices may be
held by the same person. Any of the offices may be left vacant from time to time
as the Board may determine. In the case of the absence or disability of any
officer of the Corporation or for any other reason deemed sufficient by a
majority of the Board, the Board may delegate the absent or disabled officer's
powers or duties to any other officer or to any Director.
25. Compensation. The compensation of all officers and agents of the
Corporation who are also Directors of the Corporation will be fixed by the Board
or by a committee of the Board. The Board may fix, or delegate the power to fix,
the compensation of other officers and agents of the Corporation to an officer
of the Corporation.
26. Succession. The officers of the Corporation will hold office until
their successors are elected and qualified. Any officer may be removed at any
time by the affirmative vote of a majority of the Whole Board. Any vacancy
occurring in any office of the Corporation may be filled by the Board or by the
Chairman as provided in By-law 24.
27. Authority and Duties. Each of the officers of the Corporation will
have such authority and will perform such duties as are customarily incident to
their respective offices or as may be specified from time to time by the Board.
STOCK
28. Certificates. Certificates representing shares of stock of the
Corporation will be in such form as is determined by the Board, subject to
applicable legal requirements. Each such certificate will be numbered and its
issuance recorded in the books of the Corporation, and such certificate will
exhibit the holder's name and the number of shares and will be signed by, or
9
<PAGE> 13
in the name of, the Corporation by the Chairman or the President and the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
and will also be signed by, or bear the facsimile signature of, a duly
authorized officer or agent of any properly designated transfer agent of the
Corporation. Any or all of the signatures and the seal of the Corporation, if
any, upon such certificates may be facsimiles, engraved, or printed. Such
certificates may be issued and delivered notwithstanding that the person whose
facsimile signature appears thereon may have ceased to be such officer at the
time the certificates are issued and delivered.
29. Classes of Stock. The designations, preferences, and relative
participating, optional, or other special rights of the various classes of stock
or series thereof, and the qualifications, limitations, or restrictions thereof,
will be set forth in full or summarized on the face or back of the certificates
which the Corporation issues to represent its stock or, in lieu thereof, such
certificates will set forth the officer of the Corporation from which the
holders of certificates may obtain a copy of such information.
30. Transfers and Restrictions on Transfers. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, it will be the duty of the Corporation to issue, or to
cause its transfer agent to issue, a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
31. Lost, Stolen, or Destroyed Certificates. The Secretary may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact, satisfactory
to the Secretary, by the person claiming the certificate of stock to be lost,
stolen, or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the Secretary may require the owners of such lost,
stolen, or destroyed certificate or certificates to give the Corporation a bond
in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of the new certificate.
32. Record Dates. (a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix a record date, which will not be more
than 60 nor less than 10 calendar days before the date of such meeting. If no
record date is fixed by the Board, the record date for determining stockholders
entitled to notice of or to vote at a
10
<PAGE> 14
meeting of stockholders will be at the close of business on the calendar day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the calendar day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of the stockholders will apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion, or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date will not be
more than 60 calendar days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose will be at the
close of business on the calendar day on which the Board adopts the resolution
relating thereto.
(c) The Corporation will be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes, and
will not be bound to recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the Corporation has
notice thereof, except as expressly provided by applicable law.
INDEMNIFICATION
33. Damages and Expenses. (a) Without limiting the generality or effect
of Article Ninth of the Certificate of Incorporation, the Corporation will to
the fullest extent permitted by applicable law as then in effect indemnify any
person (an "Indemnitee") who is or was involved in any manner (including without
limitation as a party or a witness) or is threatened to be made so involved in
any threatened, pending, or completed investigation, claim, action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (including
without limitation any action, suit, or proceeding by or in the right of the
Corporation to procure a judgment in its favor) (a "Proceeding) by reason of the
fact that such person is or was or had agreed to become a Director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Board or an officer of the Corporation as a director, officer, employee, or
agent of another Corporation, partnership, joint venture, trust, or other
enterprise, whether for profit or not for profit, or anything done or not by
such person in any such capacity, against all expenses (including attorneys,
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding. Such indemnification
will be a contract right and will include the right to receive payment in
advance of any
11
<PAGE> 15
expenses incurred by an Indemnitee in connection with such Proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized by this By-law 33 or otherwise.
(b) The right of indemnification provided in this By-law 33 will not be
exclusive of any other rights to which any person seeking indemnification may
otherwise be entitled, and will be applicable to Proceedings commenced or
continuing after the adoption of this By-law 33, whether arising from acts or
omissions occurring before or after such adoption.
