International Wire Group Holdings, Inc. (the Company) (OTCMKTS:ITWG) today announced results for the third quarter and for the nine months ended September 30, 2018. Both third quarter and first nine months 2018 operating results were above the comparable 2017 levels.
We were pleased with third quarter results as strong demand continued in our largest markets served. Industrial and energy demand remained strong along with the electronics/data communication markets. HPC Medical Products demand was also strong while aerospace demand remained firm. Our Engineered Wire Products business in Europe experienced some softness in demand, said Edwin J. Flynn, Chief Executive Officer of International Wire Group Holdings, Inc.
Third Quarter Results
Net sales for the quarter ended September 30, 2018 were $138.4 million, an increase of $3.3 million, or 2.4%, compared to $135.1 million for the same period in 2017. This increase was partly due to a higher selling price of copper, partially offset by 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 higher copper prices and a higher proportion of tolled copper, net sales increased $8.9 million, or 6.9%, versus the same period in 2017. This increase resulted from $4.3 million of higher sales and $4.7 million of higher customer pricing/mix, partially offset by $0.1 million from the effects of unfavorable foreign currency exchange rates. Total pounds of product sold in the third quarter of 2018 increased by 6.4% compared to the third quarter of 2017.
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Operating income for the three months ended September 30, 2018 was $8.0 million compared to $6.3 million for the 2017 period, an increase of $1.7 million, or 27.0%, primarily from higher sales volume, higher LIFO/copper profits and more favorable customer pricing/mix, partially offset by higher selling, general and administrative expenses.
Net income of $0.2 million for the three months ended September 30, 2018 was an increase of $0.4 million from a net loss of $0.2 million for the three months ended September 30, 2017. The increase was due primarily to higher operating income and lower interest expense.
Net income per basic and diluted share was $0.04 and net loss per basic and diluted share was $0.05 for the three months ended September 30, 2018 and 2017, respectively.
Nine Months Results
Net sales for the nine months ended September 30, 2018 were $449.8 million, an increase of $46.3 million, or 11.5%, compared to $403.5 million for the same period in 2017. This increase was partly due to a higher selling price of copper, partially offset by a higher proportion of tolled copper. Excluding the effects of higher copper prices and a higher proportion of tolled copper, net sales increased $33.1 million, or 7.9%, versus the same period in 2017. This increase resulted from $25.6 million of higher sales, $4.6 million of favorable customer pricing/mix and $2.9 million from the effects of favorable foreign currency exchange rates. Total pounds of product sold in the first nine months of 2018 increased by 8.9% compared to the first nine months of 2017.
Operating income for the nine months ended September 30, 2018 was $22.6 million compared to $21.3 million for the same period in 2017, an increase of $1.3 million, or 6.1%, primarily from higher sales volume, partially offset by lower LIFO/copper profits and higher selling, general and administrative expenses.
Net loss of $0.4 million for the nine months ended September 30, 2018 was a decrease of $0.1 million from a net loss of $0.5 million for the nine months ended September 30, 2017, primarily from higher operating income and lower interest expense, partially offset by a lower income tax benefit.
Net loss per basic and diluted share was $0.08 and $0.11 for the nine months ended September 30, 2018 and 2017, respectively.
Non-GAAP Results and Net Debt
In an effort to better assist investors and noteholders in understanding the Companys 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/(loss) excluding interest expense, income tax provision/(benefit), depreciation and amortization expense, amortization of deferred financing costs, stock-based compensation (income)/expense, impairment charges, gain/loss on sale of property, plant and equipment, (gain)/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/(loss), the most directly comparable financial measure calculated and presented in accordance with GAAP. Net debt as of September 30, 2018 and December 31, 2017 is also presented below. In $ millions:
Reconciliation of Net Income/Loss to Non-GAAP Adjusted EBITDA (unaudited)
|3Q 2018||3Q 2017|
|Income tax expense/(benefit)||0.0||(1.2||)|
|Depreciation & amortization||3.6||3.7|
|Amortization of deferred financing costs||0.4||0.4|
|Loss/(gain) on early extinguishment of debt||0.3||(0.2||)|
|Income tax expense/(benefit)||0.1||(1.6||)|
|Depreciation & amortization||11.6||11.9|
|Amortization of deferred financing costs||1.1||1.3|
|Loss/(gain) on early extinguishment of debt||0.3||(0.2||)|
|Net Debt (unaudited)|
|September 30,||December 31,|
|Total debt excluding original issue discount||$||286.2||$||285.3|
Additional financial information will be made available on or about November 9, 2018 through the Companys investor website (http://internationalwiregroup.gcs-web.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 industrial and energy, electronics and data communications, automotive/specialty vehicles, aerospace and defense, medical products and consumer and appliance industries. The Company has seventeen manufacturing facilities and one distribution facility located throughout 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, would, could, anticipate or the negative of any thereof or other variations thereof or comparable terminology, or by discussions of strategy or intentions. Undue reliance should not be placed on any forward-looking statements. These statements are based on managements current beliefs and assumptions and on information currently available to management as of the date they were made. 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. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Many 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, developments in the competitive environments of the markets we serve, our reliance on our significant customers, lack of long-term contracts, our substantial dependence on business outside of the U.S. and changes in exchange rates and other risks associated with our international operations, limitations due to our indebtedness, potential 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 Companys 2017 financial report. This report is accessible on the Financial Information page on the Investor Relations portion of the Companys website, available at http://internationalwiregroup.gcs-web.com or http://www.internationalwiregroup.com.
International Wire Group Holdings, Inc.
Donald F. DeKay
Vice-President, Chief Financial Officer and Secretary