WHX Corporation Reports Financial Results for the Third Quarter of 2010

WHITE PLAINS, N.Y., Nov. 9, 2010 /PRNewswire-FirstCall/ -- WHX Corporation (Nasdaq (CM): WXCO); ("WHX" or the "Company") today reported financial results for the third quarter ended September 30, 2010.

The Company reported net income of $6.0 million on net sales of $173.8 million for the three months ended September 30, 2010, compared with net income of $1.0 million on net sales of $142.3 million for the three months ended September 30, 2009. Basic and diluted net income per common share was $0.49 for the three months ended September 30, 2010, compared with net income of $0.08 per share in the same period of 2009.

For the nine months ended September 30, 2010, WHX reported net income of $9.6 million on net sales of $499.9 million, compared with a net loss of $14.5 million on net sales of $406.8 million for the nine months ended September 30, 2009. Basic and diluted net income per common share was $0.79 for the nine months ended September 30, 2010, compared with a net loss of $1.19 per share in the same period of 2009.

"The increase in demand as compared to 2009 for WHX's products and services that we reported in the first half of 2010 continued in the third quarter, resulting in 22.1% quarter-over-quarter sales growth, and 22.9% sales growth on a year-to-date basis versus 2009," said Glen Kassan, Vice Chairman of the Board and Chief Executive Officer of WHX. "The increased sales volume across all operating business segments was driven by the improvement in the world-wide economy, with increased demand from the electrical, replacement roofing, petrochemical and commercial construction markets."

Mr. Kassan added: "The Company also reported higher gross margin and reduced selling, general and administrative expenses as a percentage of sales for the three and nine months ended September 30, 2010 versus the same periods in 2009, principally generating the $6.5 million and $28.2 million improvement in income from continuing operations for the three and nine months ended September 30, 2010 over 2009. We believe the improvement in gross margin and reductions in expenses as a percentage of sales were materially driven by the continuing application of the WHX Business System and other cost improvement initiatives."

"We also refinanced in October substantially all of WHX's indebtedness principally with our existing lenders or their affiliates.  This refinancing will lower our ongoing borrowing costs compared to our prior financing arrangements and extend the maturity date of almost all of our indebtedness," Mr. Kassan stated.

Other Financial Highlights:

Net income from continuing operations in the third quarter of 2010 was $6.2 million, compared to net income from continuing operations of $1.4 million in the third quarter of 2009. The increase of $4.8 million in the net income from continuing operations was principally driven by the $31.5 million increase in sales, an improvement in gross margin from 25.7% to 27.1%, and a $2.4 million lower non-cash pension expense, partially offset by a $2.8 million lower gain on proceeds from insurance claims.

The Company generated Adjusted EBITDA of $21.0 million for the third quarter of 2010, as compared to $15.0 million for the same period in 2009, an increase of $6.0 million.  See "Note Regarding Use of Non-GAAP Financial Measurements" below for the definition of Adjusted EBITDA.

Gross profit in the third quarter of 2010 increased to $47.0 million as compared to $36.6 million for the same period of 2009. Gross profit margin also improved to 27.1% as compared to 25.7% during the same period of 2009, with improvement in all business segments.  The improvement in gross profit margin was driven by higher production volume, more profitable product mix, and enhanced manufacturing efficiencies.  

Selling, general and administrative expenses of $30.4 million for the third quarter of 2010 were $5.0 million higher than the third quarter of 2009, reflecting higher variable costs, plus the reinstatement of certain employee compensation costs.  The 2009 quarter reflected the suspension of these programs.  SG&A expenses as a percent of net sales were lower in the third quarter of 2010, at 17.5% of net sales, as compared to 17.8% of net sales for the same period of 2009.  

Non-cash pension expense of $1.1 million was recorded in the third quarter of 2010, compared to $3.5 million of non-cash pension expense in the third quarter of 2009. The non-cash pension expense in both years primarily represents actuarial loss amortization.  

During the third quarter of 2009, WHX evaluated the goodwill of its Silicone Technology reporting unit in light of deterioration of its profitability and forecasted future operating income.  As a result of the evaluation, a non-cash impairment charge of $1.1 million was recognized in the third quarter of 2009 to write down the goodwill.