(c) The indemnification and advancement of expenses provided by, or
granted pursuant to, this By-law 33 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
34. Insurance, Contracts, and Funding. The Corporation may purchase and
maintain insurance to protect itself and any Indemnitee against any expenses,
judgments, fines, and amounts paid in settlement or incurred by any Indemnitee
in connection with any Proceeding referred to in By-law 33 or otherwise, to the
fullest extent permitted by applicable law as then in effect. The Corporation
may enter into contracts with any person entitled to indemnification under
By-law 33 or otherwise, and may create a trust fund, grant a security interest,
or use other means (including without limitation a letter of credit) to ensure
the payment of such amounts as may be necessary to effect indemnification as
provided in By-law 33.
GENERAL
35. Fiscal Year. The fiscal year of the Corporation will end on
December 31 of each year or such other date as may be fixed from time to time by
the Board.
36. Seal. The Board may adopt a Corporation seal and use the same by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
37. Reliance upon Books, Reports, and Records. Each Director, each
member of a committee designated by the Board, and each officer of the
Corporation will, in the performance of his or her duties, be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports, or statements presented to the Corporation by
any of the Corporation's officers or employees, or committees of the Board, or
by any other person or entity as to matters the Director, committee member, or
officer believes are within such
12
<PAGE> 16
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
38. Time Periods. In applying any provision of these By-laws that
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days will be used unless otherwise specified, the
day of the doing of the act will be excluded, and the day of the event will be
included.
39. Amendments. Except as otherwise provided by law or by the
Certificate of Incorporation or these By-laws, these By-laws or any of them may
be amended in any respect or repealed at any time, either (a) at any meeting of
stockholders, provided that any amendment or supplement proposed to be acted
upon at any such meeting has been described or referred to in the notice of such
meeting, or (b) at any meeting of the Board, provided that no amendment adopted
by the Board may vary or conflict with any amendment adopted by the
stockholders.
40. Certain Defined Terms. Capitalized terms used herein that are not
otherwise defined are used herein as defined in the Certificate of Incorporation
of the Corporation.
13
<PAGE> 1
Exhibit 11
WOLVERINE TUBE, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three-month period ended: Nine-month period ended:
------------------------- ------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before extraordinary
item ................................. $ 7,289 $ 9,580 $ 23,189 $ 30,277
Extraordinary item, net of
tax .................................. -- -- (4,738) --
Preferred dividends .................... (70) (70) (210) (210)
-------- -------- -------- --------
Net income applicable to
Common shares ........................ $ 7,219 $ 9,510 $ 18,421 $ 30,067
======== ======== ======== ========
Weighted average common
shares outstanding ................... 14,057 13,824 14,018 13,744
Common equivalent shares
outstanding .......................... 183 391 209 447
-------- -------- -------- --------
Weighted average common
and common equivalent shares
outstanding .......................... 14,240 14,215 14,227 14,191
======== ======== ======== ========
Earnings Per Share:
Income before extraordinary
item ................................. $ .51 $ .67 $ 1.61 $ 2.12
Extraordinary item ..................... -- -- (.33) --
-------- -------- --------
Net income per common
share ................................ $ .51 $ .67 $ 1.28 $ 2.12
======== ======== ======== ========
</TABLE>
- --------------------
(1) Represents shares issuable upon the exercise of stock options based upon the
treasury stock method using the average market price per share. 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.
19
<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 NINE
MONTH PERIOD ENDED SEPTEMBER 27, 1997, AND THE CONDENSED CONSOLIDATED BALANCE
SHEET OF WOLVERINE TUBE, INC. AT SEPTEMBER 27, 1997 AND AS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-27-1997
<CASH> 8,802
<SECURITIES> 0
<RECEIVABLES> 88,242<F1>
<ALLOWANCES> 0
<INVENTORY> 72,168
<CURRENT-ASSETS> 170,291
<PP&E> 153,458<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 417,012
<CURRENT-LIABILITIES> 51,686
<BONDS> 94,347
0
2,000
<COMMON> 141
<OTHER-SE> 227,545
<TOTAL-LIABILITY-AND-EQUITY> 417,012
<SALES> 511,038
<TOTAL-REVENUES> 511,038
<CGS> 447,612
<TOTAL-COSTS> 447,612
<OTHER-EXPENSES> 21,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,984
<INCOME-PRETAX> 36,419
<INCOME-TAX> 13,230
<INCOME-CONTINUING> 23,189
<DISCONTINUED> 0
<EXTRAORDINARY> 4,738
<CHANGES> 0
<NET-INCOME> 18,451
<EPS-PRIMARY> $1.28
<EPS-DILUTED> $1.28
<FN>
<F1>THE VALUES FOR THE TAGS RECEIVABLES AND PP&E ARE SHOWN NET OF THEIR RESPECTIVE
ALLOWANCE ACCOUNTS.
</FN>
</TABLE>
