CAMDEN, N.Y.--(BUSINESS WIRE)--International Wire Group Holdings, Inc. (the “Company”) (OTC Pink: ITWG) today announced results for the third quarter and for the nine months ended September 30, 2016. Operating income for the third quarter was above comparable 2015 results, however, operating income for the nine months ended September 30, 2016 was below comparable 2015 results.
“Third quarter and first nine months results reflect continued challenging demand in our largest markets served. Sales to our largest U.S. industrial and energy customers softened further in the third quarter. In the automotive sector, overall car production remains steady, but declines in commercial truck market demand coupled with increased competitive capacity supplying the Mexican automotive market has impacted volumes. Medical products sales for the quarter improved sequentially, while demand for standard aerospace products sold through distribution remained soft in the quarter. Electronics product sales were solid in the quarter and continued to be supported by a successful customer de-integration project,” said Edwin J. Flynn, Chief Executive Officer of International Wire Group Holdings, Inc.
Third Quarter Results
Net sales for the quarter ended September 30, 2016 were $129.1 million, a decrease of $25.0 million, or 16.2%, compared to $154.1 million for the same period in 2015. This decrease was partly due to a lower selling price of copper and a higher proportion of tolled copper. Tolled copper is customer-owned copper. The value of tolled copper is not included in net sales and costs of sales. Excluding the effects of lower copper prices and a lower proportion of tolled copper, net sales decreased $11.1 million, or 7.9%, versus the same period in 2015. This decrease resulted from $13.4 million of lower sales volume, partially offset by $2.3 million of higher customer pricing/mix. Total pounds of product sold in the third quarter of 2016 decreased by 9.5% compared to the third quarter of 2015.
Operating income for the three months ended September 30, 2016 was $6.1 million compared to $6.0 million for the three months ended September 30, 2015, an increase of $0.1 million, or 1.7%, from lower selling, general and administrative expenses and higher silver profits, partially offset by lower sales volume, lower LIFO/copper profits and less favorable plant utilization.
Net loss of $3.9 million for the three months ended September 30, 2016 was a decrease of $4.5 million from net income of $0.6 million for the three months ended September 30, 2015. The decrease was due primarily to a higher loss on early extinguishment of debt partially offset by a higher income tax benefit.
Net loss per basic share of $0.84 for the three months ended September 30, 2016 was a decrease of $0.97 from the 2015 period net income of $0.13 per basic share. Net loss per diluted share of $0.84 for the three months ended September 30, 2016 was a decrease of $0.96 from the 2015 period net income of $0.12 per diluted share.
Nine Months Results
Net sales for the nine months ended September 30, 2016 were $405.8 million, a decrease of $98.3 million, or 19.5%, compared to 2015 period sales of $504.1 million. This decrease was partly due to a lower selling price of copper partially offset by a lower proportion of tolled copper. Excluding the effects of lower copper prices and a lower proportion of tolled copper, net sales decreased $47.3 million, or 10.4%, versus the same period in 2015. This decrease resulted from $45.7 million of lower sales volume and $1.6 million of less favorable customer pricing/mix. Total pounds of product sold in the first nine months of 2016 decreased by 11.2% compared to the first nine months of 2015.
Operating income for the nine months ended September 30, 2016 was $22.9 million compared to $29.9 million for the same period in 2015, a decrease of $7.0 million, or 23.4%, primarily from lower sales volume, lower LIFO/copper profits and less favorable plant utilization, partially offset by higher silver profits and lower selling, general and administrative expenses.
Net loss of $1.5 million for the nine months ended September 30, 2016 was a decrease of $9.3 million from net income of $7.8 million for the nine months ended September 30, 2015. The decrease was due primarily from lower operating income and higher loss on early extinguishment of debt partially offset by a lower income tax provision.
Net loss per basic share of $0.32 for the nine months ended September 30, 2016 was a decrease of $1.91 from the 2015 period net income of $1.59 per basic share. Net loss per diluted share of $0.32 for the nine months ended September 30, 2016 was a decrease of $1.89 from the 2015 period net income of $1.57 per diluted share.
The decrease in net income per basic share resulted from lower net income, partially offset by a decrease in outstanding shares in the 2016 period compared to the 2015 period due to the repurchase of common stock since the 2015 period. The decrease in net income per diluted share resulted from lower net income, partially offset by a decrease in the number of outstanding shares and stock options in the 2016 period compared to the 2015.
