WHEELING, W.Va., Aug. 9 /PRNewswire-FirstCall/ -- Wheeling Pittsburgh
Corporation today filed its second-quarter financial results with the U.S.
Securities and Exchange Commission (SEC). In this information, we reported
a second-quarter EBITDA loss of $26 million, which was consistent with our
revised guidance provided on June 29th.
In connection with the Esmark Incorporated merger, we also submitted a
revised S-4 filing with the SEC. This document needs to be approved by the
SEC before the vote on the proposed merger with Esmark can take place.
The following comments are attributed to James P. Bouchard, Chairman and Chief
Executive Officer of Wheeling Pittsburgh Corporation
In this filing, we report financial performance and cash utilization in
the year to date. This performance arises, in large part, out of the
reduced margin between selling prices for our products (which were lower
than expected) and scrap costs which have been rising significantly
throughout the year. As a spot player, selling price and scrap cost changes
impact us more quickly and dramatically than other companies which have
more contracts in these areas.
We were also adversely impacted by the unplanned outages in our
Electric Arc Furnace during the month of April, which we also disclosed in
or first- quarter earnings release and conference call.
The combination of these historic losses and our current outlook lead
us to believe that we will likely not be in compliance with the fixed
charge coverage ratio under our Term Loan Agreement when it is calculated
in April, 2008.
This is a projected event of default which, as has occurred once
before, has caused us to reclassify our liabilities to our lenders as
current. It is important to note that we are not in default. We have not
missed any payments to any of our lenders. The opposite is the case. When
we raised money in March of this year, we used $37.5 million of it to
prepay our Term Loan Agreement through June 2008. We have obtained waivers
from such financial covenants in the past and, if and when these covenants
become relevant, we expect to do so again.
Our independent auditor, PriceWaterhouseCoopers, has concluded that
based upon generally accepted auditing standards, they were required to
include an explanatory paragraph in their report which states that, in
their opinion, there is substantial doubt about our ability to continue as
a going concern. This conclusion was reached by them because, unlike us,
they are unable to consider the possibility of other actions which we could
take which would alleviate the situation.
First and foremost, among these possible actions is the proposed merger
with Esmark, which will infuse between $50 to $200 million of fresh equity
into the combined company. We expect to refinance our revolving credit
facility in connection with the merger, which should provide substantial
additional liquidity. The merger also brings to Wheeling Pitt the cash flow
from the Esmark companies . Post merger there is a also material
improvement of the combined company balance sheet. The merger is proceeding
as planned under all of the terms and conditions agreed to by the Boards of
Wheeling Pitt and Esmark Our SEC filing, despite its negative disclosures,
is an important step to achieving the merger.
In addition, we have negotiated a long term strategic slab relationship
with E2 Acquisition Corp to purchase large volumes of slabs from Sparrows
Point at below current market prices. These purchases would begin upon
closing of the Sparrows Point acquisition and the logistics are being
worked on at this time. Additionally, we have:
-- entered into a vendor relationship with Tube City which has brought
stability to our scrap supply situation;
-- received a proposal to refinance our bank borrowings before the merger;
and
-- put in place a $125 million "shelf" registration statement which would
enable us to raise additional debt or equity on relatively short
notice.
We also have recently been awarded a verdict in excess of $225 million
in the Massey coal supply litigation. This recovery will eventually provide
a material improvement to our balance sheet.
Our liquidity at the end of July was $39 million under our revolver
credit facility and we have $14 million in cash. These are materially
higher levels of liquidity than existed when the current management team
assumed their positions. And, as previously noted, we have prepaid our long
term bank debt through June 2008. In short, we have had and will continue
to face challenges. We are fully confident in our plan and our ability to
overcome these challenges and, pending our merger with Esmark, will
continue to implement our strategic acquisition and growth initiatives.
Forward-Looking Statements Cautionary Language
This press release contains forward-looking statements. These forward-
looking statements are based on current expectations and assumptions that
are subject to risks and uncertainties that could cause actual results to
differ materially. These risks and uncertainties include, among others,
factors relating to (i) the risk that the conditions to closing under the
purchase agreement for the Sparrows Point facility may not be satisfied,
(ii) the risk that Wheeling-Pittsburgh and E2 Acquisition Corporation may
not be able to finalize definitive terms for certain supply agreements,
including a slab supply agreement, (iii) the risk that Wheeling-Pittsburgh
and/or Esmark Incorporated will derive any benefits from its minority
ownership position in E2 Acquisition Corporation, (iv) in other risks
identified in "Item 1A -Risk Factors" section of Wheeling-Pittsburgh's
Annual Report on Form 10-K for the year ended December 31, 2006 and other
reports and filings with the Securities and Exchange Commission. In
addition, any forward-looking statements represent Wheeling-Pittsburgh's
views only as of today and should not be relied upon as representing its
views as of any subsequent dates. While Wheeling-Pittsburgh may elect to
update forward-looking statements from time to time, it specifically
disclaims any obligation to do so.
In connection with the proposed business combination of Wheeling-
Pittsburgh Corporation ("Wheeling-Pitt") and Esmark Incorporated
("Esmark"), Clayton Acquisition Corporation ("New Esmark") has filed with
the SEC a registration statement on Form S-4 and related preliminary proxy
statement with the SEC. Stockholders of Wheeling-Pitt and Esmark are urged
to read the registration statement, proxy statement/prospectus and any
other relevant documents, including the definitive proxy
statement/prospectus, filed with the SEC when they become available, as
well as any amendments or supplements to those documents, because they will
contain important information, including information on the proposed
transaction as well as participants and their interests in the Company and
Esmark. Stockholders will be able to obtain a free copy of the registration
statement and related proxy statement/prospectus, as well as other filings
containing information about Wheeling-Pitt and Esmark, at the SEC's website
at http://www.sec.gov. New Esmark, Wheeling-Pitt, Esmark and their
respective directors and executive officers may be deemed participants in
the solicitation of proxies from the stockholders of Wheeling-Pitt in
connection with the proposed business combination transaction. Information
regarding the participants in the proxy solicitation and their respective
interests may be obtained by reading the registration statement and related
preliminary proxy statement. This document shall not constitute an offer to
sell or the solicitation of an offer to buy any securities, nor shall there
be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
About Wheeling-Pittsburgh:
Wheeling-Pittsburgh is a steel company engaged in the making,
processing and fabrication of steel and steel products using both
integrated and electric arc furnace technology. The Company manufactures
and sells hot rolled, cold rolled, galvanized, pre-painted and tin mill
sheet products. The Company also produces a variety of steel products
including roll formed corrugated roofing, roof deck, floor deck, bridgeform
and other products used primarily by the construction, highway and
agricultural markets.
SOURCE Wheeling-Pittsburgh Steel Corporation
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CONTACT:
Dennis Halpin of Wheeling-Pittsburgh Steel
Corporation, +1-304-234-2421
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