During the third quarter of 2010, the Company recognized income of $0.2 million from the proceeds of an insurance claim relating to a fire at one of its facilities in Mexico.  During the three months ended September 30, 2009, the Company recorded a gain from insurance proceeds of $3.0 million.  The Company reached a settlement agreement with an insurer for reimbursement of certain remediation and legal expenses for five sites where one or more of our subsidiaries had incurred environmental remediation expenses.  

Note Regarding Presentation of Non-GAAP Financial Measures:

The financial data contained in this press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission ("SEC"), including "Adjusted EBITDA".  The Company is presenting Adjusted EBITDA because it believes that it provides useful information to investors about WHX, its business and its financial condition. The Company defines Adjusted EBITDA as net income or loss from continuing operations before the effects of realized and unrealized losses on derivatives, interest expense, taxes, depreciation and amortization, LIFO liquidation gain, and pension expense or credit, and excludes certain non-recurring and non-cash items. The Company believes Adjusted EBITDA is useful to investors because it is one of the measures used by the Company's Board of Directors and management to evaluate its business, including in internal management reporting, budgeting and forecasting processes, in comparing operating results across the business, as an internal profitability measure, as a component in evaluating the ability and the desirability of making capital expenditures and significant acquisitions, and as an element in determining executive compensation. Further, the Company believes that Adjusted EBITDA is a measure of leverage capacity and the Company's ability to service its debt.

However, Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America ("GAAP"), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income (loss) or cash flows from operating, investing, or financing activities. Because Adjusted EBITDA is calculated before recurring cash charges including realized and unrealized losses on derivatives, interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. There are a number of material limitations to the use of Adjusted EBITDA as an analytical tool, including the following:

• Adjusted EBITDA does not reflect the Company's net realized and unrealized losses and gains on derivatives and any LIFO liquidations of its precious metal inventory;
• Adjusted EBITDA does not reflect the Company's interest expense;
• Adjusted EBITDA does not reflect the Company's tax expense or the cash requirements to pay its taxes;
• Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacement;
• Adjusted EBITDA does not include pension expense; and
• Adjusted EBITDA does not include discontinued operations.

The Company compensates for these limitations by relying primarily on its GAAP financial measures and by using Adjusted EBITDA only as supplemental information. The Company believes that consideration of Adjusted EBITDA, together with a careful review of its GAAP financial measures, is the most informed method of analyzing WHX.

The Company reconciles Adjusted EBITDA to net income from continuing operations, and that reconciliation is set forth below.  Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

Our Company

WHX Corporation is a diversified global industrial company delivering value through the WHX Business System which drives innovation, operating excellence and superior customer service. WHX and its affiliated companies employ over 1,700 people at 30 locations in eight countries.

Our companies are organized into six businesses: Precious Metals, Tubing, Engineered Materials, Arlon Electronic Materials, Arlon Coated Materials and Kasco.

We sell our products and services through direct sales forces, distributors and manufacturer's representatives. We serve a diverse customer base, including the construction, electronics, telecommunications, home appliance, transportation, utility, medical, semiconductor, and aerospace and aviation markets. Other markets served include the signage industry and meat room products and maintenance services for the food industry.

We are based in White Plains, New York and our common stock is listed on the NASDAQ Capital Market under the symbol WXCO. 

Forward-Looking Statements

This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that reflect WHX's current expectations and projections about its future results, performance, prospects and opportunities.  WHX has tried to identify these forward-looking statements by using words such as "may," "should," "expect," "hope," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions.  These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties and other factors, that could cause its actual results, performance, prospects or opportunities in 2010 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements.  These factors include, without limitation, WHX's need for additional financing and the terms and conditions of any financing that is consummated, customers' acceptance of its new and existing products, the risk that the Company will not be able to compete successfully, and the possible volatility of the Company's stock price and the potential fluctuation in its operating results.  Although WHX believes that the expectations reflected in these forward-looking statements are reasonable and achievable, such statements involve significant risks and uncertainties and no assurance can be given that the actual results will be consistent with these forward-looking statements.  Investors should read carefully the factors described in the "Risk Factors" section of the Company's filings with the SEC, including the Company's Form 10-K for the year ended December 31, 2009 for information regarding risk factors that could affect the Company's results.  Except as otherwise required by Federal securities laws, WHX undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

SOURCE WHX Corporation