Net debt (total debt less cash) was $272.5 million as of September 30, 2016, an $19.0 million increase from December 31, 2015 primarily due to higher inventory and the impact of the issuance of $260.0 million of 10.750% Senior Secured Notes Due 2021, the proceeds which, together with advances under the revolving credit facility, were used to redeem all of the outstanding 8.50% Secured Senior Notes due 2017 and also fund the repurchase of all of the outstanding 10.00%/12.0% PIK Notes due 2020, partially offset by higher accounts payable.
Non-GAAP Results and Net Debt
In an effort to better assist investors and noteholders in understanding the Company’s financial results, as part of this release, the Company is also providing Adjusted EBITDA, which is a measure not defined under accounting principles generally accepted in the United States (GAAP). Adjusted EBITDA is net income excluding interest expense, income tax provision, depreciation and amortization expense, amortization of deferred financing costs, stock-based compensation expense, impairment charges, gain/loss on sale of property, plant and equipment, loss on early extinguishment of debt and extraordinary non-recurring gains and losses. Management uses Adjusted EBITDA as a measure in evaluating the performance of our business. Other companies may define Adjusted EBITDA differently. As a result, our measures of Adjusted EBITDA may not be directly comparable to measures used by other companies. Below is a reconciliation of this non-GAAP financial measure to Net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Net debt as of September 30, 2016 and December 31, 2015 is also presented below. In $ millions:
Reconciliation of Net Income to Non-GAAP Adjusted EBITDA (unaudited)
|3Q 2016||3Q 2015|
|Income tax benefit||(4.4||)||(1.4||)|
|Depreciation & amortization||3.9||4.2|
|Amortization of deferred financing costs||0.5||0.5|
|Loss on early extinguishment of debt||6.7||0.1|
|Other adjustments (1)||0.1||1.0|
|Income tax (benefit)/expense||(3.2||)||2.3|
|Depreciation & amortization||12.9||13.0|
|Amortization of deferred financing costs||1.5||1.5|
|Loss on early extinguishment of debt||6.7||0.1|
|Other adjustments (1)||0.1||1.0|
(1) Includes a $1.0 million extraordinary non-recurring scrap charge.
Net Debt (unaudited)
|September 30,||December 31,|
|Total debt excluding original issue discount||$||278.8||$||263.1|
Additional financial information will be made available on or about November 11, 2016 through the Company’s investor website (http://itwg.client.shareholder.com or http://www.internationalwiregroup.com) in the section titled “Financial Information.”
About International Wire Group Holdings, Inc.
International Wire Group Holdings, Inc., through its subsidiaries, is a manufacturer and marketer of wire products, including bare, silver-plated, nickel-plated and tin-plated copper wire, engineered wire products and high performance conductors, for other wire suppliers, distributors and original equipment manufacturers. Its products include a broad spectrum of copper wire configurations and gauges with a variety of electrical and conductive characteristics and are utilized by a wide variety of customers primarily in the aerospace, automotive/specialty vehicles, consumer and appliance, electronics and data communications, industrial and energy and medical products industries. The Company has eighteen manufacturing facilities and one distribution facility located in the United States, France, Italy and Poland.
Forward-Looking Information is Subject to Risk and Uncertainty
Certain statements in this release may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “expect,” “may,” “will,” or the negative of any thereof or other variations thereof or comparable terminology, or by discussions of strategy or intentions. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. These statements are based on management’s beliefs and assumptions and on information currently available to management as of the date they were made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Many important factors could cause our results to differ materially from those expressed in forward-looking statements. These factors include, but are not limited to, fluctuations in our operating results and customer orders, unexpected decreases in demand or increases in inventory levels, changes in the price of copper, tin, nickel and silver, the competitive environment, our reliance on our significant customers, lack of long-term contracts, substantial dependence on business outside of the U.S. and changes in exchange rates and risks associated with our international operations, limitations due to our indebtedness, loss of key employees or the deterioration in our relationship with employees, litigation, claims, liability from environmental laws and regulations and other factors.
For additional information regarding the factors that may cause our actual results to differ from those expected by our forward-looking statements, see “Risk Factors” in the Company’s 2015 financial report. This report is accessible on the “Financial Information” page on the Investor Relations portion of the Company’s website, available at http://itwg.client.shareholder.com or http://www.internationalwiregroup.com.