- Shipments of 232,000 tons in May and June
- Total revenues of $159.9 million, with revenues from product sales of $156.6 million, or $674 per ton
- EBITDA of $11.9 million, or $51 per ton
- Operating income of $9.0 million, or $39 per ton
- Net income of $4.3 million, or $19 per ton
- Diluted earnings per share of $.43
- Implementation of new industry pattern work systems, reducing job classes from 34 to six and significantly reducing headcount
Patrick G. Tatom, president and chief executive officer, said: “We are off to a great start as the new WCI Steel. We are pleased with our performance to-date and appreciate the efforts of our employees. Good demand in our key markets, strong shipments and generally robust prices contributed to our solid performance for the first two months of the new company.” “The operational efficiency and cost reduction made possible by the new work systems is the centerpiece of the company’s new collective bargaining agreement with the United Steelworkers. Achievement of these efficiencies requires substantial training of the workforce, and the company is working its way through that process,” Tatom said. At the end of July, 209 hourly employees had elected to leave the company through the Transitional Assistance Program (TAP). This represents more than a 17 percent decrease in the number of hourly employees. Another 35 employees are projected to leave before the end of the year through the TAP process; however, they are currently being retained for training and operational support. Cynthia B. Bezik, chief financial officer, added: “Our liquidity is strong. At the end of June, we had $7.8 million of cash on hand and only $15.5 million borrowed under the $150 million revolving credit facility. We anticipate that our borrowing under the credit facility will increase over the balance of the year due to our planned capital spending program and the normal seasonal build-up of raw materials for the winter.” Capital Expenditures As previously announced, WCI Steel is investing $66 million in two major capital projects:
- A $36.7 million new walking beam slab reheat furnace at the hot strip mill, which is expected to be completed in January, 2008. The new walking beam furnace will replace three pusher-style furnaces. One of the three pusher-style furnaces will be decommissioned in November to facilitate construction of the new walking beam furnace. The new furnace is a key step in the strategic plan to grow WCI Steel’s custom product business, increase coil size and enhance the operating cost structure by improving energy efficiency, increasing material yields and lowering maintenance costs.
- A $29.3 million new baghouse system at the basic oxygen furnace to reduce emissions and meet new federal air quality standards. The new baghouse is set to be operational in April, 2007.
During the two months ended June 30, WCI Steel spent $4.1 million in capital, primarily related to these two projects. Capital spending in the second half of the year is currently forecasted at about $30 million.“We expect to invest more than $125 million in the 2006 to 2009 time frame in capital to improve the operating efficiencies and
capabilities of our facilities,” Tatom said.
Outlook
“We are focused on continuous improvement within our operations while targeting profitable growth areas that capitalize on our core competencies in customer service, technical service and providing custom products serving niche markets,” Tatom noted. He added that the appointment of Thomas J. Gentile on May 1 to the newly created position of Vice President – Business Development signaled the company’s focus on building its strategic position for the future. WCI Steel currently plans to ship approximately 320,000 tons in the quarter ending Sept. 30, 2006 and about 310,000 tons in the final quarter of the year. Combined with the 232,000 tons shipped in the May to June period, and the 456,000 tons shipped by Old WCI in the January through April time period, calendar year shipments are anticipated to total 1,318,000 tons. Projected shipments of 630,000 tons in the second half of the calendar year are below the combined 688,000 tons shipped in the first half of the calendar year by WCI Steel and Old WCI. This reflects seasonal factors, inventory levels and scheduled production outages. Second half results are forecasted to benefit from continued favorable market conditions and pricing, along with lower employment levels. WCI Steel expects that market positives will be partially offset by operational inefficiencies due to workforce retraining and disruptions associated with the capital program. Energy costs also remain a concern. As a result, it is currently expected that EBITDA per ton shipped for the second half will range between $50 to $60 per ton as compared to the $51 per ton achieved in the May to June period.WCI’s preliminary estimate of steel shipments for 2007 is 1,250,000 tons, slightly below the projected 2006 calendar year level
due to production outages related to the capital program.
Background Information
WCI Steel, Inc., a Delaware corporation, was formed in March, 2006 and had no assets or liabilities until May 1. Under a plan of reorganization for WCI Steel, Inc., an Ohio corporation (Old WCI), confirmed by the US Bankruptcy Court on March 30 and effective on May 1, WCI Steel, the newly formed company, acquired substantially all the assets of Old WCI. On May 1, WCI Steel issued $100 million 2016 senior secured notes, received $50 million in cash for the issuance of 5.0 million preferred shares and distributed approximately 19,000 shares of common stock. Under the plan of reorganization, WCI Steel is obligated to issue 4.0 million shares of common stock to the creditors of Old WCI as bankruptcy claims are resolved. As of June 30, WCI Steel had distributed 3.5 million shares of common stock and expects to distribute the remainder by year-end. The 5.0 million shares of preferred stock have a 10 percent “payment-in-kind” dividend and convert into common stock at a 1.2 ratio no later than May 1, 2008. Assuming conversion of the 5.0 million shares of preferred stock as of June 30, 2006 and the 4.0 million shares of common stock, WCI Steel has approximately 10.1 million common shares outstanding on a fully diluted basis.Additional Financial Information
Click here to view the accompanying Second Quarter 2006 Financial Statements. Under the Indenture for the $100 million of senior secured notes, WCI Steel plans to exchange the notes with new notes that will be registered with the SEC in the second quarter of 2007 and, at that time, the company expects to begin to file periodic financial reports with the SEC.
General InformationWCI Steel is a niche-oriented integrated producer of value-added, custom steel products, with an emphasis on customer and technical service. WCI Steel focuses on smaller orders of a wide range of custom flat-rolled steel products, including high carbon, alloy, ultra high strength, and heavy-gauge galvanized steel and on developing closer, more responsive relationships with customers. WCI Steel currently produces 185 grades of flat-rolled custom and commodity steel products at its Warren, Ohio facility. Major customers are steel converters, processors, service centers, construction product companies, and to a lesser extent, automobile manufacturers. Forward-Looking Statements Forward-looking statements in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "expect," "anticipate," "intend," "believe," "foresee" and similar expressions are intended to identify such forward-looking statements; however, this press release also contains other forward-looking statements. WCI cautions that there are various important factors that could cause actual events to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated events will occur. Among such factors are: general economic and business conditions; demand for WCIÕs products; changes in industry capacity and levels of imports of steel or steel products; effectiveness of the remedies under Section 201 of the Trade Act of 1974; the ability to maintain sufficient liquidity during the restructuring process; the status of any on-going restructuring discussions or negotiations; industry trends, including product pricing, competition; currency fluctuations; the loss of any significant customers; availability of qualified personnel; major equipment failures; changes in, or the failure or inability to comply with, government regulation, including, without limitation, environmental regulations; the outcome of legal matters and the risk factors detailed from time to time in WCI's periodic reports filed with the Securities and Exchange Commission. By making these forward-looking statements, WCI does not undertake to update them in any manner except as may be required by the Securities and Exchange Commission under federal laws. Important Limitations on Using News Releases
By their very nature, news releases are dated and time-sensitive, reflecting information that is current, or expectations that are believed to be reasonable, at the time of issuance. Reading an out-of-date news release can, therefore, be misleading and should never be relied upon as a current statement of fact or expectation.
WCI Steel, Inc. undertakes no responsibility to delete, edit, or update information in old news releases that may no longer reflect current facts or expectations.