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Esmark Announces Year-End Results
05/01/2008 - Esmark reports a net loss of $12.3 million on net sales of $313.4 million for the fourth quarter, and a net loss of $9.0 million on net sales of $825.6 million for the year ended December 31, 2007.
Esmark Inc. reported a net loss of $12.3 million on net sales of $313.4 million for the fourth quarter, and a net loss of $9.0 million on net sales of $825.6 million for the year ended December 31, 2007. Results include the results of Esmark Steel Service Group, Inc. (ESSG), and the results of Wheeling Pittsburgh Corp. subsequent to the merger on November 27, 2007.
Full-Year Results—The net loss of $9.0 million (($2.15) per basic and diluted share) compares to net income of $3.5 million (($9.71) per basic and diluted share) for 2006. Net sales of $313.4 million compare to net sales of $150.2 million for the fourth quarter of 2006.
Steel shipments totaled 454,000 tons ($690 per ton), which compares to steel shipments of 188,000 tons ($801 per ton) for the fourth quarter of 2006. Revenue increased primarily due to inclusion of post-merger Wheeling Pittsburgh, while average revenue per ton decreased due to the lower priced mix.
Cost of sales totaled $286.7 million ($631 per ton), as compared to cost of sales of $137.2 million ($730 per ton) for the fourth quarter of 2006. Again, the decrease reflects the inclusion of Wheeling Pittsburgh and the lower priced mix.
Fourth-Quarter Results—The net loss of $12.3 million (($0.76) per basic and diluted share) compares with a net loss of $5.6 million (($1.40) per basic and diluted share) in the fourth quarter of 2006. Earnings per share include the effect of dividends on and conversions of preferred stock that was outstanding prior to the merger.
Net sales, $825.6 million, compare to net sales of $578.0 million for 2006. Steel shipments totaled 1,145,000 tons ($721 per ton). Steel shipments for 2006 totaled 734,000 tons, or $788 per ton. The increase in net sales can be attributed to an increase in the volume of steel products sold, partially offset by a $67-per-ton decrease in the average selling price of steel products. The lower average selling price reflected the lower priced mix largely due to the effect of including the post-merger sales of Wheeling Pittsburgh. Tons sold include toll-processed tons.
Cost of sales totaled $750.6 million ($655 per ton), as compared to cost of sales of $508.7 million ($693 per ton) for 2006. The $241.9 million increase in the cost of steel products sold was due primarily to the increased shipments, while the $38 per ton decrease resulted primarily from lower substrate cost and the lower-priced mix described above.
Management Comments—“While a net loss is being reported today, it includes the non-cash write-off of $9.7 million of goodwill at ESSG in the fourth quarter,” said James P. Bouchard, Esmark’s Chairman and CEO. “I am pleased to report that EBITDA, adjusted for this non-cash charge, was a positive $25.3 million for the year and $7.9 million in the fourth quarter, which was the combined companies' first reporting period. In addition, as I indicated in our release in early March, both ESSG and Wheeling Pittsburgh have positive Adjusted EBITDA."
Formation and Merger—On November 27, 2007, the company consummated a business combination transaction in which Wheeling Pittsburgh and ESSG (formerly known as Esmark Inc.) became wholly owned subsidiaries of the company. For financial reporting purposes, ESSG was identified as the acquiring entity and Wheeling Pittsburgh was identified as the acquired entity. As a result, the company’s consolidated financial statements include the accounts of ESSG on an historical basis and the accounts of Wheeling Pittsburgh from the date of the merger.
Wheeling Pittsburgh’s opening balance sheet prepared as of November 27, 2007, includes an estimated liability of approximately $42.0 million related to company's planned reorganization of the Wheeling Pittsburgh Mill Operations, which includes the announced shutdowns of the Allenport, Pa., sheet finishing operations and two of the three galvanizing lines at the Martins Ferry, Ohio, plant.
Esmark Inc. is a vertically integrated steel producer and distributor, combining steel production capabilities through both blast furnace and electric arc furnace technologies with the just-in-time delivery of value-added steel products to a broad customer base concentrated in the Ohio Valley and Midwest regions. Currently headquartered in Wheeling, W.Va., the company produces carbon flat-rolled products for the construction, container, appliance, converter/processor, steel service center, automotive and other markets. The company's products include various sheet products such as hot rolled, cold rolled, hot dipped galvanized, electro-galvanized, black plate and electrolytic tinplate.
